171
contract benefits in accordance with the plan), 
a civil assessment, in an amount not to exceed 
$5,000,000, payable to the claimant may be 
awarded in any action under such paragraph if 
the claimant establishes by clear and convincing 
evidence that the alleged conduct carried out by 
the defendant demonstrated bad faith and fla-
grant disregard for the rights of the participant 
or beneficiary under the plan and was a proxi-
mate cause of the personal injury or death that 
is the subject of the claim. 
‘‘(11) LIMITATION ON ATTORNEYS’ FEES.—
‘‘(A) IN GENERAL.—Notwithstanding any 
other provision of law, or any arrangement, 
agreement, or contract regarding an attorney’s 
fee, the amount of an attorney’s contingency fee 
allowable for a cause of action brought pursu-
ant to this subsection shall not exceed 1⁄3 of the 
total amount of the plaintiff’s recovery (not in-
cluding the reimbursement of actual out-of-
pocket expenses of the attorney). 
‘‘(B) 
DETERMINATION
BY
DISTRICT 
COURT.—The last Federal district court in 
which the action was pending upon the final 
disposition, including all appeals, of the action
172
shall have jurisdiction to review the attorney’s 
fee to ensure that the fee is a reasonable one. 
‘‘(12) LIMITATION OF ACTION.—Paragraph (1) 
shall not apply in connection with any action com-
menced after 3 years after the later of—
‘‘(A) the date on which the plaintiff first 
knew, or reasonably should have known, of the 
personal injury or death resulting from the fail-
ure described in paragraph (1), or 
‘‘(B) the date as of which the requirements 
of paragraph (9) are first met. 
‘‘(13) TOLLING
PROVISION.—The statute of 
limitations for any cause of action arising under 
State law relating to a denial of a claim for benefits 
that is the subject of an action brought in Federal 
court under this subsection shall be tolled until such 
time as the Federal court makes a final disposition, 
including all appeals, of whether such claim should 
properly be within the jurisdiction of the Federal 
court. The tolling period shall be determined by the 
applicable Federal or State law, whichever period is 
greater. 
‘‘(14) PURCHASE OF INSURANCE TO COVER LI-
ABILITY.—Nothing in section 410 shall be construed 
to preclude the purchase by a group health plan of
173
insurance to cover any liability or losses arising 
under a cause of action under subsection (a)(1)(C) 
and this subsection. 
‘‘(15) EXCLUSION
OF
DIRECTED
RECORD-
KEEPERS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (C), paragraph (1) shall not apply with 
respect to a directed recordkeeper in connection 
with a group health plan. 
‘‘(B) 
DIRECTED
RECORDKEEPER.—For 
purposes of this paragraph, the term ‘directed 
recordkeeper’ means, in connection with a 
group health plan, a person engaged in directed 
recordkeeping activities pursuant to the specific 
instructions of the plan or the employer or 
other plan sponsor, including the distribution of 
enrollment information and distribution of dis-
closure materials under this Act or title I of the 
Patients’ Bill of Rights Act of 2004 and whose 
duties do not include making decisions on 
claims for benefits. 
‘‘(C) 
LIMITATION.—Subparagraph 
(A) 
does not apply in connection with any directed 
recordkeeper to the extent that the directed rec-
ordkeeper fails to follow the specific instruction
174
of the plan or the employer or other plan spon-
sor. 
‘‘(16) EXCLUSION
OF
HEALTH
INSURANCE 
AGENTS.—Paragraph (1) does not apply with re-
spect to a person whose sole involvement with the 
group health plan is providing advice or administra-
tive services to the employer or other plan sponsor 
relating to the selection of health insurance coverage 
offered in connection with the plan. 
‘‘(17) NO EFFECT ON STATE LAW.—No provi-
sion of State law (as defined in section 514(c)(1)) 
shall be treated as superseded or otherwise altered, 
amended, modified, invalidated, or impaired by rea-
son of the provisions of subsection (a)(1)(C) and this 
subsection. 
‘‘(18) RELIEF FROM LIABILITY FOR EMPLOYER 
OR
OTHER
PLAN
SPONSOR
BY
MEANS
OF
DES-
IGNATED DECISIONMAKER.—
‘‘(A) IN
GENERAL.—Notwithstanding the 
direct participation (as defined in paragraph 
(5)(C)(i)) of an employer or plan sponsor, in 
any case in which there is (or is deemed under 
subparagraph (B) to be) a designated decision-
maker under subparagraph (B) that meets the
175
requirements of subsection (o)(1) for an em-
ployer or other plan sponsor—
‘‘(i) all liability of such employer or 
plan sponsor involved (and any employee of 
such employer or sponsor acting within the 
scope of employment) under this sub-
section in connection with any participant 
or beneficiary shall be transferred to, and 
assumed by, the designated decisionmaker, 
and 
‘‘(ii) with respect to such liability, the 
designated decisionmaker shall be sub-
stituted for the employer or sponsor (or 
employee) in the action and may not raise 
any defense that the employer or sponsor 
(or employee) could not raise if such a de-
cisionmaker were not so deemed. 
‘‘(B) AUTOMATIC DESIGNATION.—A health 
insurance issuer shall be deemed to be a des-
ignated decisionmaker for purposes of subpara-
graph (A) with respect to the participants and 
beneficiaries of an employer or plan sponsor, 
whether or not the employer or plan sponsor 
makes such a designation, and shall be deemed 
to have assumed unconditionally all liability of
176
the employer or plan sponsor under such des-
ignation in accordance with subsection (o), un-
less the employer or plan sponsor affirmatively 
enters into a contract to prevent the service of 
the designated decisionmaker. 
‘‘(C) TREATMENT
OF
CERTAIN
TRUST 
FUNDS.—For purposes of this paragraph, the 
terms ‘employer’ and ‘plan sponsor’, in connec-
tion with the assumption by a designated deci-
sionmaker of the liability of employer or other 
plan sponsor pursuant to this paragraph, shall 
be construed to include a trust fund maintained 
pursuant to section 302 of the Labor Manage-
ment Relations Act, 1947 (29 U.S.C. 186) or 
the Railway Labor Act (45 U.S.C. 151 et seq.). 
‘‘(19) PREVIOUSLY PROVIDED SERVICES.—
‘‘(A) IN GENERAL.—Except as provided in 
this paragraph, a cause of action shall not arise 
under paragraph (1) where the denial involved 
relates to an item or service that has already 
been fully provided to the participant or bene-
ficiary under the plan or coverage and the claim 
relates solely to the subsequent denial of pay-
ment for the provision of such item or service.
177
‘‘(B) EXCEPTION.—Nothing in subpara-
graph (A) shall be construed to—
‘‘(i) prohibit a cause of action under 
paragraph (1) where the nonpayment in-
volved results in the participant or bene-
ficiary being unable to receive further 
items or services that are directly related 
to the item or service involved in the denial 
referred to in subparagraph (A) or that 
are part of a continuing treatment or se-
ries of procedures; or 
‘‘(ii) limit liability that otherwise 
would arise from the provision of the item 
or services or the performance of a medical 
procedure. 
‘‘(20) EXEMPTION FROM PERSONAL LIABILITY 
FOR INDIVIDUAL MEMBERS OF BOARDS OF DIREC-
TORS, JOINT BOARDS OF TRUSTEES, ETC.—Any indi-
vidual who is—
‘‘(A) a member of a board of directors of 
an employer or plan sponsor; or 
‘‘(B) a member of an association, com-
mittee, employee organization, joint board of 
trustees, or other similar group of representa-
tives of the entities that are the plan sponsor
178
of plan maintained by two or more employers 
and one or more employee organizations; 
shall not be personally liable under this subsection 
for conduct that is within the scope of employment 
or of plan-related duties of the individuals unless the 
individual acts in a fraudulent manner for personal 
enrichment. 
‘‘(o) REQUIREMENTS FOR DESIGNATED DECISION-
MAKERS OF GROUP HEALTH PLANS.—
‘‘(1) IN GENERAL.—For purposes of subsection 
(n)(18) and section 514(d)(9), a designated decision-
maker meets the requirements of this paragraph 
with respect to any participant or beneficiary if—
‘‘(A) such designation is in such form as 
may be prescribed in regulations of the Sec-
retary, 
‘‘(B) the designated decisionmaker—
‘‘(i) meets the requirements of para-
graph (2), 
‘‘(ii) assumes unconditionally all liabil-
ity of the employer or plan sponsor in-
volved (and any employee of such employer 
or sponsor acting within the scope of em-
ployment) either arising under subsection 
(n) or arising in a cause of action per-
179
mitted under section 514(d) in connection 
with actions (and failures to act) of the 
employer or plan sponsor (or employee) oc-
curring during the period in which the des-
ignation under subsection (n)(18) or sec-
tion 514(d)(9) is in effect relating to such 
participant and beneficiary, 
‘‘(iii) agrees to be substituted for the 
employer or plan sponsor (or employee) in 
the action and not to raise any defense 
with respect to such liability that the em-
ployer or plan sponsor (or employee) may 
not raise, and 
‘‘(iv) where paragraph (2)(B) applies, 
assumes unconditionally the exclusive au-
thority under the group health plan to 
make medically reviewable decisions under 
the plan with respect to such participant 
or beneficiary, and 
‘‘(C) the designated decisionmaker and the 
participants and beneficiaries for whom the de-
cisionmaker has assumed liability are identified 
in the written instrument required under sec-
tion 402(a) and as required under section
180
121(b)(19) of the Patients’ Bill of Rights Act 
of 2004. 
Any liability assumed by a designated decisionmaker 
pursuant to this subsection shall be in addition to 
any liability that it may otherwise have under appli-
cable law. 
‘‘(2) QUALIFICATIONS FOR DESIGNATED DECI-
SIONMAKERS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), an entity is qualified under this 
paragraph to serve as a designated decision-
maker with respect to a group health plan if the 
entity has the ability to assume the liability de-
scribed in paragraph (1) with respect to partici-
pants and beneficiaries under such plan, includ-
ing requirements relating to the financial obli-
gation for timely satisfying the assumed liabil-
ity, and maintains with the plan sponsor and 
the Secretary certification of such ability. Such 
certification shall be provided to the plan spon-
sor or named fiduciary and to the Secretary 
upon designation under subsection (n)(18)(B) 
or section 517(d)(9)(B) and not less frequently 
than annually thereafter, or if such designation
181
constitutes a multiyear arrangement, in con-
junction with the renewal of the arrangement. 
‘‘(B) SPECIAL
QUALIFICATION
IN
THE 
CASE OF CERTAIN REVIEWABLE DECISIONS.—In 
the case of a group health plan that provides 
benefits consisting of medical care to a partici-
pant or beneficiary only through health insur-
ance coverage offered by a single health insur-
ance issue, such issuer is the only entity that 
may be qualified under this paragraph to serve 
as a designated decisionmaker with respect to 
such participant or beneficiary, and shall serve 
as the designated decisionmaker unless the em-
ployer or other plan sponsor acts affirmatively 
to prevent such service. 
‘‘(3) REQUIREMENTS RELATING TO FINANCIAL 
OBLIGATIONS.—For purposes of paragraph (2)(A), 
the requirements relating to the financial obligation 
of an entity for liability shall include—
‘‘(A) coverage of such entity under an in-
surance policy or other arrangement, secured 
and maintained by such entity, to effectively in-
sure such entity against losses arising from pro-
fessional liability claims, including those arising
182
from its service as a designated decisionmaker 
under this part; or 
‘‘(B) evidence of minimum capital and sur-
plus levels that are maintained by such entity 
to cover any losses as a result of liability arising 
from its service as a designated decisionmaker 
under this part. 
The appropriate amounts of liability insurance and 
minimum capital and surplus levels for purposes of 
subparagraphs (A) and (B) shall be determined by 
an actuary using sound actuarial principles and ac-
counting practices pursuant to established guidelines 
of the American Academy of Actuaries and in ac-
cordance with such regulations as the Secretary may 
prescribe and shall be maintained throughout the 
term for which the designation is in effect. The pro-
visions of this paragraph shall not apply in the case 
of a designated decisionmaker that is a group health 
plan, plan sponsor, or health insurance issuer and 
that is regulated under Federal law or a State finan-
cial solvency law. 
‘‘(4) LIMITATION ON APPOINTMENT OF TREAT-
ING PHYSICIANS.—A treating physician who directly 
delivered the care, treatment, or provided the patient 
service that is the subject of a cause of action by a
183
participant or beneficiary under subsection (n) or 
section 514(d) may not be designated as a des-
ignated decisionmaker under this subsection with re-
spect to such participant or beneficiary.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
502(a)(1) of such Act (29 U.S.C. 1132(a)(1)) is 
amended—
(A) by striking ‘‘or’’ at the end of subpara-
graph (A); 
(B) in subparagraph (B), by striking 
‘‘plan;’’ and inserting ‘‘plan, or’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) for the relief provided for in sub-
section (n) of this section.’’. 
(b) RULES RELATING TO ERISA PREEMPTION.—
Section 514 of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1144) is amended—
(1) by redesignating subsection (d) as sub-
section (f); and 
(2) by inserting after subsection (c) the fol-
lowing new subsections: 
‘‘(d) PREEMPTION NOT TO APPLY TO CAUSES OF AC-
TION UNDER STATE LAW INVOLVING MEDICALLY RE-
VIEWABLE DECISION.—
184
‘‘(1) NON-PREEMPTION OF CERTAIN CAUSES OF 
ACTION.—
‘‘(A) IN GENERAL.—Except as provided in 
this subsection, nothing in this title (including 
section 502) shall be construed to supersede or 
otherwise alter, amend, modify, invalidate, or 
impair any cause of action under State law of 
a participant or beneficiary under a group 
health plan (or the estate of such a participant 
or beneficiary) against the plan, the plan spon-
sor, any health insurance issuer offering health 
insurance coverage in connection with the plan, 
or any managed care entity in connection with 
the plan to recover damages resulting from per-
sonal injury or for wrongful death if such cause 
of action arises by reason of a medically review-
able decision. 
‘‘(B) 
MEDICALLY
REVIEWABLE
DECI-
SION.—For purposes of subparagraph (A), the 
term ‘medically reviewable decision’ means a de-
nial of a claim for benefits under the plan 
which is described in section 104(d)(2) of the 
Patients’ Bill of Rights Act of 2004 (relating to 
medically reviewable decisions).
185
‘‘(C) LIMITATION
ON
PUNITIVE
DAM-
AGES.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), with respect 
to a cause of action described in subpara-
graph (A) brought with respect to a partic-
ipant or beneficiary, State law is super-
seded insofar as it provides any punitive, 
exemplary, or similar damages if, as of the 
time of the personal injury or death, all 
the requirements of the following sections 
of the Patients’ Bill of Rights Act of 2004 
were satisfied with respect to the partici-
pant or beneficiary: 
‘‘(I) Section 102 (relating to pro-
cedures for initial claims for benefits 
and prior authorization determina-
tions). 
‘‘(II) Section 103 of such Act 
(relating to internal appeals of claims 
denials). 
‘‘(III) Section 104 of such Act 
(relating to independent external ap-
peals procedures).
186
‘‘(ii) EXCEPTION
FOR
CERTAIN
AC-
TIONS FOR WRONGFUL DEATH.—Clause (i) 
shall not apply with respect to an action 
for wrongful death if the applicable State 
law provides (or has been construed to pro-
vide) for damages in such an action which 
are only punitive or exemplary in nature. 
‘‘(iii) EXCEPTION
FOR
WILLFUL
OR 
WANTON DISREGARD FOR THE RIGHTS OR 
SAFETY OF OTHERS.—Clause (i) shall not 
apply with respect to any cause of action 
described in subparagraph (A) if, in such 
action, the plaintiff establishes by clear 
and convincing evidence that conduct car-
ried out by the defendant with willful or 
wanton disregard for the rights or safety 
of others was a proximate cause of the per-
sonal injury or wrongful death that is the 
subject of the action. 
‘‘(2) DEFINITIONS AND RELATED RULES.—For 
purposes of this subsection and subsection (e)—
‘‘(A) TREATMENT
OF
EXCEPTED
BENE-
FITS.—Under section 154(a) of the Patients’ 
Bill of Rights Act of 2004, the provisions of
187
this subsection do not apply to certain excepted 
benefits. 
‘‘(B) PERSONAL INJURY.—The term ‘per-
sonal injury’ means a physical injury and in-
cludes an injury arising out of the treatment 
(or failure to treat) a mental illness or disease. 
‘‘(C) CLAIM FOR BENEFIT; DENIAL.—The 
terms ‘claim for benefits’ and ‘denial of a claim 
for benefits’ shall have the meaning provided 
such terms under section 102(e) of the Pa-
tients’ Bill of Rights Act of 2004. 
‘‘(D) MANAGED CARE ENTITY.—
‘‘(i) IN
GENERAL.—The term ‘man-
aged care entity’ means, in connection with 
a group health plan and subject to clause 
(ii), any entity that is involved in deter-
mining the manner in which or the extent 
to which items or services (or reimburse-
ment therefor) are to be provided as bene-
fits under the plan. 
‘‘(ii) TREATMENT OF TREATING PHY-
SICIANS, OTHER TREATING HEALTH CARE 
PROFESSIONALS, 
AND
TREATING
HOS-
PITALS.—Such term does not include a 
treating physician or other treating health
188
care professional (as defined in section 
502(n)(6)(B)(i)) of the participant or ben-
eficiary and also does not include a treat-
ing hospital insofar as it is acting solely in 
the capacity of providing treatment or care 
to the participant or beneficiary. Nothing 
in the preceding sentence shall be con-
strued to preempt vicarious liability of any 
plan, plan sponsor, health insurance issuer, 
or managed care entity. 
‘‘(3) EXCLUSION OF EMPLOYERS AND OTHER 
PLAN SPONSORS.—
‘‘(A) CAUSES
OF
ACTION
AGAINST
EM-
PLOYERS AND PLAN SPONSORS PRECLUDED.—
Subject to subparagraph (B), paragraph (1) 
does not apply with respect to—
‘‘(i) any cause of action against an 
employer or other plan sponsor maintain-
ing the plan (or against an employee of 
such an employer or sponsor acting within 
the scope of employment), or 
‘‘(ii) a right of recovery, indemnity, or 
contribution by a person against an em-
ployer or other plan sponsor (or such an 
employee) for damages assessed against