Opinion ID: 1104139
Heading Depth: 2
Heading Rank: 2

Heading: Is state law saved from preemption?:

Text: The second preemption inquiry is whether the state laws at issue which relate to the Plan regulate insurance, thus falling within the savings clause, and thus exempt from ERISA's preemptive effect (if the deemer clause does not apply). Cramer, supra, Pilot Life, supra. In Pilot Life, the Supreme Court utilized three criteria to determine whether a particular practice falls under the business of insurance, as that phrase is used in the McCarran-Ferguson Act, so that it regulates insurance: first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry. 481 U.S. at 48-49, 107 S.Ct. at 1553. We expounded upon the meaning of these criteria in Cramer v. Association Life Ins. Co., supra, at 537: The insurer-insured relationship is defined in the substantive provisions of the insurance contract, and consists of the respective obligations of each party to the contract.... ... As we appreciate the use of the term spreading of risk in the context of an insurance policy, the risk focused upon is that risk for which the insurance company has specifically contracted to reimburse its insured.... Thus, when looking to see if a particular practice acts to spread the risk, we must focus on the actual risks that were transferred from the insured to the insurer and determine if the practice acts to alter the contractual apportionment of those risks. Not all of these factors are met as applied to Louisiana state law on subrogation. While subrogation may not transfer or spread a policyholder's risk, it can be an integral part of the policy relationship between the insurer and the insured. However, it is not limited to entities within the insurance industry. Thus, state laws on subrogation arguably do not regulate insurance and are not saved from ERISA's preemption. [5]