Opinion ID: 733312
Heading Depth: 2
Heading Rank: 2

Heading: Preemption and the Common Law of Subrogation

Text: 39 Whether United's cause of action is preempted presents yet another question. United brought this cause of action under state common law as a subrogee. 4 United's theory is that it became subrogated to the rights of Jones when it paid claims for which BMA was primarily liable. Relying on Baxter, 886 F.2d at 186, BMA argues that ERISA preempts United's state-law subrogation claim. We agree. 40 In Baxter, the beneficiary had been awarded damages from a tortfeaser in addition to the medical benefits he had received under an ERISA plan. When the plan's insurer attempted to enforce a plan provision creating a right of subrogation in favor of the insurer against the beneficiary, the beneficiary pointed to state law precluding such subrogation. We found that the state anti-subrogation law prevented the plan administrator from exercising its rights under the plan to obtain reimbursement from the beneficiary for the medical expenses paid. Because the state law directly impacted the structure of the ERISA plan, we concluded that it was related to the plan. See Arkansas BCBS, 947 F.2d at 1345 (explaining Baxter ). We further found that the law was not saved from preemption by the savings clause, and consequently, ERISA preempted the state anti-subrogation law. 41 The district court in this case distinguished Baxter and rejected BMA's preemption argument on the basis that United's subrogation claim is not related to the plan. The court stated: 42 Although the terminology is the same, the subrogation involved in Baxter and that involved here are entirely different. The subrogation at issue in Baxter related to the rights and obligations running between the insurer and the insured. It thus relate[d] to an employee benefit plan, and required analysis under the McCarran-Ferguson Act. By contrast the subrogation involved here is unrelated to the substantive provisions of the insurance policy; it is simply an equitable principle for recovering a claim from one who ought to have paid it. 43 (Appellant's Adden. at A-5.) 44 We agree that in some respects, this case is quite different from Baxter. Here, the dispute is between two insurance companies over which company is responsible to pay for certain benefits. This particular state-law claim does not affect either the amount of benefits due to Jones or any reimbursement from him to the plan. This subrogation claim implicates the allocation of liability between prior and succeeding insurance carriers under state insurance law. 45 Despite these distinctions from Baxter, we nonetheless conclude that ERISA preempts United's claim. Under Missouri law, [i]t is ... well established that in [a subrogation] action a party makes a claim through a derivative right acquiring no greater rights in law or equity than the party for whom it was substituted and therefore, cannot make a claim its subrogor could not make. Stoverink v. Morgan, 660 S.W.2d 743, 745 (Mo.Ct.App.1983). Thus, as a subrogee, United stands in the shoes of Jones and has no greater rights than Jones has. Under settled law, Jones could not bring a state-law claim seeking benefits owed him under section 376.438, because ERISA would preempt that claim and require him to use ERISA's remedies. See Pilot Life, 481 U.S. at 54-56, 107 S.Ct. at 1556-58 (holding that ERISA preempts a beneficiary's state-law causes of action based on improper processing of claims for benefits because the civil enforcement provisions of ERISA are meant to be the exclusive vehicle for such actions). Consequently, United's state-law subrogation claim is likewise preempted. 46 To be sure, subrogation is an equitable doctrine founded on principles of justice, and BMA was obligated under Missouri law to provide a reasonable extension of benefits. See American Nursing Resources, Inc. v. Forrest T. Jones & Co., 812 S.W.2d 790, 796 (Mo.Ct.App.1991); Quality Wood Chips, Inc. v. Adolphsen, 636 S.W.2d 94, 96-97 (Mo.Ct.App.1982) (explicating the nature of subrogation claims). The equitable nature of the doctrine, however, is that we theoretically place the subrogee in the shoes of the subrogor. We cannot change the color or size of those shoes. We therefore hold that United's state-law cause of action, based on its right of subrogation, is preempted by ERISA.