FMC Corp. v. Holliday

498 U.S. 52, 111 S. Ct. 403, 112 L.Ed.2d 356 (1990)

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FMC Corp. v. Holliday

United States Supreme Court
498 U.S. 52, 111 S. Ct. 403, 112 L.Ed.2d 356 (1990)

Facts

FMC Corporation (plaintiff) operated an employee benefit plan that provided health benefits to FMC employees and their dependents. The plan was self-funded, which meant that the plan had not purchased an insurance policy to meet its payment obligations to plan members. FMC’s plan included a subrogation clause that required plan members to reimburse the plan for any benefits paid to the member if the member recovered on the claim in a liability action against a third party. In 1987, Cynthia Ann Holliday (defendant), the daughter of an FMC plan member, was injured in a car accident, and the plan paid some of her medical expenses. Holliday’s father received a settlement in a Pennsylvania litigation against the driver of the car that injured Holliday. However, Holliday refused to reimburse the plan based on §§ 1719 and 1720 of Pennsylvania’s Motor Vehicle Financial Responsibility Law, which prohibited an employee benefit plan from exercising a right of subrogation or reimbursement on a claimant’s tort recovery. FMC sought a declaratory judgment in federal court regarding the plan’s right to reimbursement. The district court granted summary judgment for Holliday, concluding that § 1720 precluded the plan from exercising subrogation rights. The appellate court affirmed, finding that § 1720 was not preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and that the plan was not exempt from state insurance regulation. Because other circuit courts had construed ERISA to protect self-funded employee benefit plans from state insurance regulation, the United States Supreme Court granted certiorari to resolve the conflict between the circuits.

Rule of Law

Issue

Holding and Reasoning (O’Connor, J.)

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