ERISA Plans Lose Right of Reimbursement in Settlements (NY)


The plague of health care reimbursement claims has frustrated many settlements.  The parties agree on a fair and reasonable settlement but prior health care payments gum up the settlement.  The New York legislature arrived at a compromise in 2009 when it enacted General Obligations Law 5-335 that prohibits insurers from seeking reimbursement of medical benefits paid from a member’s tort settlements.  The question remained whether this statute was preempted by ERISA, which would make claims for reimbursement by employer-sponsored plans beyond the reach of General Obligations Law 5-335.

The Second Circuit addressed this issue in Wurz v. The Rawlings Company and held that Gen. Oblig. Law 5-335 trumped ERISA in this context Giving a resounding victory to both plaintiffs and general liability insurers –a rare partnership in litigation – the Second Circuit held that ERISA did not affect  the duty imposed by Gen. Oblig. Law 5-335 on health care insurers not to seek reimbursement of medical expenses from their members’ tort settlements.

Wurz gives CGL insurers and self-insured defendants clear authority to resist claims for medical reimbursement even from ERISA based health insurance plans. On a practical level, Wurz will encourage settlements by allowing the parties to negotiate without any obligation to reimburse health care insurers for benefits paid on behalf of their members.

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