and 04-1225 JEAN LEVINE, On behalf of herself and all others similarly situated v. UNITED HEALTHCARE CORPORATION DC NJ 01-cv-04964 NOREEN BOGURSKI v. HORIZON BLUE…

1
PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 04-1224 and 04-1225
JEAN LEVINE, On behalf of herself
and all others similarly situated
v.
UNITED HEALTHCARE CORPORATION
(DC NJ 01-cv-04964)
NOREEN BOGURSKI
v.
HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY
(DC NJ 01-cv-05339)
BENJAMIN EDMONSON, On behalf of
Himself and All Others Similary Situated
v.
JERSEY; HORIZON HEALTHCARE SERVICES, INC.,
dba Horizon Blue Cross Blue Shield of New Jersey
(DC NJ 01-cv-05812)
United Healthcare Corporation
Horizon Blue Cross Blue Shield

-- 1 of 41 --

2
of New Jersey,
Appellants at No. 04-1224
JEAN LEVINE, On behalf of herself
and all others similarly situated
v.
UNITED HEALTHCARE CORPORATION
(DC NJ 01-cv-04964)
NOREEN BOGURSKI
v.
HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY
(DC NJ 01-cv-05339)
Jean Levine, Noreen Bogurski
*Benjamin Edmonson,
Appellants at No. 04-1225
*(Dismissed pursuant to Court's order of 11/17/04)
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Nos. 01-cv-04964, 01-cv-05339, 01-cv-05812)
District Judge: Honorable Jerome B. Simandle
Argued December 15, 2004
BEFORE: NYGAARD and GARTH, Circuit Judges

-- 2 of 41 --

Honorable Louis H. Pollak, District Judge for the United*
States District Court for the Eastern District of Pennsylvania, sitting
by designation.
3
and POLLAK , District Judge.*
(Filed March 16, 2005 )
William F. Hanrahan, Esq. (Argued)
Edward A. Scallet, Esq.
Jason H. Ehrenberg, Esq.
Groom Law Group Chartered
1701 Pennsylvania Avenue, NW
Suite 1200
Washington, DC 20006
Counsel for Appellants/Cross Appellees
United Healthcare Corp.
Edward S. Wardell, Esq. (Argued)
Kelley Wardell & Craig
41 Grove Street
Haddonfield, NJ 08033
Counsel for Appellants/Cross Appellees
Horizon Blue Cross, etc., et. al.
Donna S. Moffa, Esq. (Argued)
Trujillo Rodriguez & Richards
8 Kings Highway West
Haddonfield, NJ 08033
Counsel for Appellees/Cross Appellants
Noreen Bogurski
Frank P. Solomon, Esq. (Argued)
Weitz & Luxenberg
210 Lake Drive East, Suite 101
Cherry Hill, NJ 08002

-- 3 of 41 --

Natalie Bennett, Esq.
Shepherd Finkelman Miller & Shah
900 Route 168, Suite B2
Washington Professional Campus
Turnersville, NJ 08012
Counsel for Appellees/Cross Appellants
Jean Levine, etc.
OPINION OF THE COURT
NYGAARD, Circuit Judge.
These interlocutory cross-appeals require us to address
two different facets of the preemptive power of the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§
1001, et seq., as it applies to the instant dispute over an insurer’s
claimed right of subrogation from an insured’s third-party tort
recovery. First, the insured ERISA plan participants, plaintiffs
below, argue that the District Court should have remanded their
claims to state court for lack of federal subject matter
jurisdiction. Second, the insurance providers, defendants below,
maintain that the District Court should have dismissed the claims
entirely, as they depend on state law that is expressly preempted
by ERISA § 514, 29 U.S.C. § 1144. Finally, the insurance
providers argue that the District Court should have dismissed the

-- 4 of 41 --

Horizon Blue Cross and Blue Shield of New Jersey was the1
health insurance provider for both Bogurski and Edmonson. With
respect to Edmonson, they were Horizon Healthcare Services, Inc., doing
business as, Horizon Blue Cross and Blue Shield.
2
claims because the state law decision on which they rely,
Perreira v. Rediger, 778 A.2d 429 (N.J. 2001), should not apply
retroactively. All three questions raise issues of first impression
in this circuit. We find the insurance providers’ arguments more
persuasive as to the first two issues, rendering consideration of
Perreira’s retroactivity unnecessary. Jurisdiction is proper in the
District Court, but the underlying claims are preempted by
ERISA and must be dismissed.
I.
Jean Levine, Noreen Bogurski, and Benjamin Edmondson
(the “Insureds”) were injured by third-parties in separate, unrelated
events and are the Appellees/Cross-Appellants in this appeal.
Their health insurance providers, United Healthcare Corporation
and Horizon Blue Cross and Blue Shield of New Jersey, are the1
Appellants/Cross-Appellees (the “Providers”). At the time of the
injuries, the Providers fulfilled their responsibilities to the Insureds
under each health insurance policy by paying at least a portion of
the Insureds’ medical expenses.

-- 5 of 41 --

The relevant regulation that provided for reimbursement and2
subrogation was repealed on August 5, 2002 and replaced with a
“Prohibition on subrogation/third party liability provisions.”
The Regulation, prior to its repeal, was as follows:
11:4-42.10 Provisions for subrogation and repayment of benefits
(a) Group policies and certificates providing health insurance may
contain subrogation provisions that require the return to the
insurer by a covered person of benefits paid for illness or injury
up to the amount a covered person received from a third party
through settlement, a satisfied judgement or other means, as
compensation for the medical costs of such illness or injury,
subject to the following:
1. Repayment of benefits shall be required only where the
amount received for the third party through settlement,
judgment or other means are specifically identified as
amounts paid for health benefits which have been paid by
the insurer under the group policy or certificate.
2. The repayment shall not exceed the amount of benefits
paid by the insurer under the group policy or certificate
for the particular illness or injury.
3. The group policy and certificate shall allow the covered
person to deduct from the repayment to the insurer the
reasonable pro-rata expenses incurred in effecting the
third party payment.
(b) Group policies and certificates providing health insurance may
exclude or reduce the health benefits payable to or on behalf of
a covered person to the extent that the covered person has
already received payment from a third party for past or future
health care costs for an illness or injury resulting from the
negligence or intentional act of such third party.
(c) Except as set forth in (b) above, no policy or certificate providing
group health insurance shall limit or exclude health benefits as
3
Each Insured then filed suit against the third party
responsible for his or her injury. At that time, a New Jersey
Department of Insurance Regulation permitted health insurance
policies to include reimbursement and subrogation clauses. N.J.
ADMIN. CODE tit. 11, § 4-42.10 (1993) (repealed August 5, 2002).2

-- 6 of 41 --

the result of the covered person’s sustaining a loss attributable to
the actions of a third party.
(d) Notwithstanding (a) or (b) above, disability income, long term
care and accidental loss benefits and blanket insurance shall not
be subject to subrogation or repayment of benefits received.
(e) Subrogation shall only be applicable when third party liability
benefits may exist, subject to the restrictions set forth above.
Levine paid $11,000 to settle her reimbursement claim,3
Bogurski placed $11,000 in escrow to settle her reimbursement claim,
and Edmondson paid $1,383.43 to settle his claim.
The Perreira decision held that the Department of Insurance4
Regulation, N.J. ADMIN. CODE tit. 11 § 4-42.10 (the “regulation”),
directly conflicted with the statute regulating deductions from plaintiff’s
awards in personal injury and wrongful death actions, N.J. STAT. ANN.
4
Each of the relevant health insurance policies had such a clause.
Consequently, when the Insureds sued their respective tortfeasors,
the Providers acted within the bounds of both the health insurance
policies and the Department of Insurance regulation by seeking
reimbursement from the Insureds for benefits paid under the health
insurance policies. The Insureds then paid a portion of their tort
settlement to the Providers to settle the reimbursement claims.3
Subsequent to these settlements between the Insureds and
the Providers, the New Jersey Supreme Court announced a decision
in Perreira v. Rediger, 778 A.2d 429 (N.J. 2001), holding that the
Department of Insurance regulation conflicted with a New Jersey
statute, and thus, was invalid. As a result, subrogation and4

-- 7 of 41 --

§ 2A:15-97 (2000) (the “statute”).
5
reimbursement provisions are no longer permitted in New Jersey
health insurance policies. Notwithstanding their earlier
settlements, the Insureds sued the Providers in New Jersey state
court to recover the amounts they paid to reimburse the Providers.
II. The District Court Proceedings
After being sued in New Jersey state court, the Providers
removed the cases to federal court claiming complete ERISA
preemption under section 502(a)(1)(B) of ERISA. The District
Court denied the Insureds’ motion to remand to state court.
Concluding that the question of removal was a “conceptually
unclear area of law,” the District Court nonetheless determined that
the Insureds sought to “recoup a benefit due under the plan,” and
thus, their claim was properly removed. The Court also denied the
Insureds’ request to certify the issue for appeal at that time.
The Providers also filed a motion to dismiss the claims.
First, the Providers claimed that ERISA preempted New Jersey’s
statute; therefore, the statute did not apply to ERISA-governed
plans. Second, they argued that the Perreira decision should not
be applied retroactively.

-- 8 of 41 --

The three McCarran-Ferguson factors are (1) whether the5
practice has the effect of transferring or spreading a policyholder’s risk;
(2) whether the practice is an integral part of the policy relationship
between the insurer and the insured; and, (3) whether the practice is
limited to entities within the insurance industry. See Rush Prudential
HMO, Inc. v. Moran, 536 U.S. 355, 366 (2002). These factors are no
longer used in determining whether a law is saved from ERISA
preemption. Kentucky Assoc. of Health Plans Inc. v. Miller, 538 U.S.
329, 341-42 (2003).
6
The District Court concluded that the New Jersey statute
was a statute “regulating insurance,” and thus, was “saved” from
ERISA preemption. First, as directed by the Supreme Court in
Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 50 (1987), the
District Court made the “common sense determination” that the
law was specifically directed toward the insurance industry because
it was intended to directly affect and regulate that industry.
Second, the Court tested the results of its common sense
determination by examining the three factors listed in the
McCarran-Ferguson Act and found that these factors supported the5
conclusion that the law regulated insurance. See Moran, 536 U.S. at
366. Thus, the District Court found that the law was “saved” from
ERISA preemption.
Having determined that New Jersey’s statute applied to
ERISA-governed plans, the District Court turned to the question of

-- 9 of 41 --

Under New Jersey law, all opinions are applied retroactively6
unless prospective application is deemed appropriate. See, e.g.,
Henderson v. Camden County Mun. Util. Auth., 826 A.2d 615, 620 (N.J.
2003). Thus, absent a specific finding that the Perreira opinion should
be limited to prospective application, the opinion would be applied
retroactively.
7
whether the Perreira decision should be applied retroactively. The
District Court determined that, under New Jersey law, prospective
application is appropriate only if: “(1) the parties and the6
community justifiably relied on the prior rule, (2) the purpose of
the new rule will not be advanced by retroactive application, and
(3) retroactive application of the rule may have an adverse effect
on the administration of justice.” (App. at 40 (citing Coons v.
American Honda Motor Co., 476 A.2d 763, 767 (1984))). Here,
the District Court concluded that the Perreira decision reflected
New Jersey’s existing law and was not new and unanticipated.
Consequently, it held that the Perreira decision applied
retroactively.
Following the denial of the motion to dismiss, the District
Court certified three issues for interlocutory appeal pursuant to 28
U.S.C. § 1292(b):
(1) whether the antisubrogation rule contained in
N.J.S.A. 2A:15-97, as interpreted by the New Jersey
Supreme Court in Perreira v. Rediger, 169 N.J. 339

-- 10 of 41 --

Although the District Court cited to the New Jersey Reports, we7
cite to the Atlantic Reporter for the Perreira decision throughout this
opinion. It should also be noted that the correct citation to the New
Jersey Reports for the Perreira decision is 169 N.J. 399.
8
(2001), applies to defendant health insurers because
it is not conflict preempted under ERISA section
514(a) because it is “saved” as a state law that
regulates insurance;
(2) whether Perreira v. Rediger, 169 N.J. 339
(2001), applies retroactively to plaintiffs’ pre-
Perreira health insurance plans; and,
(3) whether plaintiffs’ unjust enrichment claims for
monies taken pursuant to subrogation and
reimbursement provisions in their ERISA health
plans are claims for “benefits due” within the
meaning of ERISA section 502(a).7
We granted permission for the appeal (issues one and two)
and cross-appeal (issue three) on January 16, 2004 and have
jurisdiction pursuant to 28 U.S.C. § 1292(b).
III. The Removal Claim: Preemption under Section 502(a)
We address the cross-appeal first because it requires us to
examine our jurisdiction. We exercise plenary review over
challenges to our subject matter jurisdiction. Pryzbowski v. U.S.
Healthcare Inc., 245 F.3d 266, 268 (3d Cir. 2001). See also Arana
v. Ochsner, 338 F.3d 433, 437 (5th Cir. 2003) (en banc).
The Insureds brought their claims in New Jersey state court

-- 11 of 41 --

When addressing preemption under section 502(a) we are8
dealing with “complete preemption,” as opposed to “express
preemption” which arises under section 514 of ERISA. Pryzbowski, 245
F.3d at 270. Compete preemption is a jurisdictional concept, and is
distinguishable from questions which arise under section 514. Id. See
also, Barber v. UNUM Life Ins. Co., 383 F.3d 134, 141 (3d Cir. 2004)
(explaining express preemption under ERISA § 514(a)).
9
as state claims for unjust enrichment. Therefore, they claim,
federal jurisdiction is inappropriate and the cases should be
remanded to state court. In general, under the well-pleaded
complaint rule, it is true that the federal courts have federal
question jurisdiction only when a federal claim appears in the
complaint, and not when a federal preemption defense may
eventually be raised in litigation. Pryzbowski, 245 F.3d at 271.
Certain federal laws, however, including ERISA, so sweepingly
occupy a field of regulatory interest that any claim brought within
that field , however stated in the complaint, is in essence a federal
claim. In such cases, the doctrine of complete preemption provides
federal jurisdiction and allows removal to federal court. See Metro.
Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). State law claims
seeking relief within the scope of section 502(a) of ERISA are
within this select group of cases where Congress has completely
preempted an area of law. Metro. Life, 481 U.S. at 62-66;8

-- 12 of 41 --

10
Pryzbowski, 245 F.3d at 271-72. Thus, if the claim is one that falls
within section 502(a) of ERISA, removal to federal court is proper.
Id.
Section 502(a) allows a participant in an ERISA plan to
bring a civil action to “recover benefits due to him under the terms
of his plan, to enforce his rights under the terms of the plan, or to
clarify his rights to future benefits under the terms of the plan.” 29
U.S.C. § 1132(a)(1)(B). The District Court found that the
Insureds’ claims were actually claims for benefits due:
“[e]ssentially plaintiffs seek to regain the whole benefit provided
to them by defendants, including those amounts paid in subrogation
pursuant to the terms of the plans. . . . [T]his Court must determine
the content of the ERISA plan and whether the New Jersey
Supreme Court case in Perreira applies to the subrogation
provision in plaintiffs’ ERISA plans.” (App. at 193).
In Pryzbowski, we laid out a framework for determining
whether a case is completely preempted under section 502(a) of
ERISA. In order to ensure that Congress’s intent of giving section
502(a) “extraordinary preemptive force” was fulfilled, we utilized
the two categories of ERISA cases, originally set out by the

-- 13 of 41 --

11
Supreme Court in Pegram v. Herdrich, 530 U.S. 211 (2000).
Pryzbowski, 245 F.3d at 271. The first category involves cases
where the claim challenges the administration of, or eligibility for,
benefits. These cases fall within the scope of 502(a) and are
preempted. Id. at 273. The second group of cases challenges the
quality of the medical treatment performed and is not preempted.
Id. As noted by the District Court, this case does not fall squarely
within either category. Thus, we must look beyond the framework
set out in Pryzbowski to determine whether this case falls within
section 502(a).
At the time of the District Court’s ruling on the removal
question, May 28, 2002, no Court of Appeals had considered
whether the type of case before us was preempted under section
502(a) of ERISA. Since the District Court’s initial ruling,
however, the Fourth and Fifth Circuits have considered whether
similar cases are subject to preemption under ERISA. Arana, 338
F.3d 433; Singh v. Prudential Health Care Plan Inc., 335 F.3d 278
(4th Cir. 2003). Both Courts of Appeal held that the federal courts
are the proper forums for these disputes. In Arana, the Fifth
Circuit held that federal jurisdiction was proper in a case strikingly

-- 14 of 41 --

12
similar to the one here. There, the plaintiff claimed that under
Louisiana law his health insurance company had no right to
reimbursement of health benefits after the plaintiff recovered in a
tort action. The Court held that the plaintiff’s claim was properly
characterized as a claim for “benefits due” or to “enforce his rights
under the plan,” either of which would provide jurisdiction. Arana,
338 F.3d at 438. It described the situation as follows:
As it stands, Arana’s benefits are under something of
a cloud, for OHP is asserting a right to be
reimbursed for the benefits it has paid for his
account. It could be said, then, that although the
benefits have already been paid, Arana has not fully
‘recovered’ them because he has not obtained the
benefits free and clear of OHP’s claims.
Alternatively, one could say that Arana seeks to
enforce his rights under the terms of the plan, for he
seeks to determine his entitlement to retain the
benefits based on the terms of the plan. Id.
In Singh, the Fourth Circuit addressed whether claims of
unjust enrichment and negligent misrepresentation relating to
subrogation and reimbursement actions of the insurer were claims
for “benefits due.” Like the Fifth Circuit, the Fourth Circuit found
that ERISA controlled and removal was appropriate because
subject matter jurisdiction is not affected by “the fortuity of when
a plan term was misapplied to diminish the benefit.” Singh, 335

-- 15 of 41 --

13
F.3d at 291 (emphasis in original).
Here, the Insureds claim that they were entitled to certain
health benefits and that the Providers wrongly sought the return of
those benefits. Even more than in Arana, the Insureds’ claim here
is for benefits due. The Insureds have already paid back a portion
of their benefits. Thus, they claim essentially that they are entitled
to have certain health insurance claims paid under their ERISA
plans. It is impossible to determine the merits of the Insureds’
claims without delving into the provisions of their ERISA-
governed plans.
We agree with the reasoning of the Courts of Appeal for the
Fourth and Fifth Circuits. Where, as here, plaintiffs claim that their
ERISA plan wrongfully sought reimbursement of previously paid
health benefits, the claim is for “benefits due” and federal
jurisdiction under section 502(a) of ERISA is appropriate. Such a
rule comports with our earlier jurisprudence because, although not
directly analogous, such claims are more like challenges to the
“administration of benefits” than challenges to the “quality of
benefits received.” See Pryzbowski, 245 F.3d at 273.
Although the Insureds have attempted to characterize their

-- 16 of 41 --

The New Jersey Statute, N.J. STAT. ANN. § 2A: 15-97, reads:9
In any civil action brought for personal injury or death,
14
claim as one looking only at state law, the essence of the claim
concerns an ERISA plan. Therefore, we conclude that federal
subject matter jurisdiction is appropriate.
IV. Express Preemption Under Section 514 of ERISA
Next, we turn to the District Court’s denial of the Providers’
motion to dismiss. Our review of the District Court’s decision is
plenary. Pryzbowski, 245 F.3d at 268. We accept all factual
allegations in the complaint as true and draw reasonable inferences
from those allegations. Id.
The first issue is whether ERISA preempts the New Jersey
statute on which the Insureds’ claims rely. If ERISA preempts the
New Jersey statute, then the reimbursement provisions in the
Insureds’ health insurance policies stand, and the Insureds’ claims
must be dismissed. Because we find that this is indeed the case,
this issue is dispositive.
New Jersey Statute, section 2A:15-97, essentially reverses
the common law collateral source doctrine by requiring a plaintiff
who receives benefits from any source other than a joint tortfeasor
to deduct that amount from his or her recovery in any civil action.9

-- 17 of 41 --

except actions brought pursuant to the provisions of P.L.
1972, c.70 (C.39:6A-1 et seq.), if a plaintiff receives or
is entitled to receive benefits for the injuries allegedly
incurred from any other source other than a joint
tortfeasor, the benefits, other than workers’ compensation
benefits or the proceeds from a life insurance policy,
shall be disclosed to the court and the amount thereof
which duplicates any benefit contained in the award shall
be deducted from any award recovered by the plaintiff,
less any premium paid to an insurer directly by the
plaintiff, or any member of the plaintiff’s family on
behalf of the plaintiff for the policy period during which
the benefits are payable. Any party to the action shall be
permitted to introduce evidence regarding any of the
matters described in this act.
The Insureds failed to plead in their complaint whether such10
amounts were withheld from their settlements. Because all of the
Insureds settled their tort actions, we assume that such deductions would
have been made if they had proceeded to trial.
15
Thus, payments made by health care providers are deducted from
a plaintiff’s tort recovery under New Jersey law.10
Generally, a state law that “relates to” an ERISA-governed
plan is preempted by ERISA. 29 U.S.C. § 1144(a). ERISA’s
expansive express preemption rule—as distinguished from the
jurisdictional question of complete preemption discussed above—is
set forth in Section 514(a) of the Act, and provides that ERISA’s
regulatory structure “shall supersede any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan
[subject to ERISA].” 29 U.S.C. § 1144(a) (emphasis added). The

-- 18 of 41 --

These excluded scenarios are set forth in the “deemer” clause,11
and exempt certain self-funded ERISA plans from the reach of state laws
otherwise saved from preemption under the savings clause. The deemer
clause is not at issue here. See 29 U.S.C. § 1154 (b)(2)(B).
16
District Court has determined that the state law on which the
Insureds rely “relates to” the Insureds’ ERISA plans. That ruling
is not before us for review. The Insureds’ claims are thus
preempted unless they fall within an exception to Section 514(a).
The relevant exception here is Section 514(b)(2)(A), or the
“savings clause.” The savings clause provides that, apart from
particular scenarios not presented here, “nothing in [ERISA’s11
preemption provisions] shall be construed to exempt or relieve any
person from any law of any state which regulates insurance,
banking or securities.” 29 U.S.C. § 1144 (b)(2)(A) (emphasis
added). Accordingly, the key question before us is whether the
New Jersey law underlying the Insureds’ claims is a law “which
regulates insurance.”
The Supreme Court recently clarified the appropriate test for
determining whether a state law that relates to employee benefit
plans falls within the savings clause. In a 2003 decision, issued
after the District Court had made its preemption ruling in this case,
the Court directed that for a “state law to be deemed a ‘law . . .

-- 19 of 41 --

This second factor, of course, marks a departure from the12
Court’s earlier jurisprudence concerning the three McCarran-Ferguson
factors, on which the District Court’s decision was based.
17
which regulates insurance’ under § 1144(b)(2)(A), it must satisfy
two requirements.” Miller, 538 U.S. at 341-42. First, the state law
must be “specifically directed toward entities engaged in
insurance.” Id. Second, the state law must “substantially affect the
risk pooling arrangement between the insurer and the insured.”
Id.12
The Providers argue that the New Jersey statute applies to
“any civil action” and funds from “any other source,” and thus, it
is not specifically directed toward insurance. In Pilot Life
Insurance Co. v. Dedeaux, 481 U.S. 41 (1987), the Supreme Court
addressed a similar case where a state law had its primary effect on
insurers but was not limited to insurers. At issue in Pilot was
Mississippi’s law of bad faith. Even though the Mississippi
Supreme Court had identified its law of bad faith with the
insurance industry, the Supreme Court found that the law was
based in general tort and contract law, not insurance law. Id. at 49-
50. The law could apply in any breach of contract case, not merely
a breach of an insurance contract. Id. As a result, the law did not

-- 20 of 41 --

18
fall within the savings clause. Id.
Here, the District Court found, and the Insureds argue, that
the New Jersey statute is distinguishable from Pilot because it was
specifically intended to benefit the liability insurance industry.
Terming the statute an “anti-subrogation law,” the Insureds contend
that the statute is the result of a conscious tort reform effort by the
legislature that shows a choice to shift the burden for tort recovery
from liability insurers to health insurers. Although the legislative
history and the Perreira decision do indicate an intent to lighten the
burden on the liability insurance industry, we cannot say that the
New Jersey statute is “specifically directed toward the insurance
industry” for the purpose of the savings clause.
Before turning to the effect the statute has on New Jersey
insurance law, an examination of the statute itself indicates that it
is more than just an insurance regulation. New Jersey did not
define section 2A:15-97 as an “antisubrogation law,” nor did New
Jersey place this statute among the statutes regulating insurance.
Rather, the statute is entitled, “Personal injury or wrongful death
actions; benefits from sources other than joint tortfeasor;
disclosure; deduction from plaintiff’s award,” and is included in the

-- 21 of 41 --

19
portion of New Jersey’s statutes dealing with civil actions. The
plain language of the statute reveals that this statute is not limited
to regulating either health insurance or liability insurance
providers.
Additionally, examination of the driving intent behind the
statute shows that this case parallels the analysis in Pilot. As in
Pilot, a state supreme court described the law as one intended to
affect the insurance industry. Perreira, 778 A.2d at 436. Despite
this finding, the law here is a general law of civil procedure. The
New Jersey statute governs all civil actions, not merely those
involving insurance entities. Furthermore, even the Perreira Court
recognized that the primary purpose of the law was to disallow
double recovery by tort plaintiffs, not to regulate insurance
contracts. Id.
The statute’s general applicability is further exemplified by
its plain language. The statute applies in “any civil action” to
benefits received from “any other source.” As in Pilot, the New
Jersey law regulates non-insurance parties as well as insurance
entities. For example, a plaintiff would be required to report any
contribution, such as a private indemnity agreement, under the

-- 22 of 41 --

20
statute. Consequently, in some circumstances the statute will have
no effect on health insurers at all. Furthermore, the Insureds
heavily rely on the New Jersey legislature’s intent to reduce the
expense of liability insurance as evidence of the statute’s specific
intent to regulate the insurance industry. The statute, however,
applies in all civil actions, not merely those in which liability
insurers will pay the judgment. Thus, in some cases the statute will
benefit private tortfeasors, and not insurance entities. Accordingly,
as the Court found in Pilot, the New Jersey statute is merely one
that will usually, although not exclusively, be applied to regulate
insurance entities. See Pilot, 481 U.S. at 49-50. This is not
sufficient to avoid preemption under ERISA.
The Insureds argue that because the statute is “aimed at”
insurance entities, the requirements under the savings clause are
satisfied, even if in some cases the statute regulates non-insurance
entities. They direct us to several cases where the fact that a statute
is “aimed at” the insurance industry or intended to affect that
industry supports the conclusion that it is specifically directed
toward the industry. See, e.g., FMC Corp. v. Holliday, 798 U.S.
52, 61 (1990) (“[I]t does not merely have an impact on the

-- 23 of 41 --

21
insurance industry; it is aimed at it.”). Examination of these cases,
however, reveals a key difference from the case here: they
explicitly regulated insurance. Miller, 538 U.S. at 331-32 (“a
health insurer shall not discriminate against . . . ”); Moran, 536
U.S. at 359 (involving a section of Illinois’s HMO Act where
Congress specifically determined that HMOs were insurance
entities); Holliday, 498 U.S. at 55, n.2 (defining “coordination of
benefits” as “a policy of insurance”); Medical Mutual of Ohio v.
Desoto, 245 F.3d 561, 569 (6th Cir. 2001) (examining California’s
antisubrogation statute that was limited to cases against a health
care provider and contributions paid as the result of “health,
sickness or income-disability insurance, accident insurance”).
Although New Jersey’s statute may have been “aimed at” shifting
the burden of tort expenses from the liability insurance industry to
the health insurance industry, the statute explicitly regulates both
insurance and non-insurance entities. As in Pilot, we are faced
with a state statute that, although commonly identified with the
insurance industry, is not “specifically directed toward the
insurance industry.”
To avoid ERISA preemption a state law must be

-- 24 of 41 --

22
“specifically directed” toward the insurance industry. The New
Jersey statute is not. Because the New Jersey statute could be
applied to any contributor in any civil action, it is merely a statute
that has a significant impact on the insurance industry. As in Pilot,
this is not sufficient. ERISA preempts the application of New
Jersey’s statute; therefore, the District Court erred in denying the
Providers’ motion to dismiss.
V.
Because we conclude that ERISA preempts application of
New Jersey’s statute, we need not address the retroactivity of the
New Jersey Supreme Court’s decision in Perreira v. Rediger, 778
A.2d 429 (N.J. 2001). We hold that the Insureds’ claims are for
benefits due, and thus were properly removed to federal court. We
also hold, however, that ERISA preempts application of New
Jersey’s statute, and thus the District Court erred in denying the
Providers’ motion to dismiss. We reverse and remand with
instructions for the District Court to dismiss the cause.

-- 25 of 41 --

See generally Arana v. Ochsner Health Plan, 338 F.3d 43313
(5th Cir. 2003); Singh v. Prudential Health Care Plan, Inc., 335 F.3d
278 (4th Cir. 2003).
The statute provides:14
In any civil action brought for personal injury or death, except
actions brought pursuant to the provisions of P.L.1972, c. 70 (C.
39:6A-1 et seq.), if a plaintiff receives or is entitled to receive
benefits for the injuries allegedly incurred from any other source
other than a joint tortfeasor, the benefits, other than workers'
compensation benefits or the proceeds from a life insurance
policy, shall be disclosed to the court and the amount thereof
which duplicates any benefit contained in the award shall be
deducted from any award recovered by the plaintiff, less any
premium paid to an insurer directly by the plaintiff or by any
member of the plaintiff’s family on behalf of the plaintiff for the
policy period during which the benefits are payable. Any party to
the action shall be permitted to introduce evidence regarding any
Garth, Circuit Judge, dissenting:
This appeal, consisting of three consolidated actions,
principally concerns two separate preemption issues: express
preemption under § 514(a) of the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1144(a) (“ERISA”), and
complete preemption under § 502(a) of ERISA, 29 U.S.C. § 1132.
While I join Part III of the majority opinion because I agree that §
502(a) complete preemption exists, thereby establishing federal
subject-matter jurisdiction, I must respectfully dissent from Parts13
IV and V of the majority opinion because, in my view, the New
Jersey collateral source statute, N.J.S.A. 2A:15-97, is saved from14

-- 26 of 41 --

of the matters described in this act.
N.J.S.A. 2A:15-97.
Of the three provisions of § 514, which are set forth below, the15
first and third are not involved in this appeal. It is the second provision,
§ 514(b)(2)(A), which concerns the regulation of insurance, that this
appeal focuses upon.
“Except as provided in subsection (b) of this section [the saving
clause], the provisions of this subchapter and subchapter III of
this chapter shall supersede any and all State laws insofar as they
may now or hereafter relate to any employee benefit plan . . . .”
§ 514(a), as set forth in 29 U.S.C. § 1144(a) (pre-emption
clause).
“Except as provided in subparagraph (B) [the deemer clause],
nothing in this subchapter shall be construed to exempt or relieve
any person from any law of any State which regulates insurance,
banking, or securities.” § 514(b)(2)(A), as set forth in 29 U.S.C.
§ 1144(b)(2)(A) (saving clause).
“Neither an employee benefit plan . . . nor any trust established
under such a plan, shall be deemed to be an insurance company
or other insurer, bank, trust company, or investment company or
to be engaged in the business of insurance or banking for
purposes of any law of any State purporting to regulate insurance
companies, insurance contracts, banks, trust companies, or
-24-
express preemption under § 514(a) of ERISA as a state regulation
of insurance.
I.
Three provisions of ERISA § 514 speak directly to the
question of express preemption, the mechanics of which have15

-- 27 of 41 --

investment companies.” § 514(b)(2)(B), 29 U.S.C. §
1144(b)(2)(B) (deemer clause).
The two other clauses of § 514–the “preemption clause” and16
the “deemer clause”– are not the subject of the certified questions in this
appeal. See supra note 3.
-25-
been neatly summarized by the Supreme Court:
If a state law “relate[s] to . . . employee benefit plan[s],” it
is pre-empted. § 514(a). The saving clause excepts from the
pre-emption clause laws that “regulat[e] insurance.” §
514(b)(2)(A). The deemer clause makes clear that a state
law that “purport[s] to regulate insurance” cannot deem an
employee benefit plan to be an insurance company. §
514(b)(2)(B).
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45 (1987). Although
the express preemption analysis normally requires the application
of the three relevant provisions of § 514, the sole issue in this
appeal is whether the District Court erred as to the second step in
the analysis in finding that N.J.S.A. 2A:15-97 is “saved” from
preemption as a state statute that regulates insurance under §
514(b)(2)(A). Accordingly, I confine my discussion to that16

-- 28 of 41 --

Indeed, United and Horizon do not attempt such an argument.17
-26-
narrow issue.
II.
In Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S.
329, 341-42 (2003), the Supreme Court rejected the previous use
of the McCarran-Ferguson factors, and instead enunciated two
requirements for a state law to be deemed a “law . . . which
regulates insurance” under § 514(b)(2)(A). First, the state law
must “be specifically directed toward entities engaged in
insurance.” Id. at 342 (citing Pilot Life, 481 U.S. at 50; UNUM Life
Ins. Co. of Am. v. Ward, 526 U.S. 358, 368 (1999); Rush
Prudential HMO, Inc. v. Moran, 536 U.S. 355, 366 (2002)).
Second, the state law must “substantially affect the risk pooling
arrangement between the insurer and the insured.” Id.
Here, there is no serious dispute that state antisubrogation
laws spread policyholder risk and therefore satisfy the second
Miller requirement. See Singh, 335 F.3d at 286 (noting that “it is17

-- 29 of 41 --

-27-
difficult to imagine an antisubrogation law . . . as anything other
than an insurance regulation, as it addresses who pays in a given set
of circumstances and is therefore directed at spreading policyholder
risk”); Med. Mut. of Ohio v. deSoto, 245 F.3d 561, 574 (6th Cir.
2001) (“The logical effect of [antisubrogation laws] . . . is to
decrease the premiums of health care providers’ insurance and
increase the premiums of health insurance – i.e., spread risks.”).
What concerns us in this appeal, then, is whether the New Jersey
collateral source statute satisfies the first Miller requirement, i.e.,
that it is specifically directed towards the insurance industry.
Focusing solely upon the statutory language, the majority
concludes that the New Jersey collateral source statute is not
specifically directed to the insurance industry because its
definitions sweep too broadly and thereby encompass organizations
or entities that do not provide insurance. To be sure, the collateral
source statute does not specifically refer to health insurance or to
subrogation and reimbursement clauses. It is contained in Title 2A
of the New Jersey Statutes, which regulates the administration of
civil and criminal justice. Moreover, the statute applies to

-- 30 of 41 --

-28-
plaintiffs “in any civil action” who receive benefits for their
injuries from “any other source other than a joint tortfeasor.”
N.J.S.A. 2A:15-97. As the majority opinion notes, the term
“benefits received” thus encompasses more than just insurance
proceeds.
On the surface, therefore, this case would appear to present
a paradigmatic example of a law of general application that has
some bearing on insurers. Such laws do not qualify under the
“saving” clause jurisprudence. See Miller, 538 U.S. at 334.
However, the inquiry does not end here, for the New Jersey
Supreme Court has spoken in a rather definitive way as to the
legislative purpose of the collateral source statute. See Perreira v.
Rediger, 169 N.J. 399 (2001).
While recognizing that “[o]n its face, N.J.S.A. 2A:15-97 .
. . is silent regarding any right to subrogation or reimbursement on
the part of health insurers,” id. at 409, the Supreme Court in
Perreira determined that the statute had more than one purpose:
“To be sure, its primary purpose was to disallow double recovery

-- 31 of 41 --

In reviewing the legislative history, the Court placed particular18
emphasis on the Passed Bill Memo prepared by Governor’s counsel:
This bill attempts to reduce the cost of liability insurance by
reducing the likelihood of a ‘double recovery’ in a liability award
for items which were already compensated by insurance or by
other ‘collateral’ sources other than a tortfeasor.
Id. at 410 (quoting Passed Bill Memo to Governor Thomas H. Kean
(Dec. 7, 1987)).
-29-
to plaintiffs, but a secondary goal was clearly the containment of
spiraling insurance costs.” Id. at 410 (emphasis added). In
enacting N.J.S.A. 2A:15-97, the Court noted that the legislature
made a “separate legislative decision” as to which “segment of the
insurance industry” would be the beneficiary of the double
recovery disallowance. Id. As the legislative history reveals, the
Court noted, the choice was made to favor liability carriers. Id.18
at 411 (citing cases agreeing that purpose of statute was to shift
burden from casualty and liability insurance industry).
III.
I am persuaded that the foregoing statutory interpretation,
coming, as it does, from the State’s highest tribunal, compels the
conclusion that the New Jersey collateral source statute is

-- 32 of 41 --

-30-
“specifically directed” towards the insurance industry. In my view,
the majority opinion accords too little weight to such statements
from the New Jersey Supreme Court, focusing instead on the
admittedly broad statutory language. Our difference, then, is
mostly an hermeneutical one, centering on the interpretive import
of Perreira in ascertaining the aim of the statute.
In assigning minimal value to Perreira, the majority opinion
states that the mere fact that the New Jersey statute has an impact
on insurance, as settled in Perreira, is not enough to satisfy the
“specifically directed” requirement of the saving clause. Even if,
the majority argues, the New Jersey Supreme Court has identified
N.J.S.A. 2A:15-97 with the insurance industry, that does not
change the actual terms of the statute. See Pilot Life, 481 U.S. at
50 (holding common law of bad faith not saved from preemption
“[e]ven though the Mississippi Supreme Court has identified its
law of bad faith with the insurance industry”). According to the
majority opinion, the collateral source statute thus resembles the
Mississippi law at issue in Pilot Life. This analogy, however,
misses the critical distinction between the two provisions.

-- 33 of 41 --

-31-
Under the relevant state law in Pilot Life, punitive damages
could be sought for “bad faith” in denying claims without any
reasonably arguable basis for the refusal to pay. 481 U.S. at 50.
The Supreme Court determined that although Mississippi had
“identified its law of bad faith with the insurance industry, the roots
of this law are firmly planted in the general principles of
Mississippi tort and contract law.” Id. “Any breach of contract,”
the Court observed, “and not merely breach of an insurance
contract, may lead to liability for punitive damages under [the
Mississippi common law of bad faith].” Id. Accordingly, the
Court concluded that the Mississippi law did not “regulat[e]
insurance” within the meaning of ERISA’s saving clause. Id.
The holding in Pilot Life was premised upon the finding that
“the roots of [the common law of bad faith were] firmly planted in
the general principles of . . . tort and contract law.” Id. at 50. Pilot
Life, contrary to the majority’s reading, did not involve a situation
where “a state supreme court described the law as one intended to
affect the insurance industry.” Majority Op. at 19. The Mississippi
Supreme Court never stated that its common law of bad faith was

-- 34 of 41 --

-32-
specifically directed towards the insurance industry; it merely
applied that longstanding law to the insurance context. Pilot Life,
481 U.S. at 49-50. Under these circumstances, the Supreme Court
quite properly held that “a common-sense understanding of the
phrase ‘regulates insurance’ does not support the argument that the
Mississippi law of bad faith falls under the saving clause.” Id. at
50.
Common sense dictates otherwise here. This case involves
a statutory enactment, which, according to the New Jersey
Supreme Court, was clearly rooted in legislative concerns about
spiraling insurance costs. The New Jersey Supreme Court was
emphatic in emphasizing insurance in its opinion:
The effectuation of no-double-recovery [by N.J.S.A. 2A:15-
97] therefore required a separate legislative decision
regarding which segment of the insurance industry would be
the beneficiary of that disallowance. The Legislature had
two choices: to benefit health insurers by allowing
repayment of costs expended on a tort plaintiff, or to benefit

-- 35 of 41 --

-33-
liability carriers by reducing the tort judgment by the
amount of health care benefits received. As the legislative
history reveals, the choice was made to favor liability
carriers. See Kiss v. Jacob, 138 N.J. 278, 282 (1994)
(stating that intent of the legislature was to control spiraling
automobile-insurance costs); Fayer v. Keene Corp., 311
N.J. Super. 200, 208, 709 A.2d 808 (App. Div.1998)
(agreeing that purpose of statute is to shift burden to health
industry); Parker v. Esposito, 291 N.J. Super. 560, 565, 677
A.2d 1159 (1996) (stating that purpose of collateral source
statute is to prevent double recovery thereby giving relief
from increasing costs of liability insurance); Lusby v.
Hitchner, 273 N.J. Super. 578, 591, 642 A.2d 1055 (App.
Div.1994) (stating that legislative determination “was
apparently not only to prevent plaintiffs from obtaining a
double recovery but also, except where PIP payments are
involved, to shift the burden, at least to some extent, from
the liability and casualty insurance industry to health and
disability third-party payers”).

-- 36 of 41 --

The relevant statute – Section 1720 of the Pennsylvania Motor19
Vehicle Financial Responsibility Law – “prohibits insurance providers
from obtaining reimbursement payments from recoveries an insured
receives from third parties in a motor vehicle accident.” Bill Gray
-34-
Perreira, 169 N.J. at 410-11.
While the Supreme Court has held that “laws of general
application that have some bearing on insurers do not qualify,”
Miller, 538 U.S. at 334, the New Jersey collateral source statute
presents the inverse proposition–it is a law specifically directed
towards the insurance industry that has some bearing on non-
insurers. As such, it “homes [sic] in on the insurance industry and
does ‘not just have an impact on [that] industry’.” Ward, 526 U.S.
at 368 (quoting Pilot Life, 481 U.S. at 50). Because the New Jersey
statute had its genesis in specific legislative action, as opposed to
general principles of tort or contract law, the majority opinion’s
reliance on Pilot Life is entirely misplaced.
For these reasons, I believe that this case more closely
resembles FMC Corp. v. Holliday, 498 U.S. 52 (1990), where the
Supreme Court dealt precisely with the question of whether a state
antisubrogation law was saved from preemption under §19

-- 37 of 41 --

Enters., Inc. Employee Health & Welfare Plan v. Gourley, 248 F.3d 206,
213 n.4 (3d Cir. 2001).
-35-
514(b)(2)(A). There, the Court held that:
There is no dispute that the Pennsylvania [antisubrogation]
law falls within ERISA’s insurance saving clause . . . [The
antisubrogation law] directly controls the terms of insurance
contracts by invalidating any subrogation provisions that
they contain. It does not merely have an impact on the
insurance industry; it is aimed at it. This returns the matter
of subrogation to state law. Unless the statute is excluded
from the reach of the saving clause by virtue of the deemer
clause, therefore, it is not pre-empted.
498 U.S. at 60-61 (citations omitted).
Likewise, the Sixth and Fourth Circuits reached the same
conclusion in considering whether similar state antisubrogation
laws regulated insurance. See Singh, 335 F.3d at 286 (holding that
subrogation prohibition of the Maryland HMO Act is a state-law
regulation of insurance); deSoto, 245 F.3d at 573 (holding that

-- 38 of 41 --

Because I would hold that the New Jersey collateral source20
statute is saved from ERISA preemption, I would be obliged to reach the
third certified question for interlocutory appeal. That question concerns
whether Perreira, which held that the statutory collateral source rule
prohibits health insurers from filing reimbursement or subrogation liens
against individual settlements or recoveries from third-party tortfeasors,
-36-
California’s antisubrogation statute regulated insurance); see also
Hampton Indus., Inc. v. Sparrow, 981 F.2d 726, 729-30 (4th Cir.
1992) (noting that “limits on subrogation recoveries appear to be
aimed at the insurance industry, and therefore would also appear to
come within the scope of the saving clause”).
Contrary to the majority, I conclude that our understanding
of the New Jersey collateral source statute must be informed by the
New Jersey Supreme Court’s interpretation. In the interpretive
light cast by the Supreme Court in Perreira, the New Jersey
collateral source statute is, in all essential respects, similar to those
statutes already held to regulate insurance by the United States
Supreme Court (FMC Corp.) and our two sister courts of appeals
(Singh and de Soto).
Accordingly, I conclude that the New Jersey collateral
source statute is saved from ERISA preemption.20

-- 39 of 41 --

applies retroactively to the health insurance plans at issue in this appeal.
This is a difficult issue, and more than that, the resolution of it
could be outcome determinative in this appeal. As a result, I believe that
the proper course for this Court to take would be to certify the issue of
retroactivity to the New Jersey Supreme Court. Under New Jersey Court
Rule 2:12A-1., the New Jersey Supreme Court may answer such a
question if “there is no controlling appellate decision, constitutional
provision or statute in this State.” N.J. Ct. R. 2:12A-1. The use of
certification “rests in the sound discretion of the federal courts.”
Lehman Bros. v. Schein, 416 U.S. 386, 391 (1974). Such discretion, in
my judgment, would be warranted here.
-37-
Because I would affirm the District Court’s holding that §
514 of ERISA does not preempt N.J.S.A. 2A:15-97, I respectfully
dissent from Part IV of the majority opinion, and from Part V of
the majority opinion, which directs the District Court to dismiss the
Insureds’ claims.

-- 40 of 41 --

-- 41 of 41 --