LEONEL SERIO v. FIDELITY GUARANTY INSURANCE UNDERWRITERS INC.
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1152-18T1
LEONEL SERIO,
Plaintiff-Respondent,
v.
FIDELITY & GUARANTY
INSURANCE UNDERWRITERS,
INC., d/b/a TRAVELERS
INSURANCE COMPANY,
Defendant-Appellant,
and
NYSA-ILA WELFARE FUND,
Intervenor-Respondent.
_____________________________
Submitted December 18, 2019 – Decided February 14, 2020
Before Judges Whipple and Mawla.
On appeal from the Superior Court of New Jersey, Law
Division, Essex County, Docket No. L-5125-14.
Law Offices of William E. Staehle, attorneys for
appellant (Peter J. Dahl, on the brief).
Ginarte Gallardo Gonzalez Winograd, LLP, attorneys
for respondent Leonel Serio, join in the brief of
appellant Fidelity & Guaranty Insurance Underwriters,
Inc.
Marrinan & Mazzola Mardon PC, and The Lambos
Firm, LLP, attorneys for intervenor-respondent NYSA-
ILA Welfare Fund (John Philip Sheridan and James
Robert Campbell, on the brief).
PER CURIAM
Plaintiff Leonel Serio was injured in a motor vehicle accident on July 23,
2008. Because the party at fault was underinsured, Serio filed a complaint
seeking to recover the resultant medical expenses from his own insurance
carrier, Fidelity & Guaranty Insurance Underwriters, Inc. (Fidelity), with whom
he had underinsured motorist benefits.
At the time of the accident, Serio was employed by Maher Terminal, and
he filed a claim for disability benefits arising out of the accident. Serio received
$13,624 from the New York Shipping Association – International
Longshoremen's Association Welfare Fund (NYSA-ILA), the administrator of
his employer-provided health plan. NYSA-ILA argues it is entitled to
reimbursement for these funds, because, as a condition for the receipt of these
benefits, Serio signed a "Lien/Recovery Authorization" placing a lien on all
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2
recovery Serio received via "settlement, [j]udgment, arbitration award,
insurance proceeds[,] or other payment" arising out of the matter.
Fidelity moved to bar any evidence of the NYSA-ILA lien pursuant to the
collateral source rule, N.J.S.A. 2A:15-97, arguing the fund was not fully self-
funded and thus was not entitled to preemption by the federal Employee
Retirement Income Security Act (ERISA). Serio moved to bar the NYSA-ILA's
lien as invalid. NYSA-ILA then intervened in the litigation and opposed both
motions.
The motion judge entered orders barring evidence of the lien and holding
the lien to be invalid. NYSA-ILA appealed the orders, arguing that ERISA
preempts the collateral source rule. Because the court did not grant oral
argument, which was requested by Fidelity should the motion be opposed, which
it was, we remanded to the Law Division for oral argument. 1
On remand, the case was assigned to a different judge, who, after hearing
oral argument, denied Fidelity's motion, holding the NYSA-ILA Welfare Fund
was an ERISA plan, and that New Jersey's collateral source rule is preempted
by ERISA. Fidelity now appeals. We affirm.
1
Serio v. Fidelity & Guar. Ins. Underwriters, Inc., No. A-0055-16 (App. Div.
Dec. 21, 2017).
A-1152-18T1
3
On appeal, Fidelity argues the collateral source statute is saved from
ERISA preemption because it is a law geared toward the regulation of insurance,
and that NYSA-ILA is subject to the collateral source rule because it is not
completely self-funded. We disagree.
"A trial court's interpretation of the law and the legal consequences that
flow from established facts are not entitled to any special deference."
Manalapan Realty v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)
(citations omitted). Because the present case implicates only issues of law, our
review is de novo.
At issue is whether N.J.S.A. 2A:15-97 is preempted by ERISA. N.J.S.A.
2A:15-97 eliminates the possibility of double-recovery by requiring a deduction
"from any tort judgment the amount received by plaintiff from collateral sources
(other than workers' compensation and life insurance) less any insurance
premiums plaintiff has paid." Perreira v. Rediger, 169 N.J. 399, 409 (2001).
There is a multi-step analysis to determine whether a state law is preempted by
ERISA. 29 U.S.C. § 1144. 2 Three provisions of ERISA are relevant. First, 29
U.S.C. § 1144(a), commonly referred to as the preemption clause, provides:
2
The United States Supreme Court has noted the ERISA preemption clause is
not without issues. "We indicated in Metropolitan Life Insurance Co. v.
Massachusetts, 471 U.S. 724 (1985), that these provisions 'are not a model of
A-1152-18T1
4
Except as provided in subsection (b) of this section, the
provisions of this subchapter and subchapter III shall
supersede any and all [s]tate laws insofar as they may
now or hereafter relate to any employee benefit plan
....
Second, 29 U.S.C. § 1144(b)(2)(A), the saving clause, provides:
Except as provided in subparagraph (B), nothing in this
subchapter shall be construed to exempt or relieve any
person from any law of any [s]tate which regulates
insurance, banking, or securities.
Finally, 29 U.S.C. § 1144(b)(2)(B), the deemer clause, provides:
Neither an employee benefit plan . . . nor any trust
established under such a plan, shall be deemed to be an
insurance company . . . or to be engaged in the business
of insurance . . . for purposes of any law of any [s]tate
legislative drafting.' Id. at 739. Their operation is nevertheless discernible."
FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990). While somewhat difficult to
discern, the U.S. Supreme court has simplified the preemption clause as follows:
It establishes as an area of exclusive federal concern the
subject of every state law that "relate[s] to" an
employee benefit plan governed by ERISA. The saving
clause returns to the [s]tates the power to enforce those
state laws that "regulate insurance," except as provided
in the deemer clause. Under the deemer clause, an
employee benefit plan governed by ERISA shall not be
"deemed" an insurance company, an insurer, or
engaged in the business of insurance for purposes of
state laws "purporting to regulate" insurance companies
or insurance contracts.
[Ibid.]
A-1152-18T1
5
purporting to regulate insurance companies [and]
insurance contracts. . . .
The first step in determining preemption by ERISA is whether the subject
statute, N.J.S.A. 2A:15-97, "relate[s] to any employee benefit plan[.]" 29 U.S.C.
§ 1144(a). The United States Supreme Court has considered that "a state law
relates to an ERISA plan 'if it has a connection with or reference to such a plan.'"
Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001) (quoting Shaw v. Delta Air
Lines, Inc., 463 U.S. 85, 97 (1983)). The Supreme Court has required courts to
consider the "'objectives of the ERISA statute as a guide to the scope of the state
law that Congress understood would survive,' as well as to the nature of the
effect of the state law on ERISA plans" when deciding whether the law relates
to an ERISA plan. Ibid. (quoting Cal. Div. of Labor Standards Enf't v.
Dillingham Constr., 519 U.S. 316, 325 (1997)).
In O'Brien v. Two West Hanover Co., 350 N.J. Super. 441, 448 (App. Div.
2002), we stated "[g]iven the breadth of the preemption clause and the United
States Supreme Court's expansive interpretation of it, we have little doubt that
ordinarily New Jersey's collateral source rule is also preempted by ERISA."
Federal courts have agreed. See Bd. of Trs. of Plumbers & Pipefitters Local
Union No. 9 Welfare Fund v. Drew, 445 F.App'x 562, 568 (3d Cir. 2011) ("New
Jersey's collateral source statute is preempted by ERISA's explicit preemption
A-1152-18T1
6
clause because it 'relates to' an ERISA plan and does not even purport to 'regulate
insurance' within the meaning of the saving clause.") (citation omitted);
Danowski v. United States, 924 F. Supp. 661, 672 (D.N.J. 1996) (concluding
that, in that case, N.J.S.A. 2A:15-97, was preempted by ERISA.).
On this issue, the legislative history of the statute is instructive. Perreira,
169 N.J. at 409. The New Jersey Senate Judiciary's Committee statement to the
bill, then known as S. 2708, declared:
The traditional "collateral source rule" holds that
damages awarded in a suit for personal injury or
wrongful death should not be reduced because the
insured claimant has received insurance proceeds or
other compensation covering the same injuries. In
effect a claimant is paid twice for the same injury.
[Id. at 409-10 (quoting Statement by Senate Judiciary
Committee (October 30, 1986)).]
The Committee clarified S. 2708 "would eliminate the collateral source rule and
require that awards for personal injury be reduced by any compensating benefits
which the plaintiff has received from other sources." Id. at 410 (quoting
Statement by Senate Judiciary Committee (October 30, 1986)).
Generally, awards in civil suits are intended to
compensate injured persons for such things as loss of
wages, medical costs, and other costs which are
attendant to the injury. To the extent that the injured
party is being compensated for the same things from
different sources there is double recovery on the part of
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7
the plaintiff. This bill, by requiring that the benefits
received from the other sources be offset against the
award, is intended to effect cost containment.
[Ibid. (quoting Statement by Assembly Insurance
Committee (Sept. 1, 1987)).]
In Perreira, the Supreme Court determined the "[l]egislature had two choices: to
benefit health insurers by allowing repayment of costs expended on a tort
plaintiff, or to benefit 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." Id. at 410-11. Thus, as the statute
covers liability carriers, it relates to those who hold benefit plans. 3
The second step in considering ERISA preemption is to determine whether
N.J.S.A. 2A:15-97 regulates insurance. This "saving clause" is considered in
the U.S. Supreme Court case Kentucky Association of Health Plans, Inc. v.
Miller, 538 U.S. 329 (2003). There the court articulated the two-part Miller test
which requires that, for a law to be deemed as regulating insurance under §
1144(b)(2)(A), it "must satisfy two requirements. First, the state law must be
3
Both the motion judge and NYSA-ILA rest this issue on the determination of
the court in Carducci v. Aetna U.S. Health, 247 F. Supp. 2d 596 (D.N.J. 2003),
rev'd on other ground by Levine v. United Healthcare Corp., 402 F.3d 156 (3d
Cir. 2005). This reliance on Carducci is somewhat unnecessary, not because it
considers an impermissible case, but because there exist adequate grounds in
Perreira to establish that N.J.S.A. 2A:15-97 "relates to employee benefits."
A-1152-18T1
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specifically directed toward entities engaged in insurance. Second, as explained
above, the state law must substantially affect the risk pooling arrangement
between the insurer and the insured." Id. at 341-42 (internal citation omitted).
Fidelity argues the collateral source rule is not preempted because it falls
within ERISA's saving clause; specifically, it is a law directed at the insurance
agency. "It is well established in [the United States Supreme Court's] case law
that a state law must be 'specifically directed toward' the insurance industry i n
order to fall under ERISA's saving clause; laws of general application that have
some bearing on insurers do not qualify." Id. at 334 (citations omitted).
However, an examination of the statute itself indicates that it is more than
an insurance regulation. The New Jersey Legislature did not define N.J.S.A.
2A:15-97 as an "antisubrogation law," nor did New Jersey place this statute
among the statutes regulating insurance. 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 portion of
New Jersey's statutes dealing with civil actions. See generally N.J.S.A. 2A:15-.
A-1152-18T1
9
The plain language of the statute reveals that this statute is not limited to
regulating either health insurance or liability insurance providers. 4
Based on the foregoing, the motion court properly found N.J.S.A. 2A:15- -
97 is preempted by ERISA. The final step, addressing the deemer clause, is thus
unnecessary, as 29 U.S.C. § 1144(b)(2)(B) is only relevant if N.J.S.A. 2A:15-97
was not preempted. Notwithstanding that, we briefly address the third prong of
the inquiry.
"[A] self-insured ERISA plan is not 'deemed' an insurance company and
is thus exempt from state law regulating insurance by ERISA's 'deemer' clause."
White Consol. Indus., Inc. v. Lin, 372 N.J. Super. 480, 484 (App. Div. 2004)
(citing 29 U.S.C. § 1144(b)(2)(B)). Here, the motion judge found NYSA-ILA
disability benefits are "wholly self-funded," hence, NYSA-ILA is not an
insurance company and is exempt from state law regulating insurance. Fidelity
asserts that while NYSA-ILA's disability benefits are self-funded, the other
benefits are not.
4
Moreover, the statute covers benefits received from any sources, not merely
insurance. Woodger v. Christ Hosp., 364 N.J. Super. 144, 151 (App. Div. 2003)
(citing Kiss v. Jacob, 138 N.J. 278, 282 (1994)) (noting N.J.S.A. 2A:15-97
covers benefits from employment contracts, worker's compensation acts,
Federal Employers' Liability Act, gratuities, social security, welfare, and
pensions under special retirement acts.).
A-1152-18T1
10
In White Consol., the court discussed that a plan would not lose its self-
funded status because it contracts with another company to provide
administrative services, or because it purchases health and other insurance
benefits for a limited class of non-New Jersey residents. 372 N.J. Super. at 486-
87 (citing United Food & Commercial Workers & Emp'rs Ariz. Health &
Welfare Tr. v. Pacyga, 801 F.2d 1157, 1162 (9th Cir.1986)). "As long as these
other types of insured benefits are separate and distinct from the self-funded
medical benefits provided under the [p]lan by [an employer] to its employees,
the [p]lan remains an uninsured, self-funded welfare plan for ERISA preemption
purposes." Id. at 487 (citing Pacyga, 801 F.2d at 1162). "[W]e hold that where,
as here, the medical benefits in question are provided under an employer's fully
self-funded employee health care plan, and other benefits purchased by an
insurance policy are completely separate from those health benefits, then the
plan is not deemed to be insurance for purposes of ERISA's insurance savings
clause. . . ." Id. at 488 (citing 29 U.S.C. § 1144(b)(2)(A)).
White Consol. involved a fund that was partially self-funded and that also
contracted for insurance. Id. at 484-85. That fund's plan included a
reimbursement and subrogation provision allowing the fund to be reimbursed
A-1152-18T1
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for benefits paid to participants from third-party recoveries. Id. at 485. Here,
the motion judge correctly reasoned:
even if Fidelity . . . was correct that the collateral source
rule is a law regulating insurance within the meaning of
ERISA's saving[] clause, . . . [it] is irrelevant . . .
because the particular benefits at issue in this case were
self-funded and the deemer clause relieves the fund
from the collateral source rule.
Affirmed.
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