As published in Subrogator Magazine
By: Constance Archer, Esquire and Jamie L. Izlar, Esquire, Equian, LLC
Pennsylvania’s state law limitations on subrogation and reimbursement have long limited the recovery of medical expenses for many types of health insurance plans (e.g., self-funded state and local government and church plans, insured ERISA plans, individual plans, etc.). Laws such as the Pennsylvania Motor Vehicle Financial Responsibility Law (MVFRL) and Medical Care Availability and Reduction of Error Fund (MCARE) prohibit many plans from recovering for medical expenses incurred in motor vehicle accidents or as a result of medical malpractice, respectively. Pennsylvania courts continue to define the rights of plans that pre-empt such state law provisions, which include Medicare Advantage plans, federal employee health plans, and self-funded ERISA plans. Until recently, the boundaries of a health insurer’s subrogation and reimbursement rights under the Pennsylvania wrongful death statute were left undefined by Pennsylvania courts.
In a case of first impression before the Superior Court of Pennsylvania, the Court en banc held that a wrongful-death claim under the Pennsylvania Wrongful Death Act is not subject to a self-funded ERISA Health and Welfare Plan’s claim for reimbursement of medical and disability benefits paid during a decedent’s lifetime. In an opinion written by Superior Court Judge Jacqueline O. Shogan on October 25, 2017, the Court reasoned that the deceased’s contractual obligation to the Welfare Fund does not transfer to the wrongful-death claim. The Court opined that the decedent’s spouse and minor daughter did not receive any benefits from the Welfare Fund related to the decedent’s injuries. The Court further found that the wrongful-death claim is distinct and separate from the injured person’s personal injury claim and exists for the benefit of the decedent’s spouse, children, and/or parents.
Overview of Rickard v. American National Property and Casualty Company
Mr. and Mrs. Rickard were debtors in bankruptcy when Mr. Rickard was involved in an automobile accident that rendered him paraplegic. The bankruptcy court authorized Mr. Rickard to pursue a claim for $250,000 in underinsured motorists (UIM) benefits. However, the court retained the right to approve or deny any settlement connected to the bankruptcy.
Mr. Rickard’s employer sponsored a self-funded ERISA-qualified employee welfare benefit plan (the Plan or the ERISA Plan) that paid $279,498.03 in medical and disability payments. Pursuant to its contract language, the Plan asserted a lien in that amount on any settlement obtained.
After the UIM carrier tendered the $250,000 policy limits, the Rickards petitioned the bankruptcy court to approve the proposed settlement and distribution. The court declined to approve the settlement because it failed to include any distribution of the proceeds to the ERISA Plan for its subrogated interest. Two days later, Mr. Rickard died. The next day, the bankruptcy attorney returned the $250,000 check to the UIM carrier. One week later, the bankruptcy court dismissed the bankruptcy proceedings as no settlement had been achieved.
Acting as administratrix for herself and her minor daughter, widowed Mrs. Rickard made a new claim under the Pennsylvania Wrongful Death Act for the UIM limits. The UIM carrier again tendered the full amount of coverage and Mrs. Rickard petitioned in Pennsylvania state court for distribution of the UIM settlement proceeds. The court denied the petition holding that collateral estoppel barred the distribution as the issue before the state court was “virtually identical to the issue decided by” the bankruptcy court. The court also held that, in the alternative, the ERISA Plan’s claim was superior to that of Mrs. Rickard and her attorney. Mrs. Rickard appealed. The appellate court affirmed the lower court’s denial. Mrs. Rickard then applied for reargument en banc, which the court granted.
The Pennsylvania Superior Court en banc determined collateral estoppel did not apply because 1) the issue decided in the bankruptcy court, which involved a living person in receipt of medical benefits under the ERISA Plan, was not identical to the issue presented under the Pennsylvania Wrongful Death Act; 2) the bankruptcy court neither approved the settlement nor addressed the merits of whether the ERISA Plan’s subrogation lien attached to a wrongful death suit, which constituted a “wholly new claim”; 3) the decedent’s minor daughter, who had not been a party to the initial bankruptcy proceedings, had a separate right of recovery distinct from her mother’s claim, and she could not be estopped from asserting her claim as a statutory beneficiary; and 4) neither Mrs. Rickard nor her daughter had a “full and fair” opportunity to litigate the issue of whether the ERISA Plan’s lien attached to their wrongful death recovery, as the recovery right of wrongful death benefits did not exist prior to the entry of the bankruptcy court’s order. Accordingly, the issue sought to be precluded “was not before the bankruptcy court, could not have been brought before the bankruptcy, and therefore, was not decided by the bankruptcy court.”
Applying U.S. Airways, Inc. v. McCutchen to Pennsylvania Wrongful Death Claims
In Rickard, the Pennsylvania Superior Court rejected the applicability of US Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013) to Mrs. Rickard’s and the minor daughter’s wrongful death claim, opining that McCutchen involved a plan’s right to recover from a living plan participant’s bodily-injury settlement in which medical benefits were paid on the decedent’s behalf. In Mrs. Rickard’s and her daughter’s case, in contrast, “the funds were obtained on behalf of statutorily enumerated beneficiaries pursuant to the Pennsylvania Wrongful Death Act.”
Citing the Supreme Court case, the lower court seemingly based its alternative view of ERISA plans on the fact that with the appropriate language and plan documents, an ERISA plan may enforce its subrogated lien interests for the entire amount of the settlement, such that the decedent’s spouse, minor daughter, and their attorney(s) receive no portion of the wrongful death recovery. However, the Superior Court disagreed, summarizing the history of Pennsylvania courts and how Pennsylvania law distinguishes between 1) survival actions, brought by the administrator or legal person of the decedent’s estate to recover loss to the decedent herself/himself for the benefit of the estate, and 2) wrongful death actions, which may be brought by the personal representative of those persons statutorily entitled to receive damages under the statute (i.e., the decedent’s family, consisting of the spouse, children or parents) to compensate for their loss resulting from the decedent’s wrongful death.
The Superior Court clarified that while a wrongful death claim belongs exclusively to the decedent’s beneficiaries and is meant to compensate them for pecuniary and emotional losses resulting from the decedent’s death, a survival claim is for damages the decedent suffered prior to death. In short, “[b]ecause the claims are separate and distinct, and because the wrongful death action ‘bears no relation to the damages recoverable by a decedent who sues for the injury while living,’” the Court found that that the decedent’s contractual obligation relating to subrogation or reimbursement to the Welfare Fund did not transfer to the wrongful-death claim.
Pennsylvania law provides separate and distinct causes of action for wrongful death and survival claims. It is unclear what persuasive value the decision will have in states where wrongful death and survival actions have merged or where medical expenses are recoverable in wrongful death actions. Additionally, the Court relying, in part on an Ohio case, hinted that there may be some opportunity to contract around these state law limitations. However, the argument would seem to be an uphill battle unless the plan could show that the party bringing the wrongful death claim benefitted from the health plan’s payments (e.g., the party received Plan benefits; is a “covered individual”; or the party is a covered individual’s representative under the terms of the Plan, etc.) . Proving that a decedent’s spouse, children, and/or parents benefitted from the decedents health plan may have some limited applicability, such as where a minor’s medical expenses accrue in favor of the parents.
Conclusion and Healthcare Reimbursement Post-Rickard
Moving forward, in light of the recent Rickard holding, health plans may better protect their rights within the boundaries of Pennsylvania’s subrogation law by always confirming whether a wrongful death or survival action is being pursued. Moreover, if there is an unallocated gross settlement for the wrongful death and survival actions, request an allocation of the settlement proceeds between the wrongful death and survival claims. The health plan will have a right of subrogation or reimbursement to the amount of the proceeds allocated to the survival claim. Although from the outset the Rickard case may appear to limit health plans’ recovery rights within the boundaries of Pennsylvania’s subrogation law, Rickard provides helpful guidance on increasing the potential for a recovery in a wrongful death case.
 See Pennsylvania’s Motor Vehicle Financial Responsibility Law, 75 Pa. Cons. Stat. Ann. § 1720 (2017); see also 40 Pa. Stat. Ann. § 1303.508 (2017) (applying MCARE).
 Rickard v. Am. Nat’l Prop. & Cas., 2017 PA Super. 340; see also Pennsylvania Death Action, 42 Pa. Cons. Stat. Ann. § 8301 (2017).
 Under the Pennsylvania wrongful death statute, recovery passes to a limited group of statutory beneficiaries, including “the spouse, children or parents of the deceased.” 42 Pa. Cons. Stat. Ann. § 8301(b), supra n. 2.
 In contrast, President Judge Emeritus, John T. Bender wrote a dissenting opinion in which Judge Jack A. Panella and Judge Anne E. Lazarus joined, opining that the lower court properly applied collateral estoppel. Rickard, supra n. 2 at 9-11.
 Pennsylvania Survival Action, 42 Pa. Cons. Stat. Ann. § 8302 (2017).
 Rickard, supra n. 2; see 42 Pa. Cons. Stat. Ann. § 8301 (Death Action), supra n. 2; 42 Pa. Cons. Stat. Ann. § 8302 (Survival Action), supra n. 5.
 Rickard, supra n. 2 at 6 (discussing Estate of Shackelford, 63 N.E.3d 584, 589 (Ohio Ct. App. 2016), where an Ohio court observed a plan’s subrogation and reimbursement clause holding that “[t]he clause does not relate to any payment, settlement, or judgment received by statutory wrongful death beneficiaries they sustained as a result of the wrongful death of the covered person; nor does it relate to damages of the statutory wrongful death beneficiaries.” (emphasis omitted).
 See Hathi v. Krewstown Park Apartments, 561 A.2d 1261, 1262 (PA Super. 1989), quoting Olivieri v. Adams, 280 F.Supp. 428, 429 (E.D. Pa. 1968)) (holding that a personal injury to a minor in Pennsylvania gives rise to two causes of action: “one the parent’s claim for medical expenses and loss of the minor’s services during minority, the other the minor’s claim for pain and suffering and for losses after minority.”).
 Rickard, supra n. 2 at 7 (analyzing Estate of Shackelford, 63 N.E.3d at 591 (Ohio Ct. App. 2016), where the Ohio Court of Appeals reversed the probate court’s decision to allow an ERISA plan to “assert its lien against the unallocated gross settlement of both the wrongful death and survival actions” with the following instructions: “first allocate the settlement proceeds between the wrongful death and survival claims, and then and only then, apply the Plan’s subrogation and reimbursement clause to the amount of proceeds allocated to the survival claim.”).