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SC District Court Holds That S.C. Code Ann. § 38-77-160 Is Preempted By ERISA

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  • SC District Court Holds That S.C. Code Ann. § 38-77-160 Is Preempted By ERISA

    So apparently, the "subrogation" forum is no longer visible or active, so I'm reposting in the main thread here.

    In Zell v. Neves et al, the plaintiffs sued an ERISA Plan seeking a declaration that the the South Carolina statute that prohibited subrogation against UIM proceeds barred the Plan's lien. The Plan removed the case to federal court and moved to dismiss for the plaintiff's failure to exhaust administrative remedies. The plaintiff countered with a motion to remand arguing that the removal was improper because the plan was not self-funded. The Court disagreed and found that the Plan's designation of stop loss insurance within the Form 5500 did not mean that the Plan was insured for purposes of ERISA's savings clause. As a result, the Court applied ERISA's deemer clause and the Supreme Court's decision in FMC Corp. v. Holliday, 498, U.S. 52, 57 (1990) to easily find that S.C. Code Ann. § 38-77-160 is preempted by ERISA. Finding that the removal was proper, the Court went on to decide the motion to dismiss for failure to exhaust administrative remedies. Then applying the Fourth Circuit's holding in Singh v. Prudential Health Care Plan, Inc., 335 F.3d 278, 290 (4th Cir. 2003) that subrogation disputes relate to benefits and must be exhausted, the district court dismissed the Plaintiff's claims for failing to first exhaust them with the Plan. A copy of the decision is attached.
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