New York Governor Signs Legislation Prohibiting ERISA Liens on Settlement Proceeds

McGivney & Kluger, P.C.

On November 13, 2013, the Governor of New York signed legislation which clarifies the scope of General Obligations Law (“GOL”) Section 5-335. As a result of this amendment, ERISA plans are prohibited from asserting liens against settlement proceeds in personal injury, medical malpractice and wrongful death actions.

This legislation was motivated by the legislature’s finding that the “settlement of certain types of claims have been impeded as a result of health insurers’ attempts to intervene into pending litigation, as well as similar attempts to institute subrogation and reimbursement actions against litigants. As a result, settlement of claims made by accident victims and others are imperiled and prevented, thus causing undue burdens and pressures upon the court system. In addition, defendants in such actions are being subjected to claims made by health insurers, exposing them to additional liability.”

Amendments to GOL Section 5-335 previously enacted in 2009 were made for the purpose of protecting “parties to the settlement of a tort claim from certain unwarranted lien, reimbursement and subrogation claims.” However, the United States District Court for the Eastern District of New York, in Wurtz v. Rawlings Co., LLC, 2013 WL1248631 (E.D.N.Y), has held that this legislation was preempted to the extent it applies to any insured employee benefit plan covered by the Employee Retirement Income Security Act of 1974 (“ERISA”).

The November 13th amendment to GOL Section 5-335 is intended to define the purpose of the “general obligations law which is to ensure that insurers will not be able to claim or access any monies paid in settlement of a tort claim whether by way of a lien, a reimbursement claim, subrogation, or otherwise so that the burden of payment for health care services, disability payments, lost wage payments or any other benefits for the victims of torts will be borne by the insurer and not any party to a settlement of such a victim’s tort claim.This law is specifically directed toward entities engaged in providing health insurance, thus falling under the ‘savings’ clause contained in ERISA, which reserves to the states the right and the ability to regulate insurance.”

Please do not hesitate to contact Greg Gaines of McGivney & Kluger, PC at ggaines@mklaw.us.com with any questions regarding this important legislation