Many situations involving insurance claims also involve issues dealing with subrogation and liens. Here is a little information for insurance lawyers who might have to deal with subrogation.
Subrogation is an element of insurance law. In 1944, the United States Supreme Court in the case styled, United States v. South-Eastern Underwriters Association, determined that insurance is a form of interstate commerce subject to federal regulation. Shortly thereafter, Congress passed the McCarran-Ferguson Act, which is found in U.S.C.S., Section 1011. The McCarran-Ferguson Act granted authority to the states to regulate the “business of insurance.” Various federal laws continued to govern the “peripherals of the industry” These peripherals included labor, tax, and securities. State laws which regulated the core nature of the insurance business thereafter overrode most federal laws to the contrary. There are numerous papers written designed to analyze the myriad of state and federal statutes and cases on the subject of subrogation, from the standpoint of lawyers and in particular lawyers handling cases involving personal injury.
In an attempt to harmonize the proliferation of insurance policies and laws to protect workers, Congress passed the Employee Retirement and Income Security Act, commonly known as ERISA, in 1974. ERISA did not vitiate the McCarran-Ferguson’s grant of state regulation; it did spawn a spate of lawsuits trying to determine which state laws qualify as state regulation, which is not pre-empted by ERISA, and which laws deal with peripheral issues, which are preempted by ERISA. ERISA also recognized that some health plans are self-funded, not funded by insurance premiums, and those plans are exempt from state regulation.
The shifting of risk through the payment of premiums is the most fundamental principle of insurance. Subrogation is a bastardization of that risk-shifting principle. Therefore, subrogation should come within the “core business” of insurance and be subject to state regulation for all premium funded insurance policies.