Bonuchi Law

Supreme Court of Missouri’s Coventry epilogue.

Nevils v. Group Health Plan, Inc., SC93134 (Mo. July 11, 2017), marks the end of a three-year, four-part series of appellate decisions between the Supreme Court of Missouri and the Supreme Court of the United States about the preemptive force of the Federal Employee Health Benefits Act (FEHBA). If you're looking to drill down on how and when the combination of an act of Congress and the Constitution’s Supremacy Clause can nullify (preempt) a State’s law, the Coventry/Nevils opinions aren't a bad place to start.

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The lawsuit arose after Coventry enforced a lien against settlement proceeds Nevils obtained on a personal injury claim. Nevils claimed that the insurance company’s attempt to recover medical expenses it paid on his behalf violated Missouri's consumer protection law because it was barred by Missouri’s anti-subrogation law. The trial court dismissed the suit, finding that the FEHBA clearly expressed Congress’s intent to preempt state anti-subrogation laws specifically to allow insurers of federal employees to recover expenses it paid from related personal injury claims. The provision at hand stated:

The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.

The Supreme Court of Missouri reversed. It held that the subrogation rights did “not relate to the nature, provision, or extent of coverage or benefits” and thus Congress wasn’t sufficiently clear that anti-subrogation provisions were to yield to FEHBA. Coventry petitioned the Supreme Court of the United States for certiorari. While the petition was pending, the government agency charged with enforcing FEHBA answered Nevils I by promulgating a rule stating that in fact subrogation rights did relate to coverage and benefits.

SCOTUS granted Coventry's petition, vacated Nevils I, and remanded the case so the Supreme Court of Missouri could reconsider its holding in light of the new governmental rule. But in Nevils II, Missouri's high court came to the same conclusion it had before and added that its wasn't bound by the federal agency’s post hoc rule of interpretation.

Back to SCOTUS the case went. Again, the Court set aside the Supreme Court of Missouri’s opinion. It adopted the government’s (and Coventry’s) position that Congress had clearly expressed its desire to have FEHBA preempt State anti-subrogation law. Notably, the Court stuck to the face of the statute, bypassing any analysis of whether the agency rule spurned by Missouri was due Chevron deference.

Practice Tip: The interplay between state and federal laws weaves a tangled web, particularly in tort litigation. The involvement of a federally-backed entity or a federal employee (or even the spouse of one) obviously gives rise to any number of potentially dispositive issues. So counsel should make sure their matter-initiation and case-vetting processes can ferret out any hidden federal angles.