Blue Cross and Blue Shield of New Jersey v. Philip Morris USA

Twenty health insurers brought an action against several tobacco companies under the New York Consumer Protection Act (CPA) seeking recovery of medical costs resulting from the companies' alleged fraudulent misrepresentations of the health effects of smoking. On appeal, the Court certified two questions of law arising from the CPA for resolution by the New York Court of Appeals: (1) whether damages claimed by an insurance company that ultimately rest on harm to the company's insureds rather than to the company itself are too indirect to support legal action under the consumer protection statute; and (2) whether the consumer protection statute requires an insurance company to offer proof of harm to individual insureds to sustain an action alleging harm to the company.  The Court of Appeals held that the insurance company lacked standing to bring a claim on its own behalf under the CPA.  In deciding the standing issue, the Court found that the harm caused to the insurance company itself, as a derivative claim wholly dependent upon the harm inflicted upon its insureds, was too remote to sustain an independent action.

Blue Cross and Blue Shield of New Jersey, Inc., et al. v. Philip Morris USA, Incorporated, et al., 818 N.E.2d 1140, 3 N.Y.3d 200 (N.Y. 2004).

  • United States
  • Oct 19, 2004
  • Court of Appeals of New York

Parties

Plaintiff Blue Cross and Blue Shield of New Jersey, Inc., Now Known as Horizon Healthcare Services, Inc., Doing Business as Blue Cross Blue Shield of New Jersey and Others, et al.

Defendant

  • Others
  • Philip Morris USA Incorporated

Legislation Cited

Related Documents

Type of Litigation

Tobacco Control Topics

Substantive Issues

Type of Tobacco Product

None

"Under common law, an insurer or other third-party payer of medical expenditures may not recover derivatively for injuries suffered by its insured. Rather, the insurer's sole remedy is in equitable subrogation. "Subrogation is the principle by which an insurer, having paid losses of its insured, is placed in the position of its insured so that it may recover from the third party legally responsible for the loss" (Winkelmann v Excelsior Ins. Co., 85 NY2d 577, 581 [1995] [citations omitted]; see also Allstate Ins. Co. v Stein, 1 N.Y.3d 416 [2004]; Great Am. Ins. Co. v United States, 575 F2d 1031, 1033 [2d Cir 1978] ["There is not a single reported case in American jurisprudence . . . which holds that upon an insurance carrier's payment to its insured, the insurer becomes vested with a claim arising out of an implied contract of indemnity with the tortfeasor who caused the damage necessitating payment by the carrier to the insured. On the contrary, the authorities and the cases unanimously hold that the insurer's recovery is premised exclusively upon subrogation"]). Nevertheless, plaintiff argues that, in enacting General Business Law § 349, the Legislature intended to abrogate the common-law rule and permit recovery for derivative injuries. But neither the text of the statute nor the legislative history reflect an intent by the Legislature to authorize insurers to bring their own direct (nonsubrogated) actions based upon injuries to their insureds. "It is axiomatic concerning legislative enactments in derogation of common law, and especially those creating liability where none previously existed, that they are deemed to abrogate the common law only to the extent required by the clear import of the statutory language" (Morris v Snappy Car Rental, Inc., 84 NY2d 21, 28 [1994] [citation omitted]). To be sure, the language of the statute permits recovery by any person injured "by reason of" a deceptive business practice [3 N.Y.3d 207] (§ 349 [h]). But we will not presume an intent to include recovery for derivative injuries within the scope of the statute in the absence of a clear indication of such intent from the Legislature. Indeed, we have warned against "the potential for a tidal wave of litigation against businesses that was not intended by the Legislature" (Oswego, 85 NY2d at 26). Moreover, allowing plaintiff's claim would effectively eliminate subrogation actions under section 349 — a result which nothing in the legislative history shows was ever intended."