Dismissal of Guaranty Fund’s Request for Declaratory Judgment as "Applicable Plan" Affirmed

In Illinois Ins. Guar. Fund v. Becerra, 2022 U.S. App. LEXIS 12320, the U.S. Court of Appeal for the Seventh Circuit addressed a declaratory judgment sought by Illinois Insurance Guaranty Fund ( “the Fund”). The Fund, which covers claims for insolvent workers’ compensation insurers in Illinois, sought a declaratory judgment finding that they are not subject to the MMSEA Section 111 reporting requirements. The Fund believed that it was not an "applicable plan" and, as a result, did not need to make such reports. The lower court dismissed the request, citing a lack of subject matter jurisdiction to determine their status as an applicable plan, finding that the Fund can obtain judicial review of their claim by utilizing the administrative appeals process established under 42 U.S.C. § 405(g). As you may recall, in CIGA v. Burwell, which was published in 2017, the Ninth Circuit addressed a similar claim made by the California Insurance Guarantee Association (CIGA), the Californian counterpart to the Fund. The Ninth Circuit determined that CIGA was not obligated to reimburse CMS for conditional payments. However, it is important to note, as the Court did here, when CIGA filed suit, the four tier appeals process has not yet gone into effect, meaning that the initial determinations from CMS that were sent to CIGA allowed for CIGA’s path to judicial review. The Fund, however, has the administrative appeals process available as a means to make their claim.

As such, the Court agreed with the lower court’s finding that subject matter jurisdiction did not exist, given that the Fund did not exhaust the available administrative remedies prior to bringing the suit. The Court determined that, “the Fund can obtain judicial review of its claim in a federal court only by channelingits appeal through the administrative process providedunder 42 U.S.C. § 405(g).” The Court recognized the potential increase of cost and delay for the Fund, but found that both precedent and prudent policy precludes the Fund’s request for a shortcut. As a result, the Court affirmed the lower court’s dismissal of the matter based on a lack of subjected matter jurisdiction.