# Petition for Writ of Certiorari — UNUM Life Ins. Co. of America v. Ward > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0180%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1999 - **Citation:** 526 U.S. 358 ## Text Supreme Court, U,8, FILED it 971868 way 201998 oem In THE Supreme Court of the United States OCTOBER TERM, 1997 UNUM LIFE INSURANCE COMPANY OF AMERICA, y. Petitioner, JOHN E. WARD, Respondent. Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit PETITION FOR A WRIT OF CERTIORARI Of Counsel: TAMARRA T. RENNICK Litigation Counsel UNUM LIFE INSURANCE COMPANY OF AMERICA 2211 Congress Street Portland, ME 04122 (207) 770-2211 LESLEY C. GREEN RUSSELL G. PETTI BANNAN, GREEN & FRANK LLP 555 South Flower Street 44th Floor Los Angeles, CA 90017 (213) 362-1177 Davip L. BACON Counsel of Record BENJAMIN I. DELANCY CHARLES M. DYKE THELEN, MARRIN, JOHNSON & Bripces LLP 833 So. Grand Avenue 84th Floor Los Angeles, CA 90071 (213) 621-9800 Attorneys for Petitioner UNUM Life Insurance Company of America WILSON - EPEsS PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001 QUESTIONS PRESENTED 1. Whether, in an opinion expressly acknowledging a circuit conflict—indeed, one affecting eight circuits—the Ninth Circuit erred in holding that a state law (the “notice-prejudice” rule) need not satisfy all three Mc- Carran-Ferguson Act criteria for the “business of insur- ance” in order to be saved from preemption under ERISA. 2. Whether the Ninth Circuit—contrary to the law in nine other circuits—erred in holding that a state law survives ERISA preemption even though it conflicts not only with ERISA’s requirement that fiduciaries administer all plans “in accordance with” their written terms, but also with ERISA’s exclusive civil enforcement scheme by expanding the remedies beyond those expressly provided for in the Act. 3. Whether—also contrary to the law in other circuits —the Ninth Circuit erred in holding that ERISA does not preempt a state law (one incorporating agency principles) even though it conflicts not only with ERISA’s regulation of initial claims filing and processing and its allocation of fiduciary responsibility, but also with the remedies pro- vided in its exclusive civil enforcement scheme. (i) ii PARTIES The petitioner is UNUM Life Insurance Company of America (“UNUM”). The respondent is John E. Ward. Pursuant to Rule 29.6 of the Rules of the Supreme Court, petitioner states that UNUM Corporation is the parent of UNUM. UNUM Corporation has two non- wholly owned subsidiaries, Boston Compania Argentina de Seguros S.A. and UNUM Delaware Company. UNUM Life Insurance Company of America has one non-wholly owned subsidiary, SP Administrator, LLC. TABLE OF CONTENTS Page QUESTIONS PRESENTED oo ceeeccecceesseseesees i nel G2 ak le a Ra a aa ii I I as i 2 1 i a a a a 1 STATUTES AND REGULATIONS INVOLVED... 1 STATEMENT OF THE CASE cece 2 ee 2 B. The District Court Proceeding ............. 4 C. The Ninth Circuit’s Decision ......... 5 REASONS FOR GRANTING THE WRIT... 9 I. THE NINTH CIRCUIT’S ERISA PREEMP- TION DECISION CONFLICTS DIRECTLY WITH HOLDINGS IN THE THIRD, FIFTH, SEVENTH, EIGHTH, TENTH AND ELEV- EE Ue ee EE 9 Il. THE NINTH CIRCUIT’S PREEMPTION DE- CISION CONFLICTS DIRECTLY WITH NINE OTHER CIRCUITS WHICH ENFORCE WRIT- TEN PLAN PROVISIONS SUCH AS NOTICE Ill. THE NINTH CIRCUIT’S PREEMPTION DE- CISION COMPLETELY DISRUPTS THE UNIFORMITY OF LAW INTENDED aac Set 16 A. Disruptions Caused By The “Notice- Prejudice” Rule ..................... leon 18 IV. iv TABLE OF CONTENTS—Continued B. Disruptions Caused By The “Elfstrom” TD ccccrecimascistnentdhninncecetcnadinegieesemmnenacictorbennimatcinens THE NINTH CIRCUIT’S PREEMPTION DE- CISION IS AN ATTEMPT TO CIRCUMVENT THIS COURT’S CONTROLLING PILOT LIFE te ee THE QUESTIONS PRESENTED BY THIS PETITION HOLD IMPORTANT IMPLICA- TIONS FOR ERISA PLANS THAT SHOULD BE ADDRESSED BY THIS COURT ............... CORICIAIEIOIN necnenceescceceeccnsnsecvscoesntntiasinindentnensccosisannennnte APPENDIX St eee Ee eee a ee A Order of the Court of Appeals denying Petition for Rehearing, with Suggestion for Rehearing en Banc, entered March 23, 1998 ........... ~ Order of the District Court granting Summary Judgment, filed August 8, 1995. Declaration of John A. Houser, III And Portions of Exhibits In Support of Motions for Summary Judgment, filed June 26, 1995 ................ Exhibit Portions (MacQuarrie and Ward Deposi- tion Excerpts) to Declaration of Jeffrey P. Smith, Bo |} ars Peat eS eee District Court Complaint, filed September 19, 1994.. 18 S la 27a 77a v TABLE OF AUTHORITIES CASES Accardi v. Davidson, 469 U.S. 899 (1984)... Anschultz v. Connecticut General Life Ins. Co., 850 F.2d 1467 (11th Cir. 1988) 00000 Belasco v. W.K.P. Wilson & Sons, Inc., 883 F.2d NS ES ee ee Boggs v. Boggs, 117 S. Ct. 1754 (1997) Boyer v. Douglas Components Corp., 986 F.2d 999 SRE See Se eer ee ee. Brazinski v. Amoco Petroleum Additives Co., 6 3. EY ere Brezan v. Prudential Insurance Co. of America, 507 F. Supp. 962 (E.D.Pa. 1981) . Brewer v. Lincoln Nat'l Life Ins. Co., 921 F.2d 150 EE ae ee aE Burnham v. Guardian Life Ins. Co., 873 F.2d 486 (1st Cir. 1989) . California Div. of Labor ‘Standards Enforcement v. Dillingham Const., 117 S. Ct. 832 (1997)... Cefalu v. B.F. Goodrich Co., 871 F.2d 1290 (5th ERE a a Se ee Central States, Southeast and Southwest Areas Pension Fund v. Mississippi Warehouse Corp., 853 F. Supp. 1053 (N.D. Ill. 1994) Christie v. K-Mart Corp. Employees Retirement Pension Plan, 784 F. Supp. 796 (D. Kan. 1992) .. CIGNA Healthplan v. Louisiana, 82 F.3d 642 (5th Cir.), cert. denied, 117 S.Ct. 386 (1996)... Cisneros v. UNUM Life Ins. Co. of America, 134 fF ne ee Coleman v. Nationwide Life Ins. Co., 969 F.2d 54 (4th Cir. 1992) (same), cert. denied, 506 U.S. ET ee ee oe Curtis-Wright Corp. v. Schoonejongen, 514 U.S. oS Sno: es Davies v. Centennial Life Ins. Co., 128 F.3d 934 RE es as ee Davison v. Cook, 564 F. Supp. 225 (E.D. Va. 1983), aff'd. mem., 784 F.2d 10 (4th Cir. 1984). Dawes Mining Co. v. Callahan, 246 Ga. 531 0 vi TABLE OF AUTHORITIES—Continued Page DeBruyne v. Equitable Life Assurance Soc., 920 2° By, Vt Se ) ee 10 Dedeauz v. Pilot Life Ins. Co., 770 F.2d 1311 (5th Cir. 1985) soveesenesenusenneessnnetsnsesnnessensesnnecssnanenstennanssstts 8 District of Columbia v. The Greater Washington Bd. of Trade, 506 U.S. 125 (1992) .....................- 20 Doe v. Blue Cross & Blue Shield United, 112 F.3d ON Lt Sb . __, / Sane ne 13 Edwards v. Great-West Life Assur. Co., 20 F.3d Oy. + | | emer anen Se een 14 Elfstrom v. New York Life Ins., Co., 67 Cal.2d 503 CID a vscccrneecnnsnnteeteinetiindeasiatiiarianctiacsessiieimasiisaentl 5, 18, 22 First National Bank of Anson County v. Gatewood, eens Ts BS 28 Fort Halifax Packing Co. v. Coyne, 482 US. 1 om | TTT 2) Wa ES SS Group Life & Health Ins. Co. v. Royal Drug Co., P . ie | Sa eae 6,9 Heath v. Varity Corp., 71 F.3d 256 (7th Cir. . Ta a ree mk eee Howard v. Gleason Corp., 910 F.2d 1154 (2d Cir ‘ | ener PT ee ee Hunt v. Hawthorne Associates, Inc., 119 F.3d 888 CRD GR. BOT anccsncctce ci cccsenctnsneescnsdctrnsnincesstnmnes 14 Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 = | ee ae wees en Insurance Bd. v. Muir, 819 F.2d 408 (3d Cir “s DODD scicnictliickicncncoeephictnintinthissinictnehiilhncbecsitejebatectindentiimantiiae Jass v. Prudential Healthcare Plan, Inc., 88 F.3d oF 2. 9 A eee 18, 18, 20 Justice v. Bankers Trust Co., Inc., 607 F. Supp. I ES 22 Kelley v. Sears, Roebuck & Co., 882 F.2d 453 (10th es Tees a 10 Kennedy v. System One Holdings, Inc., 835 F Supp. 947 (S.D. Tex. 1998) .....-------ee 15 Kinkead v. Southwestern Bell Sick. & Acci. Corp. Disability Benefit Plan, 111 F.3d 67 (8th Cir. ” gp eS Se eee oe ee Laws v. Calmat, 852 F.2d 430 (9th Cir. 1988) ........ 16 vii TABLE OF AUTHORITIES—Continued Page Massachusetts Mutual Life Ins. Co. v. Russell, 478 SS 8, | er eee ra ee 16, 20 McKinsey v. Sentry Ins. Co., 986 F.2d 401 (10th EEE SE ae Le te 22 McMahan v. New England Mut. Life Ins. Co., 888 F.2d 426 (6th Cir. 1989) 00000 10 Member Services Life Ins. Co. v. Amer. National Bank and Trust Co., 130 F.3d 950 (10th Cir. eee se. TT Nee 14 Mertens v. Hewitt Associates, 508 U.S. 248 FIAT RE SE Coal oes TUS ee Sere es 11 Metropolitan Life Ins. Co. v. Henry, 217 Ind. 38 FRR OR EA PCRs ee ee ee SPE Cee 28 Metropolitan Life Ins. Co. v. Massachusetts, 471 — Ee ne See BES 6 Nachwalter v. Christie, 805 F.2d 956 (11th Cir. EAE ee Se ae te 14 National Conf. of Blue Cross-Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1996) 11, 16, 20, 28 Nazay v. Miller, 949 F.2d 1823 (3d Cir. 1991)... 13 Perkins v. Time Ins. Co., 898 F.2d 470 (5th Cir. EEE TO REE ee a TEL es se eee 20 Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 SS EE eT A 6, 12, 18, 16, 17 Pohl v. National Benefits Consultants, Inc., 956 ; F.2d 126 (7th Cir. 1992) 00 12, 14 Roe v. General American Life Ins. Co., 712 F.2d Sr 13 Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983). 12, 26 Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562 Et IRE ere ee ae eT ee ee 13 Tiger v. AT&T Tech. Plan for Employees’ Pen- Tingle v. Pacific Mut. Ins. Co., 996 F.2d 105 (Sth AS Seen ete SER A ET aT Tal Ee 7,9, 10 Turrill v. Life Ins. Co. of North America, 753 F.2d SS FR Sd Ls ee 8,19 Vaca v. Sipes, 386 U.S. 171 (1967) ne. - 8 vili ~ TABLE OF AUTHORITIES—Continued Page Varsic v. United States Dist. Ct., 607 F.2d 245 eS a ae 26 White v. Jacobs Engineering Group Long Term Disability Plan, 896 F.2d 344 (9th Cir. 1990)... 15 Williams v. UNUM Life Ins. Co. of Am., 118 F.3d OR, OR Ry RR enh Eee e ee eee 10 STATUTES AND REGULATIONS 0 Oe Bh eciitticntninanmmnnmnitiiie 2 ERISA § 2(a), 29 U.S.C. § 1001 (a) ........................ 29 ERISA § 3(16) (A) (B), 29 U.S.C. § 1002(16) (A) .. 2 ERISA §§ 401-414, 29 U.S.C. §§ 1101-1114 ............... 12 ERISA § 402(a) (2), 29 U.S.C. § 1102(a) (2) ......... 13 ERISA § 404(a) (1) (D), 29 U.S.C. §§ 1104(a) (1) ; | REESE ee aeRO Ferny \ a deere ERISA § 502(a) (1) (B), 29 U.S.C. § 1132(a) (1) EE ee eee eae 7, 8, 18, 24 ERISA § 608, 29 U.S.C. § L1BB 2... ccecceneeeecceeeene 2 ERISA § 504(a), 29 U.S.C. § 1144(a) ...................... 5, 8, 12 ERISA § 504(b) (2) (A), 29 U.S.C. § 1144(b) (2) ihe OD | cs iia, inci isteialiasisitenditiiinintiiiiantilinlnititibislencaittidiniatines ‘ ERISA § 504(b) (2) (B), 29 U.S.C. § 1144(b) (2) Pe OO ih Siiccshi csttiethintalichnittinnsitencsctitlandibiiileaiie BD C.F. B BESOBEB-1 CD) ~..2002200000000-000cccrcceesnesrcccessess 15 29 C.F.R. § 2560.508-1 (0) =~ (GD) ooo cccccccccccceneeeenenenes 25 29 C.F.R. § 2560.50B-1 (0) = (Gf) -....-.-ccccccccecccneneennnees 25 29 C.P.R. § 2660.503-1(G) (2) ..........-ccccccceeceeceeecnennnes 25 OTHER AUTHORITIES 13A George J. Couch et al., Couch Cyclopedia of Insurance Law § 49.49 at 276-77 (2d ed. 1982).. 27 In THE Supreme Court of the United States OcToBEeR TERM, 1997 No. UNUM Lire INsuRANCE CoMPANY OF AMERICA, » Petitioner, JouHNn E. Warp, Respondent. Petition for a Writ of Certiorari to the United States Court of Appeals for the Ninth Circuit PETITION FOR A WRIT OF CERTIORARI Petitioner, UNUM Life Insurance Company of America (“UNUM”), respectfully submits that a writ of certiorari should issue to review the judgment and opinion of the United States Court of Appeals for the Ninth Circuit in this case. OPINIONS BELOW The opinion of the Court of Appeals is reported at 135 F.3d 1276 (9th Cir. 1998), and is reprinted in the Ap- pendix (“App.”) at la to 25a. The Court of Appeals’ denial of UNUM’s petition for rehearing, with a sugges- tion for rehearing en banc, entered on March 23, 1998, is unreported. App. at 26a. The District Court's opinion granting summary judgment to UNUM (App. at 27a to 33a) is unreported. 2 JURISDICTION The Court of Appeals’ order denying UNUM'’s petition for rehearing, with a suggestion for rehearing en banc, was entered on March 23, 1998. This petition is being timely filed within 90 days of that date. This Court has jurisdic- tion pursuant to 28 U.S.C. § 1254(1). STATUTES AND REGULATIONS INVOLVED This case involves the statutes and regulations set forth at App. 99a to 108a. STATEMENT OF THE CASE A. Factual Background In February of 1983, UNUM issued a group long-term disability insurance policy to fund an employee welfare benefit plan (the “Plan”) sponsored by Management Analysis Company (“MAC”), an employer with multi- state operations. App. at 59a, 47a. Respondent John Ward worked for MAC in California, serving as its Presi- dent and Chief Executive Officer (“CEO”). App. at 2a, 78a, 83a to 86a. The Plan is covered by the Employee Retirement Income Security Act (“ERISA”). App. at 2a. While the employer-sponsor served as Plan Administrator,’ UNUM performed not only the Plan’s initial claims- handling and payment functions, but also the fiduciary review procedure for denied claims required by ERISA.’ The Plan explicitly stated that the employer serves as Plan Administrator and acts on its own behalf or as an agent for its employees, and not as UNUM’s agent. App. at 44a. A participant in the Plan since its inception in 1983, Ward concedes that he was aware of the Plan and had received from MAC in 1983 a certificate of coverage con- 1 App. at 18a; ERISA § 3(16)(A), (B), 29 U.S.C. § 1002(16)(A), (B). 2 App. at 39a; ERISA § 503, 29 U.S.C. § 1133. 3 taining the Plan’s summary plan description. App. at 2a. This certificate described not only the Plan’s benefits and requirements for eligibility and participation, but also the procedures and deadlines Ward had to follow in submit- ting claims to UNUM. App. at 4la to 43a. As CEO, Ward met annually with the company’s human resources division to review MAC’s insurance plans, including the Plan, and five months before his resignaticn he attended a company-wide meeting relating to MAC’s benefits at which a UNUM representative gave a summary of the Plan’s benefits. App. at 32a to 33a. Ward served as President and CEO of MAC until May 8, 1992, when he resigned upon the Board of Directors’ request over financial concerns about a particular com- pany project. App. at 27a. Ward asserts that by May of 1992, he had begun to experience a disabling condition, and that by December of that year he had received a medical diagnosis of his diabetes and alleged disability. In early 1993, he applied for and received state disability benefits, and alleges that he contacted MAC’s human resources division to discuss extension of his COBRA con- tinuation insurance. In July of 1993, he received a Social ~ Security Determination that he was eligible for Social Security benefits, a copy of which he sent to the human resources division. App. at 28a. Ward, however, did not submit a claim for plan bene- fits until April, 1994. UNUM received Ward’s notice and proof of claim form on April 11, 1994, nearly two years after the onset of his claimed disability. This was UNUM’s first actual notice of the claimed disability. App. at 38a. The Plan’s written notice and proof of claim provisions required a participant to submit to UNUM written notice of claim for plan benefits within 30 days of the date a disability starts, if possible, and a written proof of claim, at the latest, one year and 180 days after the onset of disability. App. at 42a to 43a. Ward’s notice of claim 4 was untimely by nearly 15 months, and his written proof of claim was submitted nearly five months after the Plan’s last deadline. App. at 5a. Accordingly, no benefits were “due” under the Plan’s written terms. Ward asserted, however, that he did not know about the “availability” of the Plan until April of 1994, when he claims he discovered his certificate of coverage among papers in his safety deposit box. App. at 3a. Ward also contended that MAC should be considered the “agent” of UNUM notwithstanding that MAC was the Plan Adminis- trator and the Plan expressly stated that MAC was not UNUM'’s agent; that MAC purportedly knew he was “dis- abled” by 1992 or 1993; and that this claimed knowledge should not only be imputed to UNUM but also free him from the Plan’s written requirements of timely written notice and proof of claim to UNUM. App. at 7a to 8a. After reviewing Ward’s claim for plan benefits and sup- porting materials, UNUM determined that he was inelig- ible because he did not submit his written claim within the Plan’s written time limits. UNUM notified him of its deci- sion in April of 1994; he, in turn, requested a review. App. at 29a, 90a to 95a. In the ERISA-required fiduciary review procedure for denied claims, UNUM upheld the decision to deny plan benefits. App. at 96a to 98a. B. The District Court Proceeding On September 15, 1995, Ward filed sut against UNUM and the Plan in United States District Court for the South- ern District of California to recover plan benefits under ERISA. App. at 77a to 98a. He did not assert a claim against MAC. On August 8, 1995, the District Court granted UNUM and the Plan summary judgment under ERISA. App. at 27a to 33a. The District Court held that the Plan’s written proof of claim provision required that proof of claim be filed with UNUM in writing within one year and 180 days after the onset of disability. and that Ward failed to comply with this provision. Additionally, 5 the District Court rejected Ward’s arguments that Califor- nia’s common-law “Elfstrom” rule* survived ERISA pre- emption and governed the payment of plan benefits. App. at 30a to 33a. The “Elfstrom” rule, if appliceble, would make MAC the “agent” of UNUM, imputing to UNUM any knowledge which the employer had of Ward’s disabil- ity and, also in Ward’s view, requiring the payment of benefits regardless of the fact that the Plan’s written proof of claim provision had been violated. Ward appealed. C. The Ninth Circuit’s Decision On appeal of the summary judgment, the Ninth Circuit reversed the District Court's decision on two grounds, the “Elfstrom” rule and California’s “notice-prejudice” rule. The Ninth Circuit’s holdings on both rules warrant a plenary review. The Ninth Circuit agreed that Ward failed to satisfy the Plan’s unambiguous written proof of claim provision. It then addressed Ward’s contention that the “notice- Prejudice” rule would preclude UNUM—the claims re- view fiduciary—from upholding the claim denial unless it could establish “actual prejudice” from the failure to comply with the proof of claim provision. The Ninth Circuit held that California’s common-law “notice-preju- dice” rule was within the scope of ERISA preemption as a state law which “related to” an employee benefit plan. ERISA § 514(a), 29 U.S.C. § 1144(a). It held, how- ever, that the rule was “saved” from ERISA’s preemption because it was a state law regulating insurance, ERISA §514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A), and therefore could be applied to Ward’s claim for plan bene- fits. In so doing, the Ninth Circuit followed its earlier decision in Cisneros v. UNUM Life Ins. Co. of America, 134 F.3d 939 (9th Cir. 1998) (“Cisneros”), App. at Sa * The rule takes its name from Elfstrom v. N Co., 67 Cal.2d 503, 505 (1967). . en See ae ap, 6 to 6a, a case in which a petition for writ of certiorari is being filed concurrently herewith.* In Cisneros, the Ninth Circuit had concluded that under Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 744 (1985), and Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48-50 (1987), ERISA’s “saving” clause may be applicable only if the state law clears two hurdles: a common-sense test that the law be “specifically directed at the insurance industry, and the “saving” clause require- ment that the law must “regulate insurance.” 134 F.3d at 944-945. To determine whether the state law regulated insurance, the Court analyzed whether it satisfies the three McCarran-Ferguson Act criteria for the “business of in- surance.” Id. at 945. Under these criteria as articulated by the Supreme Court, the state law must first have the effect of transferring or spreading the policyholder’s risk of loss to the insurer, “an indispensable characteristic of insurance.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 211-212 (1979). Second, the state law must be an integral part of the insurance policy relation- ship between insurer and insured. Third, it must be lim- ited to entities within the insurance industry. Metropolitan Life, 471 U.S. at 743; Pilot Life, 481 U.S. at 48-50, Ad- ditionally, to avoid a conflicts-preemption bar, the state law—even if it otherwise satisfies the “saving” clause— must not conflict with one of ERISA’s substantive provi- siens, including its exclusive civil enforcement scheme. Pilot Life, 481 U.S. at 51-57. In Cisneros, the Ninth Circuit found that California’s “notice-prejudice” rule did not transfer or spread the pol- icyholder’s risk of loss to the insurer, and thus failed to satisfy the first McCarran-Ferguson criterion. Finding that the rule satisfied the last two criteria, the court then held that ERISA’s “saving” clause would preserve a state common-law rule even though it did not satisfy all three criteria. 134 F.3d at 945-946. The Cisneros court ex- * Respondent has been provided a copy of the petition in the Cisneros case. 7 pressly acknowledged that its ERISA “saving” clause hold- ing conflicted with two decisions by the Fifth Circuit, CIGNA Healthplan v. Louisiana, 82 F.3d 642, 650 (Sth Cir.), cert. denied, 117 S.Ct. 386 (1996), and Tingle v. Pacific Mut. Ins, Co., 996 F.2d 105, 108 (Sth Cir. 1993). It stated: “We recognize that the Fifth Circuit has held that all three of the McCarran-Ferguson factors must be satisfied .... We... disagree.” 134 F.3d at 946, The Cisneros court also rejected UNUM’s arguments, based on Pilot Life, 481 U.S. at 51-57, that the “notice- prejudice” rule should nevertheless be preempted under conflicts-preemption because it conflicted with a number of ERISA’s key substantive provisions. UNUM pointed out that the rule would require the payment of plan bene- fits under circumstances where payment is barred not only by the Plan’s written terms, but also by ERISA’s fiduciary responsibility provisions requiring that plans must be ad- ministered “in accordance with” their written terms, and its exclusive civil enforcement scheme allowing suit for benefits only if “due” under those terms. ERISA §§ 404 (a)(1)(D), 502(a)(1)(B), 29 U.S.C. §§ 1104(a)(1) (D), 1132(a)(1)(B). UNUM also pointed out that the Cisneros holding would result in situations where a claim would be granted or denied depending on which state’s law applied. The Ninth Circuit acknoweldged a direct conflict between the “notice-prejudice” rule and ERISA, conceding that the rule caused “a plan's written terms [to be] altered,” caused “complications and extra burdens” on plan administration, and made the plan “more difficult to administer.” Furthermore, it acknowledged that the rule “differ[ed| markedly” in various states. 134 F.3d at 947 (emphasis added). Nevertheless, the court rejected UNUM’s argument that ERISA preempted the “notice- prejudice” rule. In addition to adopting the “notice-prejudice” rule, the Ward court held that ERISA did not preempt California’s 8 common-law “Elfstrom” rule® under which the employer, as administrator of a group insurance plan, is deemed the ‘agent” of the insurer and its knowledge is imputed to the insurer. Ward thus allowed two state law rules to penetrate ERISA’s regulatory sphere, in contrast to Cisneros. Sim- ilarly to the “notice-prejudice” rule, the “Elfstrom” rule would require the payment of plan benefits under circum- stances where payment is barred both by the Plan’s written terms and ERISA’s fiduciary responsibility and civil en- forcement provisions. The Ninth Circuit nevertheless held that the rule did not “relate to” an ERISA plan within the meaning of ERISA’s preemption clause in §514(a). It based this extraordinary holding on Turrill v. Life Ins. Co. of North America, 753 F.2d 1322 (Sth Cir. 1985), which preceded this Court’s 1987 landmark decision in Pilot Life, supra. App. at 16a to 20a. The Ninth Circuit inferred that Turrill, a 1985 diversity jurisdiction case, supported a holding of no ERISA preemption because the Fifth Circuit had discussed state law agency theory with- out, as the Ninth Circuit put it, “even hint{ing] that state agency law is somehow preempted by ERISA.” App. at 18a. This is hardly surprising, given that prior to Pilot Life the lower courts, including the Fifth Circuit, uni- formly—but incorrectly—held that ERISA did not pre- empt such claims. See, e.g., Dedeaux v. Pilot Life Ins. Co., 770 F.2d 1311 (Sth Cir. 1985), decided by the same three judge panel as Turrill, reversed by Pilot Life, supra. Pilot Life in 1987 held that state common-law ac- tions involving claims processing and the failure to pay benefits under an insured ERISA plan obviously “relate to” the plan because they have “‘a connection with or refer- ence to such a plan.’” It therefore held that ERISA pre- empted these claims both through the preemption clause in §514(a) and through the exclusivity of its civil en- forcement scheme in § 502(a). 481 U.S. at 47-48, 52-57. It was on this impliedly overruled and discredited Fifth Circuit authority that the Ninth Circuit relied in adopting state agency law in a suit for plan benefits. 5 Elfstrom v. New York Life Ins. Co., 67 Cal.2d 503, 505 (1967). 9 REASONS FOR GRANTING THE WRIT I. THE NINTH CIRCUIT'S ERISA PREEMPTION DE- CISION CONFLICTS DIRECTLY WITH HOLDINGS IN THE THIRD, FIFTH, SEVENTH, EIGHTH, TENTH AND ELEVENTH CIRCUITS. Once again, the Ninth Circuit has brought itself sharply into conflict with other Circuits on important federal is- sues which require unformity nationwide. The ERISA pre- emption decision on the “notice-prejudice” rule in Ward and Cisneros creates an acknowledged, direct conflict among holdings in the Circuits which only this Court can resolve. The Ninth Circuit's holding has engendered a similar holding in the Sixth Circuit but squarely conflicts with the holdings of the Fifth Circuit, which require a state law to satisfy all three of the McCarran-Ferguson Act fac- tors for the “business of insurance” in order to be “saved” from ERISA preemption. CIGNA Healthplan v. Loui- siana, 82 F.3d 642, 650 (Sth Cir.), cert. denied, 117 S.Ct. 387 (1996); Tingle v. Pacific Mut. Ins. Co. 996 F.2d 105, 108 (Sth Cir. 1993). The Cisneros decision pe gy poe this direct conflict. 134 F.3d at 946. In deed, conflict is even more widespread as shown Tingle’s observation that “(t]he Eleventh, Sixth, Tenth and Eighth Circuits have all held that a statute's failure to satisfy one or more of the Metropolitan Life factors excludes it from the ERISA saving insurance clause.” 996 F.2d at 110. Most recently in Davies v. Centennial Life Ins. Co., 128 F.3d 934, 940 (6th Cir. 1997), the Sixth Circuit acknowledged the widening Circuit conflict as to .hether all three McCarran-Ferguson factors are required, holding that “no single one is dispositive.” It followed Cisneros and provided a but see reference to the Fifth Circuit’s CIGNA decision. The Ninth Circuit’s holding that the “saving” clause does not require satisfaction of the first prong of the McCarran-Ferguson test—the actual spreading or trans- fer of the of loss—further conflicts with the of the Third, Seventh, Eighth, Tenth and Eleventh Cir- 10 cuits, all of which have uniformly ruled that state laws which fail to spread or transfer an insurance policyhold- er’s risk, an “indispensable characteristic of insurance,” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 211-213 (1979), are not saved from preemp- tion by ERISA § 514(b)(2)(A).° The Ninth Circuit’s preemption decision not only de- stroys the national uniform: y of law in plan administra- tion that is one of ERISA’s chief goals, but also causes a Circuit split that is certain to widen in the future and encompass additional state law rules. This Court need look no further than two companion cases involving petitioner UNUM for a sampling of what the Ninth Circuit has in store for ERISA preemption law and ERISA plan spon- sors. See Cisneros, petition for a writ of certiorari filed concurrently herewith (the same “notice-prejudice” rule at issue herein); Williams v. UNUM Life Ins. Co., 113 F.3d 1108, 1113 (9th Cir. 1997) (California’s “rolling accrual” proof of loss provision (each monthly failure to pay benefits constitutes a new cause of action) may void an ERISA plan’s limitation of actions provision). The Ninth Circuit’s reasoning in both of those cases is the same as its reasoning in the present case. It was because of the significant consequences the Ninth and Sixth Circuits’ new preemption holdings will have on * Insurance Bd. v. Muir, 819 F.2d 408, 412 (3d Cir. 1987) (state law which does not affect transfer of risk or satisfy any other McCarran-Ferguson Act factor is preempted); Tingle, 996 F.2d at 108 (state law which fails to transfer risk is preempted) ; McMahan v. New England Mut. Life Ins. Co., 888 F.2d 426, 428-30 (6th Cir. 1989) (state law which fails to transfer risk or satisfy third factor is preempted) ; DeBruyne v. Equitable Life Assurance Soc., 920 F.2d 457, 468-70 (7th Cir. 1990) (same); Brewer v. Lincoln Nat'l Life Ins. Co., 921 F.2d 150, 153-54 (8th Cir. 1990) (state law which fails to transfer risk is preempted); cert. denied, 501 U.S. 1238 (1991); Kelley v. Sears, Roebuck & Co., 882 F.2d 453, 455-56 (10th Cir. 1989) (state law which fails to transfer risk or satisfy second factor is preempted) ; Anschultz v. Connecticut General Life Ins. Co., 850 F.2d 1467, 1468-69 (11th Cir. 1988) (same). Il. THE NINTH CIRCUITS PREEMPTION DECISION CONFLICTS DIRECTLY WITH NINE OTHER CIR- CUITS WHICH ENFORCE WRITTEN PLAN PRO- VISIONS SUCH AS NOTICE REQUIREMENTS. Still another reason supports the granting of a writ of certiorari. In a direct clash with ERISA’s plain language and decisions from nine other Circuits, the Ninth Circuit's adoption of the “notice-prejudice” and “Elfstrom” rules will allow state common-law claims in one or more states to void a number of ERISA’s key substantive provisions and prohibit written plan notice requirements permitted by ERISA. In so doing, the decision not only destroys ERISA’s goals of a “uniform body of benefit law” and the “nationally uniform administration” of plans, National Conf. of Blue Cross-Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 657 (1996) (citation omitted) (em- phasis added) (“Travelers”), but also overlooks signifi- cant constraints which ERISA, this Court and the other Circuits have imposed on the adoption of state common- law principles in the employee benefit field. As set forth in more detail at pages 8 to 14 of the peti- tion for a writ of certiorari in Cisneros, ERISA is a “ ‘com- prehensive and reticulated statute,’ the product of a dec- ade of congressional study of the nation’s private em- ployee benefit system.” Mertens v. Hewitt Associates. 508 U.S. 248, 251 (1993) (citation omitted). One of ERISA’s purposes is to avoid a “multiplicity of regula- tion”, a “ ‘conflict in ... . law’” and ‘“ conflicting direc- tives’ ” between federal and state regulatory systems. Travelers, 514 U.S. at 656-657. ERISA contains a pre- emption clause in § 514(a) which, among other effects, 12 preempts state laws that “mandate[] employee benefit structures or their administration,” “prohibit” what is “permitted” by federal law, “preclude uniform administra- tive practice,” or provide “alternate enforcement mecha- nisms.” 29 U.S.C. § 1144(a); 514 U.S. at 657-658, 660. In striking a balance between competing federal and state interests, Congress made the administration of both in- sured and self-funded ERISA plans, including claims processing, “ ‘exclusively a federal concern.’” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987) (citation omitted). Congress intended to “minimize[] the need for interstate employers to administer their plans differently in each State in which they have employees.” Shaw vy. Delta Air Lines, Inc., 463 U.S. 85, 105 (1983). To ensure uniformity of law, Congress enacted a broad array of national, uniform fiduciary standards to govern the administration of both self-funded and insured ERISA plans. ERISA §§ 401-414, 503, 29 U.S.C. §§ 1101-1114, 1133. Indeed, Congress codified federal “trust” principles in ERISA not merely to ensure “uniformity,” but also to ensure that certain “plans, such as insured plans, which do not use the trust form as their mode of funding,” would be subject to the same exacting standards.’ Additionally, one “of ERISA’s purposes is to protect the financial integrity of pension and welfare plans by con- fining benefits to the terms of the plan as written.” Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 128 (7th Cir. 1992) (Posner, J.) ERISA’s “written plan instrument” rule, one of ERISA’s “core functional re- quirements,” Curtis-Wright Corp. v. Schoonejongen, 514 U.S. 78, 84 (1995), assists in ensuring the nationally uniform administration of plans. It requires that all plans—self funded and insured alike—be in writing and be administered by fiduciaries “in accordance with” their ‘H.R. Rep. No. 533, 93d Cong., Ist Sess. 12 (1973) 2 Legislative History of the Employee Retirement Income Security Act at 2259 (emphasis added). 13 written terms to the extent not inconsistent with ERISA. ERISA §§401(a), (b), 404(a)(1)(D), 29 U.S.C. §§ 1102(a), (b), 1104(a)(1)(D) (emphasis added). Moreover, ERISA’s exclusive civil enforcement provisions ensure the same goals, authorizing suit only if benefits are “due” under those written terms. ERISA § 502(a)(1)(B), 29 U.S.C. §1132(a)(1)(B); Pilot Life, 481 U.S. at 52-57. Apart from the Ninth Circuit, the Courts of Appeals have consistently carried forward ERISA’s goal of a uni- form national body of law to govern plan administration by holding that ERISA preempts state common-law “no- tice” rules or “notice” statutes, or state law agency rules, all of which vary from state to state. The decisions’ ra- tionale is that these state laws not only “relate to” ERISA plans, but also conflict either with the sponsor’s freedom of plan design or the Act’s comprehensive regulatory scheme. See, ¢.g., Nazay v. Miller, 949 F.2d 1323, 1336- 1337 (3d Cir. 1991) (ERISA preempts “notice-prejudice” rule with respect to self-funded plan); Howard v. Gleason Corp., 910 F.2d 1154, 1157-1158 (2d Cir. 1990) (ERISA preempts state statute requiring a terminated employee be notified of insurance conversion options) ; Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 571 (11th Cir.) (ERISA preempts state statute governing notice to insured of termination of coverage), cert. denied, 513 U.S. 808 (1994); Doe v. Blue Cross & Blue Shield United, 112 F.3d 869, 874-875 (7th Cir. 1997) (ERISA plan’s internal limitations period controls over state stat- ute); Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1488-1490 (7th Cir. 1996) (ERISA preempts state law agency claims related to a denial of plan benefits). * The plan documents, which include the “contract or other in- struments under which the plan is established or operate,” encom- pass group insurance policies. ERISA § 104(a)(1), (b)(2); see ¢.g., Belasco v. W.K.P. Wilson & Sons, Inc., 833 F.2d 277, 280 (11th Cir. 1987); Roe v. General American Life Ins. Co., 712 F.2d 450 (10th Cir. 1983). 14 Furthermore, other Circuits have consistently held that ERISA precludes the use of any state or federal doctrines —similar to the two state law rules involved here—that would cause a departure from the plan’s unambiguous written terms, or any of ERISA’s carefully-drawn statu- tory provisions which ensure uniformity in plan adminis- tration. See, e.g., Nachwalter v. Christie, 805 F.2d 956, 960 (1ith Cir. 1986) (“federal courts may not use state common law to re-write a federal statute”); Member Serv- ices Life Ins. Co. v. Amer. National Bank and Trust Co.., 130 F.3d 950, 957-958 (10th Cir. 1997) (courts cannot “rewrite [ERISA] to satisfy [their] proclivities”); Pohl, 956 F.2d at 128 (ERISA “confin{es] benefits to the terms of the plan as written”); Hunt v. Hawthorne Associates, Inc., 119 F.3d 888, 891 (11th Cir. 1997) (“{t]he corner- stone of an ERISA plan is the written instrument”); Edwards v. Great-West Life Assur. Co., 20 F.3d 748, 750 (7th Cir. 1994) (courts cannot “rewrit{[e] the plan”); Burnham v. Guardian Life Ins. Co., 873 F.2d 486, 490 (Ist Cir. 1989) (same); Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 56, 59 (4th Cir. 1992) (same), cert. denied, 506 U.S. 1081 (1993); Boyer v. Douglas Com- ponents Corp., 986 F.2d 999, 1005 (6th Cir. 1993) (same); Cefalu v. B.F. Goodrich Co., 871 F.2d 1290, 1295-1296 (5th Cir. 1989) (same). The Ninth Circuit’s decision on the “notice-prejudice” and “Elfstrom” rules not only directly conflicts with other Circuits, but also will spur additional litigation across the country as plan participants whose claims would be barred under the provisions of ERISA seek refuge in the more generous provisions of state law. If one or two judicial revisions of ERISA’s text governing fiduciary duties and civil enforcement are appropriate through artful but errone- ous readings of the preemption and “saving” clauses, plain- tiffs and the lower courts will ask, why not twenty? If twenty, why not two hundred? This departure from the national uniformity of law required by ERISA, the chaos in plan administration and the increased litigation and 15 transaction costs will only lead plan sponsors to a reduc- tion or elimination of benefits, Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 13 (1987), all in conflict with the “public interest in encouraging the formation of em- ployee benefit plans,” Pilot Life, 481 U.S. at 54. As explained in more detail at pages 12-14 of the peti- tion in Cisneros, the Ninth Circuit’s decision frustrates yet another principle central to ERISA’s statutory scheme— the orderly internal resolution of benefit disputes as a pre- requisite to filing suit under the Act’s civil enforcement system. Notice of claim deadlines are not only standard features of many ERISA plans, but they also protect against the difficulties of proof, expenses and errors asso- ciated with stale claims.’ A plan’s written procedures and time limits for the filing of ERISA claims,”’ no less than the ERISA fiduciary review procedure required by § 503, are essential steps in the plan’s administrative remedies.” A significant part of this Court’s Pilot Life holding is that ERISA suits must be regarded as arising under federal law in a manner similar to those under § 301 of the Labor- Management Relations Act (“LMRA”). 481 U.S. at 55- 56. Under § 301, an agreement’s administrative remedies — including its written requirements and time limits for filing a claim—must be followed as a prerequisite to filing ® Central States, Southeast and Southwest Areas Pension Fund v. Mississippi Warehouse Corp., 853 F.Supp. 1053, 1058 (N.D. Il. 1994); Tiger v. AT&T Tech. Plan for Employees’ Pensions, Dis- ability Plan, 633 F.Supp. 532, 534 (E.D. N.Y. 1986). 10 29 C.F.R. § 2560.503-1(b), (c). 1! See Kinkead v. Southwestern Bell Sick & Acci. Corp. Disability Benefit Plan, 111 F.3d 67, 68 (8th Cir. 1997); Kennedy v. System One Holdings, Inc., 835 F.Supp. 947, 950 n. 3 (S.D. Tex. 1993); Christie v. K-Mart Corp. Employees Retirement Pension Plan, 784 F.Supp. 796, 804 (D. Kan. 1992); see also White v. Jacobs Engi- neering Group Long Term Disability Plan, 896 F.2d 344, 346-47 (9th Cir. 1990) (plan’s 60 day time limit for appealing denied claim is enforceable). 16 suit.” In permitting Ward’s-suit to proceed in admitted violation of the Plan's requirements, the decision below defers to the plaintiff but only at the cost of cutting across the grain of uniform federal law under ERISA, its antecedents in § 301 of the LMRA, and recent de- cisions by this Court. The carefully-crafted nature of ERISA’s statutory scheme precludes the Ninth Circuit's continuing efforts to use state law doctrines to rewrite plan provisions and “fine-tune” the statute in favor of participants. Massachusetts Mutual Life Ins. Co. v. Rus- sell, 473 U.S. 134, 147-148 (1985); Pilot Life, 481 U.S. at 54. Ill. THE NINTH CIRCUIT’S PREEMPTION DECISION COMPLETELY DISRUPTS THE UNIFORMITY OF LAW INTENDED BY CONGRESS. The Ninth Circuit’s decision adopting the “E/fstrom” and “notice-prejudice” rules should be reviewed not only because it creates significant conflicts among the Circuits on ERISA preemption, but also because it has a far- ranging impact which destroys ERISA’s key objectives of governing the administration of both self-funded and in- sured plans in accordance with an exclusive, uniform body of federal law. As this Court has noted, the “potential for conflict in substantive law” is “[plarticularly disruptive” under ERISA. /ngersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990) (emphasis added). The decision’s severe repercussions—-which will create a crazy quilt of conflicting plan rules across the land—warrant swift inter- vention by this Court. The Ninth Circuit’s new ERISA preemption standard, announced in connection with the “Elfstrom” rule. is so narrow and restricted, and the Court’s disregard for con- flicts-preemption is so complete, that the standard reopens 2 See, e.g., Laws v. Calmat, 852 F.2d 430, 484 (9th Cir. 1988): Brazinski v. Amoco Petroleum Additives Co., 6 F.3d 1176, 1179 (7th Cir. 1998); Vaca v. Sipes, 386 U.S. 171, 184-185 (1967). 17 a door closed by Pilot Life to state law suits based on virtually any claim arising out of a denial of plan bene- fits. Similarly, the Court’s new standard for construing ERISA’s “saving” clause is so broad and indiscriminate that it will arguably include virtually any common-law rule of general application that can be identified with the in- surance industry regardless of whether it conflicts with ERISA’s substantive provisions. Under the combined effect of these two standards, ERISA plan design, administra- tion and civil enforcement will be challenged by an almost unlimited range of state laws. This will both conflict with Pilot Life, as discussed in more detail in section IV, below, and, at the same time, resurrect the same obstacles to plan growth and development—the “multiplicity of regulation” and “ ‘conflict .. . in law’”—that the Act was designed to eliminate. Travelers, 514 U.S. at 656-657 (citation omitted ). In misconsrtuing ERISA’s preemption and “savings” clauses, the Ninth Circuit’s decision produces a result exactly opposite to ERISA’s fundamental purposes. To require all ERISA plans to be administered the same way in each state, Congress carefully crafted each of the Act’s major components. It framed the definition of em- ployee benefit plans explicitly to include all plans whether established “through the purchase of insurance or other- wise.” ERISA § 3(1). It also inserted a “deliberately expansive” preemption provision designed to make the regulation of all ERISA plans “ ‘exclusively a federal concern.” Pilot Life, 481 U.S. at 45-46 (citation omit- ted) (emphasis added). Similarly, it added a “deemer” clause which precludes any plan from being “deemed” an “insurance company” or “engaged in the business of in- surance.” ERISA § 514(b)(2)(B). This significant quali- fication to the “saving” clause—which was completely overlooked by the Ninth Circuit—reflects Congress’ com- mitment to free the administration of insured plans from the possibility of state regulation through some artful or overly-broad construction of the insurance exception. The “deemer” clause makes explicit Congress’ objectives to 18 achieve federal uniformity in benefits law and plan ad- ministration by barring direct state regulation of plans irrespective of their funding mechanisms. When the “deemer” clause is thus read in conjunction with the Act’s key objectives, it is clear that state regulation impacting plan administration and benefit payment—regulation which strikes at the very core of ERISA—would be preempted, notwithstanding that plan administration is conducted in part by an insurance company or a Blue Cross/Blue Shield organization. A. Disruptions Caused By The “Notice-Prejudice” Rule. The disruptions caused by the Ninth Circuit’s error in allowing a state law rule, such as the “notice-prejudice” rule, to seize control over plan structure and administra- tion, and the resulting conflict with ERISA’s goals and Pilot Life, are discussed in detail at pages 18 through 22 of the petition for a writ of certiorari in the Cisneros case. B. Disruptions Caused By The “Eifstrom” Rule. In finding the California agency law announced in “E/f- strom” not preempted, the Ninth Circuit’s decision not only once again flouts Pijot Life, but also conflicts with the law in other Circuits and produces a disruptive result that is contrary to ERISA’s objectives. Apart from the Ninth Circuit, the courts have held that ERISA § 514(a) preempts state common-law agency doctrines which impact plan administration and the payment of benefits and thus “conflict with Congress’ intent that a plan not be subject to a myriad of state laws.” See, e.g., Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1488-1490, 1493 (7th Cir. 1996) (ERISA , reempts state law agency claims relating to a benefit denia‘). The decision below plainly conflicts with the Seventh Circuit’s agency law decision in Jass. In addition, field preemption and conflicts-preemption bar the decision below because the common-law agency rule clashes 19 with ERISA’s exclusive framework regulating fiduciary responsibility, claims-filing and civil enforcement. In its haste to subject ERISA plans to state law con- trol, the Ninth Circuit did not correctly analyze whether California agency law “relates to” an ERISA plan within the meaning of § 514(a) or is barred by field or conflicts- preemption. Instead, it mechanically applied state agency law based on a single, outdated, impliedly-overruled case, Turrill v. Life Ins. Co. of North America, 753 F.2d 1322 (Sth Cir. 1985), which permitted state law to govern the administration of an insured ERISA plan. The Ninth Circuit failed to recognize the significance of the point that Turrill was decided prior to Pilot Life at a time when the courts consistently but incorrectly believed that ERISA preemption did not apply to suits alleging improper claims- handling or failure to pay benefits under insured plans. Accordingly, it was an anachronistic, direct contravention of Pilot Life for the Ninth Circuit to hold that ERISA does not preempt state law doctrines governing claims filing and benefit payment under an insured ERISA plan. Four equally valid arguments establish that ERISA preempts state law agency rules such as the one embodied in “Elfstrom,” thus barring a multiplicity of federal-state regulation. First, the state law plainly “relates to” the Plan under the “ordinary meaning” of that term because it purports to regulate claims filing and processing and thereby dictates the payment of plan benefits. Indeed, Ward is attempting to use state law not only to assert the timely, oral “filing” of an ERISA claim with his em- ployer, but also to bind the Plan’s claims review fiduciary to such “filing” and obtain benefits precluded by the Plan’s written terms. The state law thus has an obvious “ ‘con- nection with or reference to such a plan.’” See Pilot Life, 481 U.S. at 47-48; District of Columbia v. The Greater Washington Bd. of Trade, 506 U.S. 125, 129 (1992). “ERISA is designed to ensure the proper administra- tion of pension and welfare plans.” Boggs v. Boggs, 117 20 S.Ct. 1754, 1760 (1997). Acknowledging the need for uniformity of law, other Circuits have correctly held that ERISA § 514(a) preempts state agency law in a suit in- volving a denial of plan benefits. In Jass, supra, which in- volved a suit to hold a plan responsible for a medical pro- vider’s conduct in denying plan benefits, the Seventh Circuit held that the state agency law “related to” an ERISA plan and was therefore preempted by § 514(a). 88 F.3d at 1494. The court found that the agency argument was based on the plan’s existence; the plan documents expressly stated that no agency relationship existed; the agency claim was a mechanism for seeking benefits not permitted by the plan documents; and applying state law would conflict with Supreme Court holdings that ERISA preempted “ ‘state laws that had the effect of regulating the structure or administration of ERISA plans or providing avenues outside of the ERISA framework to vindicate employees’ rights under these plans’” (citation omitted). Both the holding and reasoning of the Seventh Circuit are in con- flict with the decision below. See also Perkins v. Time Ins. Co., 898 F.2d 470 (Sth Cir. 1990) (under ERISA, per- sonal liability of another party cannot be imputed to in- surer under agency law theory). Second, in cases where the direct relationship between the plan and the state law is not so immediately obvious as the one here, this Court has held that whether the law “relates to” the plan within the meaning of ERISA § 514(a) should be based on “ ‘the objectives of the ERISA statute . . . as well as . . . the nature of the effect of the state law on ERISA plans.’” California Div. of Labor Standards Enforcement v. Dillingham Const., 117 S.Ct. 832, 838 (1997) (citation omitted). Under this analysis, ERISA preempts state law that would frustrate ERISA’s goals by imposing different regulations from state to state, or by permitting claimants governed by one state law to obtain “benefits in excess of what plan administra- tors intended to provide, and in excess of what the plan provided to employees in other States.” Travelers, 514 U.S. 21 at 656-657, 658. State laws cannot “preclude uniform administrative practice.” Jd, at 660. The state agency law adopted by the Ninth Circuit spawns all of these vices by subjecting plan administration and benefit payment to a multiplicity of regulation not only between federal law and state law, but also—for multistate employers—among the conflicting laws of the 50 states. Third, the Ninth Circuit’s decision disrupts the uni- formity of regulation secured by ERISA’s fiduciary | re- sponsibility provisions. ERISA’s fiduciary and co-fiduciary liability rules impose personal liability and damages on a fiduciary for its own acts causing loss to a plan. ERISA § 409(a); Russell, 473 U.S. at 139. The court, however, permitted Ward to proceed on a state law agency theory that UNUM, as a “principal” and co-fiduciary, was per- sonally liable for any ERISA violation by the employer in failing to ensure that he timely filed a written notice and proof of claim with UNUM. App. at 24a to 25a. As indicated, Ward was a CEO who admittedly had re- ceived a certificate of coverage which described the pro- cedures and deadlines for submitting a claim to UNUM, and also participated in annual meetings where the Plan was reviewed. /d. at 29a, 32a to 33a. ERISA did not re- quire the employer to do still more. ERISA’s reporting and disclosure rules “may not be a foolproof informational scheme, although it is quite thorough. Either way, it is the scheme that Congress devised.” Curtiss-Wright, 514 U.S. at 84 (emphasis added). Even if the employer had violated ERISA by not seeking Ward out to give him further, specialized information about claims-filing, the Ninth Circuit still erred in permitting him to use state law agency doctrine to impute such a violation to UNUM as a co-fiduciary. App. at 25a. ERISA explicitly places the reporting and disclosure obligations personally on the Plan Administrator, §§ 105(b) (1), 502(c), and no other party can be held liable for such a violation, see, e.g., McKinsey v. Sentry Ins. Co., 986 F.2d 401 (10th Cir. 1993). Further, ERISA’s co-fiduciary liability rules im- 22 pose liability only where the co-fiduciary has actual knowl- edge of a breach by its co-fiduciary but fails to act.” Within the Plan’s time limit for filing written notice and proof of claim, UNUM had no knowledge that Ward claimed to be “disabled” or had purportedly so advised his employer. Fourth, the state law agency rule adopted by the Ninth Circuit runs afoul of conflicts-preemption and the ex- clusivity of ERISA’s civil enforcement scheme for dual reasons. First, it conflicts with ERISA’s fiduciary respon- sibility rules; second, it seeks to control benefit payment contrary to the Plan’s written terms. In an attempt to suggest otherwise, the Ninth Circuit opined: “[NJor does Elfstrom create an ‘alternative enforcement mechanism’ for ERISA plan obligations beyond those set forth in the statute.” App. at 2la to 22a. This conclusion is 180 de- grees off course. The decision below provides the clearest possible example of an “alternate enforcement mechanism” triggering ERISA preemption. It would permit a state law rule to require the payment of plan benefits under circum- stances where a claim denial is mandated by the Plan itself, ERISA’s fiduciary responsibility rules and its ex- clusive civil enforcement scheme. IV. THE NINTH CIRCUIT’S PREEMPTION DECISION IS AN ATTEMPT TO CIRCUMVENT THIS COURT'S CONTROLLING PILOT LIFE DECISION. The holding and reasoning of this Court’s unanimous decision in Pilot Life also preclude the Ninth Circuit's holdings that in a suit to recover plan benefits the “notice- prejudice” and “Elfstrom” rules escape ERISA preemption. ‘S ERISA § 405(a)(1), (3); H.R.Rep. No. 1280, 98d Cong., 2d Sess, 304 (1994) (actual knowledge is required; there is no duty of investigation) ; Davison v. Cook, 564 F.Supp. 225, 237 (E.D. Va. 1983), aff'd. mem., 734 F.2d 10 (4th Cir. 1984), cert. denied sub nom., Accardi v. Davidson, 469 U.S. 899 (1984); Justice v. Bank- ers Trust Co,, Inc., 607 F.Supp. 527, 586 (D.C. Ala. 1985). i Plan does necessarily invalidate his claim under § 502(a)(1)(B) the “notice-prejudice” rule. It also permitted i! i : by Pilot Life: state common law rules purporting to govern the processing of claims allow a recovery that is both un- available under the plan and in conflict with ERISA’s sub- stantive provisions, here its fiduciary responsibility and The Ninth Circuit's decision on the two state law rules contravenes not only the Court’s holding in Pilot Life but on allegedly improper processing of claims and failure to pay benefits because such actions manifestly “relate to” an ERISA plan in the sense of having “‘a connection with or reference to such a plan.’” 481 U.S. at 47-48. In construing ERISA’s “saving” clause, the Court evalu- ated Mississippi's “law of bad faith” under the common- sense and McCarran-Ferguson ve ee ys ruled that “we are obligated in interpreting the saving clause to con- sider . . . [its] role . . . in ERISA as a whole.” Because the plaintiff's “bad faith” claims sought remedies for im- proper claims processing and failure to pay benefits, a sub- 24 ject already addressed in ERISA’s enforcement scheme, the Court reasoned that “our understanding of the ‘saving’ clause must be informed by the legislative intent concern- ing the civil enforcement provisions provided by ERISA section 502(a).” Pilot Life, 481 U.S. at 52. The Ninth Circuit completely failed to consider the preemption and “saving” clauses in this broader context. To determine legislative intent, this Court evaluated the structure, language and purposes of the statute. First, the Court observed that § 502 is one of three statutory sections aimed at enforcing ERISA; the other two are § 503, governing the processing of claims and the fiduciary review of denied claims, and § 501, which provides crimi- nal penalties for certain violations. Pilot Life, 481 U.S. at 52-53. Second, the Court noted that the language of the statute does not provide for the extra-contractual damages and other remedies that the plaintiff was seeking against the insurance carrier. Rather, the detailed provisions of § 502(a) set forth a com- prehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public inter- est in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others . would be completely undermined if ERISA-plan par- ticipants . . . were free to obtain remedies . . . that Congress rejected in ERISA. Pilot Life, 481 U.S. at 54. Third, the Court determined that Congress intended to model ERISA’s civil enforce- ment provisions upon § 301 of the LMRA which “pre- empts any ‘state-law claim whose resolution is substan- tially dependent upon the analysis of the terms of an agreement made between the parties in a labor contract.’ ” Id. at 55 (citation omitted). Thus, Congress intended “that all suits . . . asserting improper processing of [ERISA] claims . . . be treated as federal questions gov- erned by § 502(a).” Jd. at 56 (emphasis added). fit plan” to comply with benefit claims regulations issued by the Secretary of Labor (emphasis added). Those regu- lations, in turn, specify that a plan’s claims procedure may provide for the filing of claims with an insurance company, and that “a claim is filed when the requirements of a rea- sonable claim filing procedure . . . have been met.” 29 C.F.R. § 2560.503-1(c)(d). Under ERISA’s fiduciary re- view procedure for denied claims, the “fiduciaries” include an insurance company, or a Blue Cross/Blue Shield or- ganization, serving as claims review fiduciary. /d. at § 2560.503-1(g)(2). By statute, these fiduciaries must follow the plan’s written terms. ERISA § 404(a)(1)(D). Correspondingly, a participant who exhausts those adminis- trative procedures may only file suit to recover benefits “due . . . under the terms of [the] plan.” ERISA § 502 (a)(1)(B) (emphasis added). This exclusive structure for fiduciary responsibility and civil enforcement would be “completely undermined if ERISA-plan participants” such as Ward could use state law doctrines to obtain benefits contrary to the plan’s written terms and ERISA’s civil enforcement scheme. Pilot Life, 481 U.S. at 54. Accord- ingly, the Pilot Life analysis precludes the decision below. 26 Vv. THE QUESTIONS PRESENTED BY THIS PETI- TION HOLD IMPORTANT IMPLICATIONS FOR ERISA PLANS THAT SHOULD BE ADDRESSED BY THIS COURT. The Ninth Circuit's decision adopting the state law “no- tice-prejudice” and agency rules will impose a multiplicity of conflicting federal-state regulation on insured ERISA plans. Additionally, it will surrender significant portions of ERISA plan administration to the varying laws in the 50 states. All of this runs exactly contrary to ERISA’s primary goals of ensuring a “uniform body of benefits law,” Travelers, 514 U.S. at 645, making the administra- tion of both self-funded and insured plans “ ‘exclusively a federal concern,”” Pilot Life, 481 U.S. 45-46 (citation omitted), and “minimiz[ing] the need for interstate em- ployers to administer their plans differently in each state in which they have employees,” Shaw, 463 U.S. at 105. Unless corrected, the Ninth Circuit's decision along with the Sixth Circuit’s decision in Davies, 128 F.3d at 940— coupled with the Circuit conflicts over ERISA preemption —will create enormous confusion and difficulty in the de- sign and administration of thousands of insured welfare plans across the country. Exactly the same hardships will affect pension plans with insurance funding. This confu- sion and uncertainty will spread into the courts as claim denials which are clearly proper under ERISA are made uncertain by the imprecise parameters of the Ninth Cir- cuit’s new view of the “saving” clause, and its narrow reading of the scope of ERISA preemption. Additionally, the adverse effects will not be limited to plan administra- tion within the Sixth or Ninth Circuits. ERISA provides for nationwide service of process, and permits a suit to be filed in any district where the plan is administered, the breach of fiduciary duty took place, or a defendant resides or may be found. ERISA § 502(e) (2); see, é.2., Varsic v. United States Dist. Ct., 607 F.2d 245, 248 (9th Cir. 1979). Consequently, the vast majority of in- sured plan sponsors coast to coast now risk not only that 27 the structure of their plans may be overturned, but also that the plan’s administration and benefit payments may be subject to conflicting federal and state regulation pur- suant to the Ninth Circuit's unprecedented decision and the parallel Sixth Circuit decision. The practical consequences of the Ninth and Sixth Cir- cuits’ decisions are ing. Just in terms of major medical care plans alone, there are an estimated 4.5 mil- lion employer-sponsored plans “ covering over 161 million individuals.” Overwhelming percentages of these plans either are insured, with a large subset being Blue Cross/ Blue Shield plans, or are self-funded plans with stop-loss insurance." More than 9 out of 10 such plans delegate some portion of ERISA claims-handling and payment— and the fiduciary review authority mandated by ERISA § 503—to insurance companies, Blue Cross/Blue Shield organizations or third-party administrators.” ign will to establish such plans in the first place. See, €.8-, Heath v. Varity Corp., 71 F.3d 256, 258 (7th Cir. 1995). Additionally, the “notice-prejudice” rule has been rejected by many states and varies considerably across the land; 14 ADMINISTRATION OF THE EMPLOYEE RETIREMENT INCOME SE- 15 STATISTICAL ABSTRACT OF THE UN!Tep StTaTes, p. 120 (117 ed. 1997). 16 Mercer/FosTer HIGGINS NATIONAL SURVEY OF EMPLOYER- SPONSORED HEALTH PLANS, Report 1997, 17-18. 1 Id. at 18. 18 Many jurisdictions consider a timely claim as a condition pre- cedent to recovery and thus do r°f follow such a rule. Other states presume prejudice to the insurer and require the claimant to estab- 28 similarly, state agency law doctrines vary from state to state.” All of this practical uncertainty coupled with the differences in state law will create strong financial incen- tives for employers either to cut back or eliminate insured benefits altogether, or to use self-funded plans notwith- standing the greater stability and solvency of insured plans. The plan administrators and claims review fiduciaries for these plans, moreover, can be expected to process literally millions of ERISA claims for disability, pension and health benefits annually. Unless this Court resolves the Circuit conflicts, it will be impossible for these ad- ministrators and fiduciaries to rely on a “ ‘uniform body’ ” of federal benefits law, or to engage in the “nationally uniform” plan. administration which was a “basic thrust” of ERISA. Travelers, 514 U.S. at 656-657. Further, they will be unable to administer their plans both in compliance with the plans’ written terms and the Ninth Circuit's deci- sion. They cannot know whether to deny a claim on the basis of a clear plan limit, or to accept the claim under state law regarding “notice-prejudice” or agency without regard to the terms of their plan and thus breach an ERISA fiduciary duty. They cannot even know which opposing sets of federal and state laws to apply to deter- mine those questions. lish its absence; still other states—such as California—require the insurer to prove “actual prejudice.” See 183A George J. Couch et al. Couch Cyclopedia of Insurance Law § 49.49 at 276-77 (2d ed. 1982). 1” See, e.g., Metropolitan Life Ins. Co. v. Henry, 217 Ind. 33, 24 N.E.2d 918 (1940) (under Indiana law, employer acting as middle- man between insurer and employees is agent of employees) ; First National Bank of Anson County v. Gatewood, 308 N.C. 203, 214-15 278 S.E.2d 507 (“case law in this jurisdiction [North Carolina] . . . establishes that the employer-master policyholder is not ordinarily the agent of the insurer”); Brezan v. Prudential Insurance Co. of America, 507 F.Supp. 962, 966 (E.D.Pa. 1981) (under Pennsylvania law, group policyholder has no obligation to ensure that terms of group policy are correctly transmitted to employees); Dawes Min- ing Co. v. Callahan, 246 Ga. 531, 272 S.E.2d 267 (1980) (in Georgia, employer is agent of insurer, and insurer has imputed knowledge of information transmitted to employer). 29 The Ninth Circuit acknowledged in Cisneros the direct ~ conflict between California’s “notice-prejudice” rule and ERISA, stating that the rule made the plan “more difficult to administer” and caused “a plan’s written terms [to be] altered.” 134 F.3d at 947 (emphasis added). In the same manner, the “Elfstrom” rule requires the payment of bene- fits under circumstances where the Plan itself and ERISA’s fiduciary responsibility and civil enforcement provisions require a claim denial. The decision thus presents, in two important respects, a “direct clash between state law and the provisions and objectives of ERISA,” one where pre- emption necessarily arises because “ ‘compliance with both federal and state regulations is a physical impossibi . - Boggs v. Boggs, 117 S.Ct. 1754, 1762 (1997) (citation omitted) (emphasis added). To allow state law rules not only to encroach on ERISA’s exclusive framework for fiduciary standards and plan administration—but to “alter” the plan’s written terms, and to permit a suit for benefits contrary to those terms—completely undermines a number of ERISA’s most significant and highly-regulated areas. It also wreaks havoc on the important principle of uni- formity of law upon which ERISA is based. Intervention by the Court is critical to restore the care- fully-crafted balance between state and federal law struck by Congress in ERISA and to reestablish the preeminence of ERISA’s statutory scheme. ERISA plans are not only “affected with a national public interest,” §2(a), 29 U.S.C. § 1001(a), but the appropriate balance between competing federal and state law is of paramount concern to the nation’s employee benefit plan system. Given the “centrality of pension and welfare plans in the national economy,” Boggs v. Boggs, 117 S.Ct. at 1760, it is vital that this Court decide the two significant, far-reaching ERISA preemption issues presented by this case, and re- solve the existing Circuit conflicts. 30 CONCLUSION For the foregoing reasons, petitioner urges the Court to grant a writ of certiorari in this case. Of Counsel: TAMARRA T. RENNICK Litigation Counsel UNUM LIFE INSURANCE COMPANY OF AMERICA 2211 Congress Street Portland, ME 04122 (207) 770-2211 LESLEY C. GREEN RUSSELL G. PETTI BANNAN, GREEN & FRANK LLP 555 South Flower Street 44th Floor Los Angeles, CA 90017 (218) 362-1177 May 20, 1998 Respectfully submitted, Davip L. BACON Counsel of Record BENJAMIN J. DELANCY CHARLES M. DYKE THELEN, MARRIN, JOHNSON & Bripces LLP 333 So. Grand Avenue 34th Floor Los Angeles, CA 90071 (213) 621-9800 Attorneys for Petitioner UNUM Life Insurance Company of America APPENDIX APPENDIX TABLE OF CONTENTS Se ee eee & ee nee ee I , ecentepoe Order of the District Court granting Summary Jude ment, filed August 8, 1995 2.200 ecceeeeeeeeeeee Declaration of John A. Houser, III And Portions of omy © hey gt” japameahnallemeasanalldiaad ment, filed June 26, 1995 o.0000.0..0ccceecseeon Exhibit Portions Meitiinaile' sak Wert Sueectien Excerpts) to Declaration of Jeffrey P. ates pS RR a aT aT OO District Court Complaint, filed September 19, 1994. ERISA § 2(a), (b), 29 U.S.C. § 1001 (a), (b) ................ # ERISA § 3(1), (16), 29 U.S.C. § 1002(1), (16) ERISA § 402(a), (b), 29 U.S.C. § 1102(a), (b) —....... a ERISA § 404(a) (1) (D), 29 U.S.C. § 1104(a) (1) (D).... ERISA § 502 (a) (1) (B), 29 U.S.C. § 1182 (a) (1) (B) ERISA § 508, 29 U.S.C. § 1188 2... .-.eececeeeceeneeeeeeoeeees ERISA § 514(a), (b) (2) (A), (B), 29 U.S.C. § 1144(a) CR) CR). A) CIB) naire nnenrnennecosononvnncenecnscnncnnosensnrveccorncen 29 C.F.R. § 2560.503-1 (1b), (€), (8) -----neecoeecneennssneesneeenees Page la la APPENDIX UNITED STATES COURT OF APPEALS NINTH CIRCUIT No. 95-56269 D.C. No. CV-94-1454-MHH Filed February 3, 1998 JouHN E. Warp, Plaintiff-A ppellant, v. MANAGEMENT ANALYSIS COMPANY EMPLOYEE DISABILITY BENEFIT PLAN, and UNUM Lire INSURANCE COMPANY OF AMERICA, Defendants-A ppellees. Appeal from the United States District Court for the Southern District of California Argued and Submitted January 9, 1997— Pasadena, California Before Betty B. Fletcher and Stephen S. Trott, Circuit Judges, and Bruce S. Jenkins,* District Judge * Honorable Bruce S. Jenkins, United States Senior District Judge for the District of Utah, sitting by designation. 2a OPINION JENKINS, District Judge: John E. Ward (“Ward”), former President and CEO of Management Analysis Company (“MAC”), brought this action under § 502 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132, seeking to recover benefits pursuant to his former employer's long- term disability plan. The United States District Court for the Southern District of California granted summary judgment in favor of the Management Analysis Company Employee Disability Benefit Plan (the “MAC Plan”) and UNUM Life Insurance Company of America (“UNUM”) on the ground that Ward’s claim for benefits under UNUM’s long-term disability policy was timely under the notice and proof of claim provisions of that policy. In light of our ruling in a related case, Cisneros v. UNUM Life Insurance Company of America, ——— F.3d ——— (9th Cir. 1998), that under California law, UNUM must show actual prejudice resulting from a claimant's untimely submission of proof of a claim before it may deny benefits under a plan governed by ERISA, we reverse the judgment in favor of UNUM and the MAC Plan and remand the case for further proceedings. We also remand for a deter- mination of whether MAC received timely notice and proof of Ward’s claim of disability while acting as a plan fiduciary and agent of UNUM, should that determination become decisive of the question of timeliness. Effective November 1, 1983, UNUM issued a Group Long Term Disability Policy to MAC as an insured employee welfare benefit plan governed by ERISA. An employee certificate booklet summarizing the plan benefits was prepared and distributed in quantity to MAC em- ployees, including Ward. 3a Ward served as President and Chief Executive Officer of MAC until, after_being asked to resign by the Board of Directors on May 5, 1992, he resigned on May 8, 1992. In May of 1992, Ward was already suffering from dia- betic neuropathy, and avers that prior to his resignation, he had begun experiencing severe and disabling leg pain resulting from that condition. The nature and extent of his illness and resulting disability were diagnosed by December of 1992. In early 1993, Ward applied for and received state disability benefits, and contacted the MAC human resources divi- sion to discuss extension of his continuation insurance coverage under COBRA. In July 1993 he received a determination that he was eligible for Social Security dis- ability benefits, a copy of which he forwarded to the MAC human resources division. Ward states that he was actually unaware of the avail- ability of the MAC Plan long-term disability benefits until April 1994, when he discovered a booklet describing the coverage amorg papers in his safety deposit box. Ward completed an application for long-term disability benefits and forwarded the same to MAC. MAC completed the employer information section of the application and for- warded the same to UNUM. UNUM received notice and proof of Ward’s claim on April 11, 1994. By letter dated April 13, 1994, UNUM informed Ward that his claim for benefits was denied as untimely under the terms of the policy. Through counsel, Ward requested that UNUM review the denial of his claim, and by letter dated July 12, 1994, UNUM in- formed Ward that it had reviewed his claim and affirmed its denial because it was “beyond the time frame stipu- lated in the policy.” Plaintiff filed his complaint against the MAC Plan to recover his claimed benefits under ERISA on September 15, 1994. UNUM appeared as a defendant and filed an 4a answer on behalf of itself and the MAC Plan on Novem- ber 23, 1994. On August 8, 1995, the district court granted the defendants’ motion for summary judgment, concluding that under the terms of UNUM’s policy as written, “plaintiff's claim was late and therefore defendant was not obligated to honor plaintiff's claim for long-term disability benefits.” The district court entered judgment on August 17, 1995, and Ward filed a timely notice of appeal. Il We review the district court’s grant of summary judg- ment de novo. Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). Whether ERISA preempts state law is a question of law which we review de novo. Inland Empire Chapter of Associated General Contractors v. Dear, 77 F.3d 296, 299 (9th Cir. 1996). We also review de novo the principles of contract interpretation as applied to the facts, including the district court’s interpretation of insur- ance policy language. O’Neill v. United States, 50 F.3d 677, 682 (9th Cir.), cert. denied, 116 S. Ct. 672 (1995). Il While in his brief Ward lists several issues and makes a series of assertions concerning agency theory under Elf- strom v. New York Life Ins. Co., 67 Cal. 2d 503, 432 P.2d 731, 63 Cal. Rptr. 35 (1967), fiduciary duty under ERISA, and the potential liability of the MAC Plan, the appellees aptly restate the central issue now before us on appeal: “Did the District Court correctly hold that the plaintiff failed to timely submit written notice and proof of claim to UNUM as required by the express terms of the MAC Plan and applicable federal law under ERISA?” UNUM expressly conditions payment of benefits upon submission of proof of claim within the time limits set forth in the policy. Section VI.F.2 of UNUM’s policy Sa provides that proof “may not be given later than one year after the time proof is otherwise required,” in this in- stance, “no later than 90 days after the end yay wei day] elimination period.” ' Section V1.1 provides that fits will be paid “[w]hen the company oer A claim.” Read together, these provisions logically and un- ambiguously establish that, under the policy, timely sub- mission of proof is a condition precedent to payment of benefits. Under the admitted facts of this case, Ward became permanently disabled on May 5, 1992. Using Ward's disability onset date of May 5, 1992, UNUM calculated that his proof of claim must have been received no later than November 5, 1993 in order to be deemed timely under the policy provision.” Ward did not submit notice or proof of his claim directly to UNUM until April 11, 1994. Ward’s submission of notice and proof of his claim plainly was untimely under the express terms of the UNUM policy. However, in light of our recent opinion in Cisneros v. UNUM Life Insurance Company of America, ——— F.3d —— (9th Cir. 1998), untimeliness under the express terms of the policy does not end the inquiry, at least as to consequence. Cisneros holds that a claimant’s failure to submit timely proof of claim does not necessarily result in the denial of benefits. Cisneros acknowledges that the California “notice-prejudice” rule remains in force respect- ing benefit plans governed by ERISA as a state law “which regulates insurance” under ERISA’s savings clause, 29 U.S.C. § 1142(b)(2)(A). Under the “notice-prejudice” rule, the insurer of an ERISA benefit plan may not deny benefits by reason of untimely notice or submission of 1 The MAC Plan documents provide that the “elimination period” consists of the 90-day period following the date of onset of the insured’s disabilty. 2 The district court’s reference to a December 5, 1993 cutoff date appears to be simple mathematical error. 6a proof of claim unless the insurer proves that it has suf- fered actual prejudice because of the delay. Id. at 67375.° Contrary to UNUM’s assertion in its brief, we are not persuaded that passage of time alone establishes prejudice as a matter of law. See id. at 673, 675 (citing Shell Oil Co. v. Winterthur Swiss Ins. Co., 15 Cal. Rptr. 2d 815, 845 (Ct. App. 1993)). Whether UNUM suffered actual prejudice as a result of Ward’s untimely notice remains a genuine issue of material fact. See Select Ins. Co. v. Superior Court, 276 Cal. Rptr. 598, 602 (1990). Thus, we reverse the district court’s judgment in favor of UNUM. Because neither the plan administrator nor the district court addressed the question of whether the notice- prejudice rule applied to Ward’s claim, neither the plan administrator nor the district court determined whether UNUM suffered actual prejudice flowing from Ward's untimely notice and proof of claim.‘ Accordingly, we remand the case to the district court with instructions to remand to the plan administrator for a factual determina- tion as to whether UNUM suffered actual prejudice by virtue of Ward’s untimely submission of proof. * At the August 3, 1995 hearing on the motion for summary judgment, the district court inquired : THE COURT: Is there a body of law that then says that you have to—the company has to show some prejudice? MR. SMITH: No, not—not under ERISA. And we have cited as the Court knows, four cases, . . . all of which interpreted this plan language, and all of which, in circumstances almost identi- cal to this, held that the proof of claim had not been timely provided— THE COURT: Now—MR. SMITH—really is under ERISA, and it is those cases that we would submit are controlling. Among the four cases referred to by UNUM counsel was the district court disposition in the Cisneros case, now reversed on the precise issue raised by the court’s question just quoted. * While the district court noted in passing that “[{t)he delay in filing precludes UNUM from definitively determining whether plain- 7a IV Ward addresses the timeliness of his claim in another way: he asserts that actual notice of his disability given to MAC as early as March of 1993 operates as notice to UNUM as early as March of 1993 because under Cali- fornia law, an employer who participates in the adminis- tration of a group insurance policy acts as an agent of the insurer. He relics on Elfstrom v. New York Life Ins. Co., 67 Cal. 2d 503, 432 P.2d 731, 63 Cal. Rptr. 35 (1967), as authority for this proposition. Ward further asserts that if the Elfstrom rule is somehow preempted by ERISA, this court should adopt a like rule as a matter of federal common law. Moreover, Ward asserts that MAC breached its duties as an ERISA co-fiduciary to inform him of the availability of long-term disability benefits under the UNUM pol cy, to receive notice of his claim, and to assist him in furnishing appropriate proof of his claim to UNUM, breaches which Ward contends UNUM was tiff’s disability existed on the date alleged in his claim,” the com- ment was made in the context of a broader policy discussion con- cerning time limits on claims rather than as a finding of fact based upon a specific evidentiary record. There appears to be little evi- dence in the present record bearing upon the question of actual prejudice. Paragraph 12 of the Declaration of John A. Houser, III, dated March 29, 1995, makes the conclusory assertion that “[d]ur- ing that nearly two year period” between the onset of Ward's dis- ability and the receipt by UNUM of notice, “UNUM was without knowledge that plaintiff claimed he was ‘disabled’ and was thereby deprived of the opportunity to fully evaluate his claim and to de- termine the extent of his disability at the time he claimed to be disabled,” but offers no specific evidence showing how that evalua- tion has been impaired in this case. In fact, the Houser Declaration indicates that UNUM did not undertake to investigate, evaluate or determine Ward’s claim on the merits, but assures that “[h]ad plaintiff timely filed his claim for disability benefits under the Policy, UNUM would have conducted a thorough claim investiga- tion.” Id. at Pll (emphasis added). On remand, UNUM has the burden to prove actual prejudice, that is, that Ward's delay would have prevented “a thorough claim investigation” in April of 1994 that otherwise would have been possible through November 5, 1993. obliged to remedy. See 29 U.S.C. § 1105(a) (“a fidu- ciary with respect to a plan shall be liable for a breach of fiudciary responsibility of another fiduciary with respect to the same plan in the following circumstances: .. . (3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.”).° The Elfstrom Rule In Elfstrom, the employer, Fullerton Publishing Co., had obtained a group life insurance policy for the benefit of its employees from the defendant, New York Life. The plaintiff was president and majority shareholder of Fuller- ton and the father of Brenda, the deceased employee, as well as the beneficiary under his daughter’s life insurance certificate. Fullerton’s bookkeeper, Mr. Still, administered the group policy under the direction of a New York Life group representative, following the directions set forth in a manual supplied by New York Life for that purpose. Mrs. Still mistakenly included Brenda as an insured in monthly reports to defendant insurer when, in fact, Brenda was not eligible, because her employment at the minimum salary required had terminated before expira- tion of the waiting period necessary for coverage. The premiums were paid until Brenda’s death, seven months after expiration of the waiting period. Under these facts, the California Supreme Court held that the duties of the employer, discharged by Mrs. Still, in administering *As Ward noted in his opening brief, whether an individual plan beneficiary may seek relief in his own behalf for breach of fiduciary duty under ERISA was raised in Varity Corp. v. Howe, 116 S. Ct. 1065 (1996). Varity answered that question in the affirm- ative, holding that plan participants and beneficiaries may sue for individual “appropriate equitable relief” pursuant to § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), and are not limited solely to relief in favor of the plan itself as in Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144 (1985), construing ERISA § 502(a)(2). Id. at 1075-79. 9a the group life insurance policy, made it the agent of defendant insurer, and that the insurer was bound by the mistakes of the employer (per Mrs. Still) acting within the scope of the agency, provided the plaintiff (bene- ficiary) was acting in good faith in directing her to effect coverage for Brenda. We are convinced that the employer is the agent of the insurer in performing the duties of administering group insurance policies. It cannot be said that the employer acts entirely for its own benefit or for the benefit of its employees in undertaking administrative functions. While a reduced premium may result if the employer relieves the insurer of these tasks . . . the insurer also enjoys signifi- cant advantages from the arrangement. 67 Cal. 2d at 512-13, 432 P.2d at 737. For the Elf- strom court, agency depended on the question of control: The most persuasive rationale for adopting the view that the employer acts as the agent of the insurer . . . is that the employee has no knowledge or control over the employer’s actions in handling the policy or its adminis- tration. An agency relationship is based upon consent by one person that another shall act in his behalf and be subject to his control... . It is clear from the evidence regarding procedural techniques here that the insurer- employer relationship meets this agency test with regard to the administration of the policy, whereas that between the employer and its employees fails to reflect true agency. The insurer directs the performance of the employer's administrative acts, and if these duties are not undertaken properly the insurer is in a position to exercise more con- stricted control over the employer’s conduct. 67 Cal. 2d at 513-14, 432 P.2d at 738; see also Pru- dential Ins. Co. of America v. State Bd. of Equalization, 21 Cal. App. 4th 458, 482, 26 Cal. Rptr. 2d 287, 303 (1993) (“As expressed in Elfstrom, the agency relation- ship was shown by the insufer’s control over the book- 10a keeper’s performance of tasks relating to the insurance, i.e., the bookkeeper/agent performed functions under the insurer/principal’s direction and for the principai’s bene- fit.”). In reaching its conclusions regarding agency, Elfstrom cited this court’s earlier decision in John Hancock Mut. Life Ins. Co. of Boston v. Dorman, 108 F.2d 220 (9th Cir. 1939). In John Hancock, Western Bakeries, the em- ployer, “handled” the insurance under a group life/ disability insurance master policy obtained for the benefit of employees; Western Bakeries had accepted insurance applications, determined employee eligibility, issued cer- tificates of insurance, and collected premiums, all of which it then reported to the insurer. We held that the employer was the insurer’s agent in handling these tasks and that acceptance of premiums by the insurer through its agent/ employer estc»ped the insurer from claiming that the in- sured was not an employee within the meaning of the policy. 108 F.2d at 222-23, 224. More recent California cases echo the Elfstrom/John Hancock rule. In McCormick v. Sentinel Life Ins. Co., 153 Cal. App. 3d 1030, 200 Cal. Rptr. 732 (1984), the California Court of Appeals explained: In Elfstrom v. New York Life Ins. Co. (1967) 67 Cal.2d 503, 505, 63 Cal.Rptr. 35, 432 P.2d 731, our high court considered whether the acts of an employer who administered a group health insurance policy could be attributed to the defendant insurer. After reviewing con- flicting cases from other jurisdictions, the court concluded the employer was acting as the insurer’s agent and hence the insurer was liable for the employer’s conduct. (Id., at p. 508, 63 Cal.Rptr. 35, 432 P.2d 731, citing Rest.2d Agency, §§ 165, 282(2), and pp. 512-513.) In rejecting the view the employer acted as the employee’s agent, the court cited the employer’s assumption of the insurer’s administ: ative functions and the employee’s lack of con- lla trol over the employer’s actions in handling the policy. (Id., at pp. 513-514, 63 Cal.Rptr. 35, 432 P.2d 731; accord Bareno v. Employers Life Ins. Co. (1972) 7 Cal. 3d 875, 883, 103 Cal.Rptr. 865, 500 P.2d 889; Pantzalas v. Superior Court (1969) 272 Cal.App.2d 499, 504, 77 Cal.Rpitr. 354.) Here, the credit union, like the employer in Elfstrom performed administrative duties in connection with proc- essing claims under Sentinel’s disability policy. It is un- disputed the credit union assumed such responsibilities as maling the initial claim form to McCormick, notifying Sentinel of a possible claim from McCormick, and appris- ing McCormick his claim was incomplete. It also appears likely McCormick had no control over the credit union’s actions.. Under these circumstances a triable issue exists as to whether the credit union was acting as Sentinel’s agent. If the fact finder determines an agency relation- ship, as defined in Elfstrom, did exist, the credit union’s acts can be attributed to Sentinel. 153 Cal. App. 3d at 1040-41, 200 Cal. Rptr. at 737; see also Metropolitan Life Ins. Co. v. State Bd. of Equal- ization, 32 Cal. 3d 649, 658-59, 652 P.2d 426, 431, 186 Cal. Rptr. 578, 583 (1982) (Elfstrom is controlling on issue whether an employer acts as the insurer’s agent in administering group insurance policies); Bass v. John Hancock Mutual Life Ins. Co., 10 Cal. 3d 792, 797, 518 P.2d 1147, 1150, 112 Cal. Rptr. 95, 198 (1974) (“[Wle have held that the employer is the agent of the insurer in performing the duties of administering group insurance policies . . . and that accordingly the insurer shares re- sponsibility for the employer’s mistakes.”); Caldwell v. United Bus Corp., 77 Cal. App. 3d 381, 383-84, 112 Cal. Rptr. 7, 8 (1986) (“The general rule in California is that the employer is merely the agent of the insurer in perform- ing the duties of administering group health insurance policies.” ). 12a Other jurisdictions as well have adopted a similar approach to the agency question. See, e.g., Middleton v. The Russell Group, Ltd., 483 S.E.2d 727, 734 (N.C. 1997) (holding that “[a]n employer who performs ad- ministrative functions [under a group insurance policy], as in the instant case, is deemed to be the agent of the insurer,” (citing Elfstrom)), and cases cited therein; Abiatti v. Buttura & Sons, Inc., 161 Vt. 314, 324, 639 A.2d 988, 993-94 (1994) (agency relationship may be founded upon the policyholder’s performance of adminis- trative tasks on behalf of the insurer); Kirkpatrick v. Boston Mut. Life Ins. Co., 393 Mass. 640, 645-46, 473 N.E.2d 173, 176-77 (1985) (“Whether or not the em- ployer acts as the insurer’s agent is a factual question to be resolved on a case by case basis.”); Norby v. Bankers Life Co. of Des Moines, Iowa, 304 Minn. 464, 471-72, 231 N.W.2d 665, 670 (1975) (“the employer policy- holder may, in appropriate circumstances, be found to be the agent of the group insurer of employees”). In Paulson v. Western Life Ins. Co., 636 P.2d 935 (Or. 1981), the Oregon Supreme Court held that whether an employer acted as agent for an insurer in administering a group policy presented a triable issue of fact. The Paulson court read Elfstrom and other cases as applying a rule expressed in these terms: “In the performance of a func- tion delegated by the insurer to the employer, the em- ployer is Weemed to be the agent of the insurer.” 636 P.2d at 941.° ® Paulson rejected the view that the cases divide into a “majority rule” and a “minority rule” concerning the employer-agency ques- tion: Our analysis of the decisions convinces us that many courts, even though they purport to apply a “majority rule” or a “minority rule,” actually base their decision upon the facts relating to the division of functions between the insurer and the employer policyholder, and that any “majority” or “minor- ity” rule is more apparent than real. It is more correct to say 13a MAC’s Administration of the UNUM Policy Central to Ward’s agency theory under Elfstrom must be proof that MAC participated in the administration of UNUM’s group disability insurance policy and performed insurance-related tasks delegated by or carried on under the direction and ultimate control of UNUM. Ward points to the fact that MAC was designated as plan adminis- trator by the MAC Plan as well as to specific provisions of the UNUM policy (Sec. VI, P D) requiring MAC to furnish information to UNUM concerning employees who become eligible for coverage, whose coverage changes in amount, or whose coverage terminates. Arguing that courts must follow an “absolute and literal interpretation” * of the language of ERISA plan docu- that when the plan is exclusively administered by the insurer, as a matter of law no agency relation exists between the in- surer and the employer. But if the employer performs all of the administration of the policy, an agency relationship exists between the insurer and the employer, as a matter of law. Be- tween these two extremes, as the division of functions becomes less separate, or to put it another way, as the employer assumes responsibility for more administrative or sales functions which are customarily performed by an insurer, a question of fact will arise as to the agency relationship between the insurer and the employer. 636 P.2d at 939. The Paulson formulation of the Elfstrom rule appears sound. It also comports with our prior determination of the same issue in John Hancock. 7 For this proposition, UNUM cites Madden v. ITT Long Term Disability Plan, 914 F.2d 1279, 1285-86 (9th Cir. 1990), cert. denied, 498 U.S. 1087 (1991). Headnote no. 7 of the Madden opinion recites that “[fliduciary’s delegate properly gave absolute and literal in- terpretation to long-term disability plan’s definition of ‘total dis- ability’, which required that employee was unable to engage in any occupation,” but this synopsis does not accurately reflect the rele- vant portion of the Madden opinion. What we said was “Metro- politan’s use of the Plan definition was clearly proper, because as an ERISA fiduciary, Metropolitan was required to apply the terms l4a ments, UNUM points to Section VI, Paragraph L of its long-term disability policy, which reads: L. AGENCY For all purposes of this policy, the policyholder acts on its own behalf or as agent of the employee. Under no circumstances will the policyholder be deemed the agent of the Company without a written authorization. Averring that no such written authorization was ever issued to MAC, and “MAC’s involvement in the LTD [long-term disability] claims process was, at most, acting as a conduit between MAC employces and UNUM,” UNUM urges the conclusion that “MAC is not UNUM’s agent.” Of course, the existence of an agency relationship generally presents a question of fact: Whether as between the parties their relationship is one of agency depends on their relations as they in fact exist under the agreement or acts of the parties, and the ques- tion is not governed by the stipulations of the parties. of the Plan. See ERISA, 29 U.S.C. § 1104(a)(1)(D) (1988).” 914 F.2d at 1286 n.6. While this court has more recently admonished that “[a]n ERISA plan administrator abuses its discretion if it construes provisions of plan in a way that ‘conflicts with plain language of plan,’” Saffle v. Sierra Pacific Power Co. Bargaining Unit Long Term Dis- ability Income Plan, 85 F.3d 455, 458 (9th Cir. 1996) (quoting Taft v. Equitable Life Assur. Soc’y, 9 F.3d 1469, 1472 (9th Cir. 1993)), we have yet to endorse a rule of strict, absolute or literal construc- tion of ERISA plan documents. Indeed, Saffle appears to reject a “literal” construction of plan language in favor of a “reasonable” one, consistent with case law from other circuits. See id. at 458-59 (citing Helms v. Monsanto Co., Inc., 728 F.2d 1416, 1420 (11th Cir. 1984) (rejecting arbitrator’s “absolute and litera!” interpretation of “totally and permanently disabled” to mean complete helplessness as unreasonable because it would render the entire plan meaningless and would contradict policies underlying ERISA); Torix v. Ball Corp., 862 F.2d 1428 (10th Cir. 1988) (same) ). 15a Thus, whether a particular relationship is that of agency does not depend on what the parties call it, and the parties cannot, where the relationship is in fact one of agency, change its nature by declaring that it is not an agency, nor can they, by calling their relations one of agency, make it so when it is not so in fact. The surrounding facts and circumstances determine the relationship, regardless of the understanding of the parties as to the exact nature of the relationship. . . . 2A C.J.S. Agency §7 (1972) (footnotes omitted); accord, Wallace v. Sinclair, 114 Cal. App. 2d 220, 250 P.2d 154, 16061 (1953); American Marine Paint Co. v. Nyno Line, 70 Cal. App. 415, 233 P. 366, 369 (1924) (“nor does it matter whether or not his employment be called an agency”); 3 Am. Jur. 2d Agency § 21 (1986) (“The manner in which the parties designate the relation- ship is not controlling, and if an act done by one person in behalf of another is in its essential nature one of agency, the one is the agent of such other notwithstand- ing he is not so called.” (footnote omitted)); 2 (pt. 2) Cal. Jur. 3d Agency § 12, at 170-73 & nn. 77-93 (1997) (citing Elfstrom). Ordinarily, an agency relationship may be established through evidence of control and apparent or applied authority, even where the parties have agreed to the contrary. See, e.g., Kuchta v. Allied Builders Corp., 21 Cal. App. 3d 541, 547, 98 Cal. Rptr. 588, 591 (1971) (notwithstanding that “the agreement itself stated that no such agency relationship was created, the declara- tions of the parties in the agreement respecting the nature of the relationship are not controlling.”); Fernander v. Thigpen, 278 S.C. 140, 293 S.E.2d 424, 426 (1982). However, UNUM also asserts that ERISA preempts the Elfstrom rule because Elfstrom imposes respondeat su- perior liability; according to UNUM, “ERISA’s rule of personal fiduciary liability not only supersedes, but is inconsistent with, the doctrines of respondeat superior and 16a vicarious liability.” Nor could the Elfstrom rule be adopted as a matter of federal common law because adoption of respondeat superior and vicarious theories would impermissibly “revise the text” of ERISA by adding causes of action or remedies not affirmatively authorized by the statute. See Mertens v. Hewitt Assoc., 508 U.S. 248, 259 (1993) (“The authority of courts to develop a ‘federal common law’ under ERISA ... is not the au- thority to revise the text of the statute.”). No prior Ninth Circuit opinion has addressed the relationship of ERISA to state agency law,* or more spe- cifically, whether ERISA preempts the rule of California State law announced in Elfstrom. Nor has any prior opinion of this court discussed whether under circum- stances such as these, federal statutory or common law creates the agency relationship that Ward suggests. Looking to case law from other circuits, Turrill v. Life Ins. Co. of North America, 753 F.2d 1322 (Sth Cir. 1985), informs our inquiry. Turrill, an American Air- lines facility maintenance mechanic, became disabled after a fall on a wet floor at the Dallas/Ft. Worth airport. The insurer had issued a group disability insurance policy to American Airlines that was in effcct at the time of the accident. Turrill did not submit notice or proof of his claim directly to the insurer until more than two years after the accident. However, soon after the accident, he did submit an array of documentation concerning his in- jury to his employer. Reversing summary judgment in favor of the insurer on grounds of timeliness, the Fifth Circuit concluded that “a genuine issue of material fact ®We have noted, however, that Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992), “construed the term ‘employee’ in the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.8 1002(6), as incorporating ‘judicial agency law criteria for identifying master-servant relationships.’ Id. at 319... .” Coupar v. United States Department of Labor, 105 F.3d 1263, 1266-67 (9th Cir. 1997). 17a exists regarding the authority of American Airlines to receive proofs of loss” as an agent of the insurer. Id. at 1324. “Whether such an agency relationship existed bears heavily on the timeliness of Turrill’s proof of loss... .” Id. To resolve the agency question, the Turrill court looked both to Texas agency law and to ERISA. Under the Employee Retirement Income Security Act of 1974 (ERISA), . . ., an employer who, like American Airlines, provides disability benefits through a group in- surance policy owes fiduciary duties to the participating and their beneficiaries. See 29 U.S.C. § 1104 (a)(1) (1982) (“[A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the par- ticipants and the beneficiaries.”) The fiduciary obliga- tions of such an employer easily include responsibility to take care that the insurance company receives documenta- tion necessary under the group policy to achieve recovery on a just benefits claim. This is especially so if the docu- mentation is already in the agent’s hands. ERISA thus obliged American Airlines to exercise care and diligence in assuring compliance with the proof of loss requirements of the master policy. It also required the employer to provide to participating employees exten- sive information regarding the plan. 29 U.S.C. § 1021 (1982). ERISA compels the employer (or other plan fiduciary) to act affirmatively in administering and providing infor- mation on its employee benefits plan. In cases involving group policies, the requisite employer’s efforts include de- termining employees’ eligibility for coverage, enrolling them in the plan and group policy, advising them as to scope of benefits, collecting and forwarding premiums, and helping employees file claims. An insurance company normally performs these functions. But in group insurance 18a situations where ERISA applies, the employer and group insurer typically develop a course of dealing in which the employer substitutes for the insurer in a relationship that ERISA impliedly may require. Under these circumstances, courts may properly infer an agency relationship. The group insurer’s failure to dis- avow the sufficiency of the employer’s performance of functions that ERISA requires the employer to perform can properly lead to a conclusion that the group insurer is STS LAR POW ree Hence ene functions. . Id. at 1325 (footnote & citation omitted). The Turrill court held that “proof of an employer’s ERISA-based reporting and fiduciary responsibilities with respect to a group insurance policy in itself raises an issue under Texas law as to the existence of an agency relationship between the employer and the group insurer.” Id. Nothing in Turrill even hints that state agency law is somehow pre- empted by ERISA. MAC’s Fiduciary Duties Under ERISA In enacting ERISA, Congress did not explicitly enumer- ate all the duties of an ERISA fiduciary, and did not describe every instance in which an employer acts in a fiduciary capacity, but intentionally left many of these details for the courts to develop in light of the special nature and purpose of employee benefit plans. Varity Corp. v. Howe, 116 S. Ct. 1065, 1070 (1996). ERISA contemplates that an employer often will act as both em- ployer and plan fiduciary, but not all of the employer's business activities implicate ERISA’s fiduciary duties. Id. at 1071. At minimum, ERISA makes an employer who exercises “discretionary authority or discretionary responsibility” in plan administration a fiduciary: 19a iA) pesven |b 9. Stastery sit omens to 9. Bian. te Oe extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting manage- ment or disposition of its assets .. . or (iii) he has any discretionary authority or ya ae responsibility in the administration of such plan. 29 U.S.C. § 1002(21)(A). An employer who performs “purely ministerial functions” in administering a plan may not be a fiduciary, but even so, “[t}he issue is not just how the duties are characterized, but what they are.” IT Corp. v. General American Life Ins. Co., 107 F.3d 1415, 1419 (9th Cir. 1997); see also 29 C.F.R. § 2509.75-8, at D-2 (1996) (“[P]ersons who have no power to make any de- cisions as to plan policy, interpretations, practices or pro- cedures” are not fiduciaries under ERISA). In this case, MAC’s activities as plan administrator included determining employees’ eligibility for coverage, enrolling them in the plan, issuing certificates of insurance under the group policy, advising employees as to scope of benefits, collecting and forwarding premiums to UNUM, and on occasion, at least, helping employees file claims. In addition, the certificate of coverage and summary plan description pamphlet prepared by UNUM and distributed to MAC employees by MAC advises employees that MAC is the Plan Administrator, that “[t]he people who operate your Plan, called ‘fiduciaries’ of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries,” and instructs employees that “[iJf you have any questions about your Plan, you should contact the Plan Administrator.” ° Arguably, MAC has assumed fiduciary duties under ERISA in the administration of the MAC Plan.” Consis- *UNUM'’s certificate of coverage also counsels employees that “Ti]f you have any questions about any terms and provisions, please contact the Insurance Administrator at your work location or write to our claims paying office.” — 20a tent with Turrill, proof of MAC’s fiduciary duties under ERISA with respect to UNUM’s group insurance policy raises an issue under California law as to the existence of an agency relationship between the employer and the group insurer in light of Elfstrom. ERISA Preemption Within its reach, ERISA regulates plans which provide employees with pension and welfare benefits. “It is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.” Burgio and Campofelice, Inc. v. New York State Dep’t of Labor, 107 F.3d 1000, 1007 (2d Cir. 1997). Section 514(a) of ERISA promotes uniform federal regu- lation of employee benefit plans by preempting “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA, subject to limited exceptions. 29 U.S.C. § 1144(a). Section 514(a)’s purpose “was to minimize the administrative and financial burden of complying with conflicting directives among States and between States and the Federal Govern- ment. Otherwise, the inefficiencies created could work to the detriment of plan beneficiaries.” Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990). While § 514(a)’s language is “deliberately expansive,” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987), ERISA does not preempt “if the state law has only a ‘ten- uous, remote, or peripheral’ connection with covered plans, . . . as is the case with many laws of general applicability. .. .” District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 130 n.1 (1992) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n.21 (1983)). In fields of traditional state regulation, ERISA preempts ‘© The term “fiduciary” has a broader meaning under ERISA than at common law because ERISA “defines ‘fiduciary’ not in terms of formal trusteeship, but in functional terms of control and authority over the plan.” Mertens, 508 U.S. at 262. 2la state law if that is “‘the clear and manifest purpose of Congress.” New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). The Supreme Court recently acknowledged the existenc eof “myriad state laws in areas traditionally subject to local regulation, which Congress could not possibly have intended to eliminate.” California Div. of Labor Standards Enforcement v. Dillingham Constr., 117 S. Ct. 832, 842 (1997). In each instance, the intent of Congress controls our analysis of preemption under ERISA. Yet the statute it- self offers little guidance as to when a state law “relates to” an ERISA plan within the meaning of § 514(a). In the Travelers case, the Supreme Court observed that courts “must simply go beyond the unhelpful text and the frus- trating difficulty of defining its key term, and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive.” 514 U.S. at 656. In light of legislative history indicating that “the basic thrust of the preemption cause . . » Was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans,” the Travelers Court concluded that two types of state laws “relate to” employee benefit plans within § 514(a): laws that “mandat[e] employee benefit structures or their administration,” and laws that “pro- vid{e] alternative enforcement mechanisms.” Id. at 657-58. ERISA and Elfstrom ERISA and Elfstrom are not anathema. Elfstrom does not dictate the benefits to be provided or the manner in which the plan will be administered. Elfstrom does not require an employer to participate in the administration of a group insurance policy or an insurer to delegate its functions to an employer.” Nor does Elfstrom create an In this case “California is not telling employers how to write their ERISA plans. Nor is it conditioning some requirement on 22a “alternate enforcement mechanism” for ERISA plan obli- gations beyond those set forth in the statute. Contrast Pilot Life, 481 U.S. at 55-57. Elfstrom simply describes in legal terms a relationship that already exists in fact. As Turrill illustrates, the principle that an employer who undertakes responsibilities in administering an em- ployee benefit plan assumes fiduciary duties under ERISA meshes smoothly with the Elfstrom rule that an employer who assumes such responsibilities in administering a group insurance policy acts as the agent of the insurer. Turrill, 753 F.2d at 1324-25; see also Middleton, 483 S.E.2d at 732-35 (on claim for unpaid benefits under ERISA § 502, Elfstrom rule applies to hold insurer accountable for em- ployer’s mistake in denying former employee COBRA continuation coverage; o*".:r state law claims preempted by ERISA). Ostensibly, the legislative effort was to ensure that em- ployee benefits are provided through an ERISA plan over- seen by plan fiduciaries, including the plan insurer and those who the insurer may enlist to participate in the administration of the plan. Nothing in § 514(a) empow- ers a plan fiduciary to extend ERISA’s preemptive reach by using policy language that negates agency law prin- ciples in favor of exonerating itself from the errors of those who act on its behalf. Cf. IT Corp., 107 F.3d at 1418 (any interpretation of a plan which prevents a plan fiduciary from being held liable as a fiduciary is void); 29 U.S.C. §1110(a). Plan documents defining or dis- avowing a relationship do not have the status of the ERISA statute, particularly when the actions of the signa- tors belie the document recitals.” how individual employers write their ERISA plans.” WSB Elec., Inc. v. Curry, 88 F.3d 788, 796 (9th Cir. 1996); see Employee Staffing Services, Inc. v. Aubry, 20 F.3d 1038, 1041 (9th Cir. 1994). 12 Merely reciting that “if the terms of your certificate of cover- age and the policy differ, the policy will govern” does not resolve the 23a Even if UNUM could by agreement with MAC exon- erate itself of its agency relationship as against MAC, there is no reason to suppose that the agreement would exonerate UNUM from its duties to participants and bene- ficiaries of the ERISA plan, or the conduct of those who act on its behalf with apparent authority. The employee participants did not sign the agreement bearing the agency disclaimer and they are entitled to have the plan adminis- tered in the interest of participants and beneficiaries. See 29 U.S.C. § 1104. Absent the insurer’s over disavowal of the sufficiency of the employer’s performance of func- tions under the plan, actually communicated, the partici- pants and beneficiaries should be able to rely upon the relationships that exist. Nothing in ERISA suggests that in availing themselves of plan benefits, employee partici- pants must sift plan documents for hidden disclaimers that the designated plan administrator does not act as agent for the plan or its insurer.“ The statute must do more than set traps for the unwary. question. Where the certificate remains silent on the subject of agency, the existence in fact of an agency relationship does not constitute a “term” of the certificate. Whether an agent or not, if an employer/plan administrator exer- cises sufficient authority over the plan to become an ERISA fidu- ciary, contractual policy disclaimers could not limit fiduciary and co-fiduciary liability under ERISA. See IT Corp., 107 F.3d at 1418-19. 18UNUM cites Kennedy v. System One Holdings, Inc., 835 F. Supp. 947 (S.D. Tex. 1993), as rejecting a participant’s claim that UNUM was estopped from denying his late claim based upon mis- representations by the employer/plan administrator because, inter alia, “the Plan clearly and unambiguously provides that System One is not UNUM’s agent ....” Id. at 951 (footnote omitted). Kennedy relies on policy language essentially identical to Section VI, Para- graph L of the long-term disability policy issued to MAC. See id. at 951 n.5. However, Kennedy does not discuss Turrill, and nothing in Kennedy suggests that the plaintiff gave his employer timely notice of his disability claim, or even that the employer hau undertaken administrative responsibilities under the insurance pol- icy in question. In fact, Kennedy identifies UNUM—not the em- 24a Applied in the context of this case, Elfstrom does not operate to create a cause of action against UNUM out- side of the exclusive claim for unpaid benefits pursuant to §502(a) of ERISA, 29 U.S.C. § 1132(a), pleaded in Ward’s complaint. Contrast Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 494-95 (9th Cir. 1988) (state statutory claim for delayed benefits payment pre- empted by ERISA); Perkins v. Time Ins. Co., 898 F.2d 470, 474 (Sth Cir. 1990) (state law tortious breach of contract and bad faith claims against insurer for nonpay- ment of benefits preempted by ERISA). Nor does Elf- strom alter the facts as between MAC and UNUM, or create an agency relationship that may or may not exist as a consequence of the parties’ own course of dealing. The question ultimately for the district court under Elfstrom becomes whether MAC acted for UNUM and under UNUM'’s control in receiving and forwarding long-term disability claims, and thus whether timely notice to MAC of Ward’s disability operated as timely notice to UNUM as well. In the context of a claim for unpaid benefits under §$ 502(a), ERISA does not operate to preempt the appli- cation of the state law embodied in Elfstrom and its prog- eny to determine the question of timeliness of notice and proof of claim. We are not persuaded that Congress had as its clear and manifest purpose the abrogation of state agency law as it applies to insurers and employers ad- ministering group insurance policies. Whether MAC acted as fiduciary and as agent of UNUM in administering the MAC Plan’s long-term dis- ability policy, particularly in receiving and forwarding ployer—‘“as administrator of the long term disability benefits plan at issue in this case.” Id. at 949; see also id. at 948 (plaintiff sought benefits under “an employee welfare benefit plan (‘Plan’) adminis- tered by UNUM”). Thus, Kennedy does not address the Elfstrom rule because the issue was not raised in that case. Indeed, we could identify no reported case giving the effect to this language now urged by UNUM. DIS fee Poy We wt 25a claims for benefits,’* cannot be decided as a matter of law on the existing record. The questions of employer-insurer agency and employer fiduciary duty instead raise genuine issues of fact.” However, these issues become material in this case only if the question of timeliness of submission of proof of claim to UNUM, including actual prejudice under Cis- neros, is ultimately resolved adversely to Ward. The judgment of the district court is REVERSED and the case is REMANDED to the district court with in- structions to remand to the plan administrator for a determination as to whether UNUM suffered actual preju- dice by reason of the delay in submission of Ward’s notice of claim, and if necessary following remand to the plan administrator, to determine whether MAC acted as ERISA fiduciary and as agent of UNUM in administering the MAC Plan’s long-term disability policy, particularly in receiving and forwarding claims for benefits, and if so, whether Ward furnished timely notice and proof of his disability to MAC, and if so, to what remedies Ward may be entitled. 14 See Norby, 304 Minn. at 472, 231 N.W.2d at 670 (“The focus . Should be on which specific and relevant administrative func- tions are performed by the employer on behalf of the insurer, with respect to the particular ground asserted for . . . nonpayment under the policy. .. . An employer may be considered an agent of an insurer for some purposes but not for others.”) % The extent of UNUM’s liability, if any, for breach by a co- fiduciary pursuant to 29 U.S.C. §1105(a) depends, inter alia, on UNUM’s knowledge of the breach, which raises even more issues of fact. That MAC has not been joined as a party to this litiga- tion does not impair Ward’s entitlement to_relief under ERISA § 502(a)(1), but may raise procedural questions as to any further relief sought under § 502(a)(3). Cf. Madden, 914 F.2d at 1287 (“*‘ERISA permits suits to recover benefits only against the Plan as an entity, . . . and suits for breach of fiduciary duty only against the fiduciary.’” (quoting Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324-25 (9th Cir. 1985) (citations omitted) ). Moreover, to the extent that Ward may be entitled to receive payment of benefits pursuant to ERISA § 502(a)(1), further equi- table relief under § 502(a)(3) may not be “appropriate.” Varity Corp., 116 S. Ct. at 1079. 26a [Filed Mar. 23, 1998] UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 95-56269 D.C. No. CV-94-01454-MHH JOHN E. WARD, Plaintiff-A ppellant, v. MANAGEMENT ANALYSIS COMPANY EMPLOYEE DISABIL- ITY BENEFIT PLAN (proper party name) UNUM Life Insurance Company of America, Defendant-Appellee. Before: FLETCHER and TROTT, Circuit Judges, and JENKINS,* District Judge ORDER _The panel has voted to deny the petition for rehearing. Judges Fletcher and Trott vote to reject the suggestion for rehearing en banc and Judge Jenkins so recommends. The full court has been advised of the suggestion for an en banc rehearing, and no judge of the court has re- quested a vote on the suggestion for rehearing en banc. Fed. R. App. P. 35. The petition for rehearing is denied and the suggestion for rehearing en banc is rejected. * Honorable Bruce S. Jenkins, United States District Judge for the District of Utah, sitting by designation. oy ee ee i 27a [Filed Aug. 8, 1995] UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA Case No. CV 94-1454 H( AJB) JOHN E. WARD, Plaintiff, vs. MANAGEMENT ANALYSIS COMPANY EMPLOYEE DISABILITY BENEFIT PLAN, Defendant. ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Defendant UNUM has filed a motion for summary judgment. Plaintiff opposes the motion. On August 3, 1$_5, the court held a telephone oral argument in this matter and both parties assented to having the matter heard on this date. Brooks Iler appeared on behalf of plaintiff John Ward and Jeffrey Smith appeared on be- half of defendant UNUM. Having reviewed the papers submitted in this matter and having heard oral argument in the case, the court grants deiendant’s motion for summary judgment. BACKGROUND Plaintiff was the former Chief Executive Officer of Management Analysis Company (“MAC”). On May 8, 1992, plaintiff resigned from his position upon the request of the company’s Board of Directors over financial con- cerns about a particular company project. 28a Throughout his nine years of employment with MAC, plaintiff had premiums for long-term disability insurance deducted from his paycheck. The disability policy is an insured employee welfare benefit plan called the Manage- ment Analysis Company Plan (the “Plan”) and is is- sued by UNUM Life Insurance Company of America (“UNUM”). The issue in this case is whether plaintiff made a timely claim for benefits under the Plan. According to plaintiff's application for benefits, he first became aware of his dis- ability on May 5, 1992. In December 1992, plaintiff re- ceived a diagnosis of diabetic neuropathy. Following confirmation of his- diagnosis, plaintiff filed a claim for state disability benefits. In or around late February or early March 1993, plaintiff received notice that his state benefits application had been approved. Plaintiff then contacted the Human Resources division of MAC to arrange for the continuation of his insurance cove [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0180%3A02. Public record. Not legal advice.