# Amicus Curiae Brief — UNUM Life Ins. Co. of America v. Ward

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1999
- **Citation:** 526 U.S. 358

## Text

Supreme Court, U.S. |
FILED |
| JAN 8 1999
OFFICE OF THE CLERK
No. 97-1868 ro
SS Se A RN AO OTE TALON TTR SOON A NATE OEE Bi IE
IN THE

SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1997

UNUM LIFE INSURANCE COMPANY OF AMERICA,
Petitioner,
Vv.

JOHN E. WARD,
Respondent.

On Writ of Certiorari To The
United States Court of Appeals
For the Ninth Circuit

BRIEF AMICUS CURIAE OF THE
AMERICAN ASSOCIATION OF RETIRED PERSONS
IN SUPPORT OF RESPONDENT

MARY ELLEN SIGNORILLE*
AARP FOUNDATION LITIGATION

MELVIN RADOWITZ
AMERICAN ASSOCIATION
OF RETIRED PERSONS
601 E Street, N.W.
Washington, DC 20049
(202) 434-2060
Counsel for Amicus Curiae
American Association of
Retired Persons

*Counsel of Record

i

TABLE OF CONTENTS

INTEREST OF AMICUS CURIAE
SUMMARY OF ARGUMENT
ARGUMENT
I. RECENT PREEMPTION DECISIONS AND
TRADITIONAL SUPREMACY CLAUSE
ANALYSIS URGE A REEXAMINATION OF
PILOT LIFE

A. The Impact of Pilot Life’s Holding Cannot
be Underestimated

. Under ERISA, State Laws Regulating the
Business of Insurance Are Unique and

Require a More Critical Analysis than Other
Types of State Laws

1. Compliance with both California’s
notice-prejudice rule and ERISA is
not a physical impossibility

California’s notice-prejudice rule
does not stand as an obstacle to the
accomplishment and execution of
the full purposes and objectives of
Congress

CONCLUSION

ii
TABLE OF AUTHORITIES
CASES

American Drug Stores, Inc. v. Harvard Pilgrim
Health Care, Inc., 973 F. Supp. 60 (D. Mass. 1997) .... )

Andrews-Clarke v. Travelers Ins. Co.,
984 F. Supp. 49 (D. Mass. OF). oc cen vcrveeewe en 8

Arizona Governing Comm. for Tax Deferred

Annuity and Deferred Compensation Plans

v. Norris, 463 U.S. 1073 (1983)... ee ee ee ee es 12
Boggs v. Boggs, 117 S. Ct. 1754 (1997)... .+-+++: passim
California Division of Labor Standards Enforcement

v. Dillingham Construction, N.A., Inc.,

519 U.S. 316 (1997) 2... eee ee ee eee eee eee 2,3

Community Health Partners, Inc. v. Commonwealth,

14 F. Supp.2d 991 (W.D. Ky. 1998)... -- eee eees 9

Corcoran v. United Healthcare, Inc..,

965 F.2d 1321 (Sth Cir. 1992) ... 2... eee eee eeres 8

Corporate Health Ins., Inc. v. Texas Dep't of Ins.,

12 F. Supp.2d 597 (S.D. Tex. 1998) ...--- ++ eee ees 9

DeBuono v. NYSA-ILA Medical & Clinical Servs.

Fund, 520 U.S. 806 (1997) «00... eeeeeeee reese 2

Degan v. Ford Motor Co.,

869 F.2d 889 (Sth Cir. 1989)... ee ee eee eens 8

Dukes v. U.S. Healthcare, Inc.,

57 F.3d 350 (3d Cir. 1995) ... 6. cece creer eens 8

v. New York Life Ins. Co.,
432 P.2d 731 (1967)... eee ee eee eee eee eeee

iii

English v. General Electric Co., 496 U.S. 72 14
FMC Corp. v. Holliday, 498 U.S. 52(1990) ....... 16, 17
Florida Lime & Avocado Growers, Inc. v. P,

373 U.S. 132 (1963) ....... totem = & 23 5) =) Serer errr 15
§ 404(a)(1)(D), 29 U.S.C. § 1104(aylKD) ......... 12
§ 502(a), 29 U.S.C. § 1132(a) .............. 4,7, 11
}. & 2 5). | PPT ETErere 12, 13
8 SUGGR., FD UB. GS EBGEED cccceseccccss 3, 4, 6, 10
§ 514(b)(2)(A), 29 U.S.C. § 1144(00)(2M(A) ... .. 3, 4, 6, 10
§ 514(b)(2)(B), 29 U.S.C. § 11440)(2)(B) ........«. 6
Mental Health Parity Act of 1996,
Pub. L. No. 104-204, 110 Stat. 2944
(codified at ERISA § 712,
29 U.S.C.A. § 1185a (West 1999)) ... 2... 6 ee eee 16

Newborns’ and Mothers’ Health Protection Act
of 1996, Pub. L. No. 104-204, 110 Stat.

2935 (codified at ERISA § 711,

29 U.S.C.A. § 1185 (West 1999)) ..........-245-- 16
DG BS Sh eccchecasecbences 12, 13, 15
Claims Procedure for Benefit Plans,

42 Fed. Reg. 27,426 (1977) .... 1... eee ce eees 13, 15

Catherine L. Fisk, The Last Article about the Language

of ERISA Preemption? A Case Study of the Failure
of Textualism, 33 HARV. J. ON LEGIS. 35 (1996) ....... 7

Stephen A. Gardbaum, The Nature of Preemption,
72 Comes L. BBV. TET (1GDE) . ww cee 10

Karen A. Jordan, The Shifting Preemption Paradigm:
and Issues,
51 VAND. L. REV. 1149 (1998) ............... 2, 15

Wendy E. Parmet, Regulation and Federalism: Legal
Impediments to State Health Care Reform,
SP FE, File GES ED cbc t icc cccccecs 9

Pension and Welfare Benefits Admin., U.S. Dep’t
of Labor, Retirement Benefits of American

Workers: New Findings from the
1994 Current Population Survey (Sept. 1995) ......... 3
Sarah Snider & Paul Fronstin, Benefit

March 1994 Current Population Survey, EBRI
ISSUE BRIEF NO. 158/SPECIAL REPORT SR-281 (Feb. 1995) 2

Kenneth Starr, et al., American Bar Ass’n, The Law
of Preemption: A Report of the Appellate
es ks bck 10

Nicole Weisenborn, ERISA Preemption and Its Effect
on State Health Reform, 5-FALL KAN. J.L. &
OT eS ee 9

Paul Wolfson, and Federalism:
The Missing Link, 16 HASTINGS CONST. L.Q. 69 (1988) . 14

No. 97-1868

IN THE
Supreme Court of the United States
OCTOBER TERM, 1997

UNUM LIFE INSURANCE COMPANY OF AMERICA,

JOHN E. WARD,

ON WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF AMICUS CURIAE OF THE
AMERICAN ASSOCIATION OF RETIRED PERSONS
IN SUPPORT OF RESPONDENT

INTEREST OF AMICUS CURIAE

The American Association of Retired Persons (AARP) is
a nonprofit membership organization of more than 30 million
persons, age 50 or older, working or retired, that is dedicated
to addressing the needs and interests of older Americans.’
AARP seeks through education, advocacy and service to
Se ee eee
dignity and purpose. As a of promoting

Y No counsel for any party authored any portion of this brief. No
persons other than AARP, its members, or its counsel have made a
monetary contribution to the preparation and submission of this brief.

2

independence, AARP attempts to foster the economic security
of individuals as they age by seeking to increase the
availability, security, equity, and adequacy of public and
private pension, health, disability, and other employee
benefits.

AARP’s members and other participants and beneficiaries
in private, employer-sponsored employee benefit plans rely on
the Employee Retirement Income Security Act (ERISA) to
protect their rights under those plans. 29 U.S.C. § 1001 ef
seq. Contrary to its purpose, a statute that was designed to
safeguard employee benefits has, all too frequently, been used
to deprive employees of rights and protections they previously
enjoyed under state law. Even after the Court’s recent
preemption trilogy,” the lower courts still are struggling with
the breadth of ERISA’s preemption clause.” These lower
court decisions bear directly on the ability of participants and
beneficiaries to bring their claims for benefits’ as well as

” Boggs v. Boggs, 117 S. Ct. 1754 (1997); DeBuono v. NYSA-ILA
Medical & Clinical Servs. Fund, 520 U.S. 806 (1997); California
Division of Labor Standards Enforcement v. Dillingham Construction,
N.A., Inc., 519 U.S. 316 (1997).

» Compare, e.g., Washington Physicians Service Ass'n v. Gregoire,
147 F.3d 1039 (9th Cir. 1998), petition for cert. filed, 67 U.S.L.W.
3376 (U.S. Nov. 23, 1998) (No. 98-889) with Prudential Ins. Co. v.
National Park Medical Center, Inc., 154 F.3d 812 (8th Cir. 1998). Se-
generally Karen A. Jordan, The Shifting Preemption Paradigm:
Conceptual and Interpretive Issues, 51 VAND. L. REV. 1149 (1998).

* Approximately 61% of employed Americans are eligible for health
benefits through employment-based health plans. See Sarah Snider &
Paul Fronstin, Employee Benefit Research Inst., Sources of Health
Insurance and Characteristics of the Uninsured: Analysis of the March
1994 Current Population Survey, EBRI IsSUE BRIEF NO. 158/SPECIAL
REPORT SR-281, at 4 (Feb. 1995). In 1994, almost one-third of retirees
(continued...)

3

States’ attempt to provide better consumer protections for their
citizens.

Given the reliance of petitioner UNUM Life Insurance
Company of America and its amici on this Court’s decision in
Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41 (1987), this
case presents the Court with the opportunity to review its
holding in Pilot Life in light of its recent preemption
decisions.” The decision in this case will have a direct and
vital bearing on the economic security of AARP’s members
and other older Americans.” In light of the significance of

*(.. continued)

reported current coverage under the health plan of their former
employer. Pension and Welfare Benefits Admin., U.S. Dep’t of Labor,
Retirement Benefits of American Workers: New Findings from the
September 1994 Current Population Survey 3 (Sept. 1995).
Approximately 47% of Americans are covered by a pension plan or
have prior plan vested benefits. Jd. at 55, tbl. B7. Among private
sector retirees aged fifty-five and older, 43% are receiving, have
received, or expect to receive pension benefits from former
employment. /d. at 47, tbl. B2.

” AARP’s brief assumes that the Court will find that California’s
notice-prejudice rule “relates to” an employee benefit plan, ERISA

§ 514(a), 29 U.S.C. § 1144(a), and that it is exempt from preemption
under the saving clause. ERISA § 514(b)(2)(A), 29 U.S.C.

§ 1144(0)(2)(A). AARP’s brief does not address the rule of law
developed in Elfstrom v. New York Life Ins. Co., 432 P.2d 731 (1967).

© As part of its advocacy efforts to ensure, to the greatest extent
possible, that participants and beneficiaries receive the benefit of
ERISA’s protections, AARP has participated as amicus curiae in
numerous cases involving ERISA, including Boggs v. Boggs, 117 S. Ct.
1754 (1997); California Division of Labor Standards Enforcement v.
Dillingham Construction, 519 U.S. 316 (1997); and John Hancock
Mutual Life Ins. Co. v. Harris Trust & Savings Bank, 510 U.S. 86
(1993).

4

the issues presented by this case, AARP respectfully submits
this brief amicus curiae”

SUMMARY OF ARGUMENT

In Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41
(1987), this Court held that the civil enforcement provisions
under ERISA § 502(a), 29 U.S.C. § 1132(a), were to be the
exclusive vehicle for actions by ERISA plan participants and
beneficiaries asserting improper processing of a claim for
benefits. The Court’s analysis did not discuss traditional
Supremacy Clause principles although this was the implicit
basis for its holding.

In passing ERISA’s preemption clause, Congress reserved
power to legislate over the field of employee benefits, ERISA
§ 514(a), 29 U.S.C. § 1144(a), and then expressly restored
power to the states to regulate insurance as applied to
employee benefit plans. ERISA § 514(b)(2)(A), 29 U.S.C.
§ 1144(b)(2)(A). This express restoration of state power
requires critical analysis and unmistakable Congressional
intent before it can be found that a state insurance law is
preempted by ERISA under the Supremacy Clause. U.S.
Const. art. VI, cl. 2; Pacific Gas & Elec. Co. v. State Energy
Resources Conservation & Dev. Comm’n, 461 U.S. 190, 206
(1983).

laws and ERISA when it found that “ERISA leaves room for
complementary or dual federal and state regulation” and state
law would only be superseded when the “dual regimes [could]
not be harmonized or accommodated.” John Hancock Mutual
Life Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 98
(1993). In order to determine whether a state regulation is

Y The written consents of the parties have been filed with the Clerk of
the Court pursuant to Supreme Court Rule 37.3.

5

complementary or can be harmonized, it is necessary to
determine whether “‘compliance with both federal and state
regulations is a physical impossibility,’” or whether that “law
‘stands as an obstacle to the accomplishment of the full
purposes and objectives of Congress[.]’” Gade v. National
Solid Wastes Management Ass'n, 505 U.S. 88, 98 (1992)
(citations omitted).

California’s notice-prejudice rule provides that an insurer
may not deny a claim as untimely unless the insurer can show
actual prejudice (other than payment of the claim itself or
general untimeliness) resulting from the delay. This rule
neither implicates nor impinges upon ERISA’s enforcement
scheme because it provides no additional remedies or an
alternative enforcement mechanism. This rule also does not
implicate ERISA’s claims procedure because the notice-
prejudice rule is a complementary interpretive rule which
deems a claim to be timely filed. Thus, conipliance with both
state and federal laws is not a physical impossibility.

Moreover, the fact that federal and state laws are different
does not mean that there is an impermissible conflict. ERISA
is not absolute, but explicitly recognizes a role for state
insurance regulation, thus permitting state insurance laws to
supplement or complement ERISA’s standards. John
Hancock, 510 U.S. at 98. California’s notice-prejudice rule
provides additional time for a participant to have his or her
claim deemed timely filed, thus protecting their rights, while
still safeguarding the insurer from stale claims. There is no
conflict or inconsistency with ERISA. Thus, California’s
notice-prejudice rule cannot be found to stand as an obstacle
to the accomplishment and execution of Congressional
purposes and objectives. See id. at 99.

6
ARGUMENT

I. RECENT PREEMPTION DECISIONS AND
TRADITIONAL SUPREMACY CLAUSE ANALYSIS
URGE A REEXAMINATION OF PILOT LIFE.

A. The Impact of Pilot Life’s Holding Cannot Be
Underestimated.

In Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 43
(1987), this Court stated that the issue before it was whether
ERISA “pre-empts state common law tort and contract actions
asserting improper processing of a claim for benefits under an
insured employee benefit plan.” Mr. Dedeaux brought claims
for tortious breach of contract, fraud in the inducement and
breach of fiduciary duties against Pilot Life because it had
reinstated and terminated his disability benefits several times
during a three year period. Not only did he seek the benefits
to which he was entitled, but he also sought damages for
mental and emotional distress and punitive damages. Jd. at
43-44.

After describing ERISA’s statutory framework including
ERISA’s purpose of protecting participants and beneficiaries,
the Court set forth the mechanics to analyze ERISA’s
preemption provisions. /d. at 45. First, it must be
determined whether a state law relates to an employee benefit
plan. ERISA § 514(a), 29 U.S.C. § 1144(a). Second, if the
state law relates to a plan, it must be determined whether the
state law is saved from preemption because it is a law that
regulates insurance. ERISA § 514(b)(2)(A), 29 U.S.C.
§ 1144(b)(2)(A). Third, if the first two determinations are
answered in the affirmative, then it must be determined
whether a state law that “purport[s] to regulate insurance”
deems an employee benefit plan to be an insurance company.
ERISA § 514(b)(2)(B), 29 U.S.C. § 1144(6)(2)(B). Although
it was unnecessary to the holding of Pilot Life in that the
Court had found that the state law at issue was not saved as a

7

law regulating insurance, the Court added a fourth component
to its preemption analysis -- even if the state law is saved
because it is a law that regulates insurance, it will still be

if it directly conflicts with a provision of ERISA.
481 U.S. at 51-53.

The Court found that the civil enforcement provisions
under ERISA § 502(a), 29 U.S.C. § 1132(a), were to be the
exclusive vehicle for actions by ERISA plan participants and
beneficiaries asserting improper processing of a claim for
benefits. Jd. at 52.” Any and all other state causes of actions
for claims which fall within the scope of § 502(a) would pose
an obstacle to the purposes and objectives of Congress. The
Court relied upon the language and structure of the civil
enforcement provisions and the legislative history. The Court
characterized the civil enforcement scheme of § 502(a) as
“one of the essential tools for accomplishing the stated
purposes of ERISA.” Pilot Life, 481 U.S. at 52. The Court
stated that the civil enforcement scheme represented a balance
between the need for prompt resolution of benefit claims
against the encouragement of the formation of employee
benefit plans. Jd. at 54. The Court further explained that the
legislative history showed Congress’ expectation that a body
of federal common law would develop. The Court opined that
this expectation would be undermined if remedies available
under ERISA could be supplemented or supplanted by state
laws. Id. at 56. Thus, Pilot Life implicitly held, without
significant analysis concerning the conflict resulting from
concurrent state and federal powers, that a state law that is
exempted from preemption under ERISA’s saving clause

At least one commentator has suggested that this holding was not
compelled by ERISA’s language or its legislative history. Catherine L.
Fisk, The Last Article about the Language of ERISA Preemption? A
Case Study of the Failure of Textualism, 33 HARV. J. ON LEGIS. 35, 51-
52 (1996).

could still be preempted under the Supremacy Clause because
it conflicts with a substantive provision of ERISA.

The significance of Pilot Life’s holding cannot be
underestimated. Not only have participants been unable to
bring claims for intentional infliction of emotional distress,
bad faith dealings, and other torts and to collect punitive and
other extra contractual damages, but many participants have
been left with no remedy at all. E.g., Degan v. Ford Motor
Co., 869 F.2d 889, 895 (Sth Cir. 1989) (characterization of
this situation as “[bJetrayal [w]ithout [a] [rjemedy”). There
has been more than one case where a plan has refused to
provide a health benefit which is due and owing under the
plan, until efor ec gy grt leaving the
participant’s estate with no remedy. E.g., Andrews-Clarke v.
owe ney Ins. Co., 984 F. Supp. 49 (D. Mass. 1997)
(insurance company refused to authorize alcohol
detoxification for more than 5 days in a row although policy
permitted 30 days; participant committed suicide, and estate
had no remedy).

Moreover, recent cases dealing with managed care issues
such as utilization review have required federal courts to enter
the traditional state area of medical malpractice. These cases
have revolved around the characterization of the breach to
decide whether a state law claim may proceed. If the breach
is characterized as improper processing of benefits, the state
claim is preempted under Pilot Life. E.g., Corcoran v.
United Healthcare, Inc., 965 F.2d 1321 (Sth Cir. 1992) (suit
for wrongful death of fetus and malpractice against utilization
review company’s refusal to authorize sy to cme to
monitor pregnancy was preempted because its decisions were
benefit determinations). If it is characterized as negligent
provision of medical care or a quality of care claim, then the
claim is not preempted. E.g., Dukes v. U.S. Healthcare,
Inc., 57 F.3d 350 (3d Cir. 1995) (suit for refusal to perform
blood tests and malpractice for allowing patient’s condition to
deteriorate resulting in stillbirth was not preempted since

9

quality of care is an area of traditional state regulation and
ERISA is silent).

The significant changes in the health care industry since
ERISA’s passage has led to increased state legislative activity
to attempt to provide increased consumer protections. See,
e.g., Washington Physicians Service Ass'n v. Gregoire, 147
F.3d 1039 (9th Cir. 1998), petition for cert. filed, 67
U.S.L.W. 3376 (U.S. Nov. 23, 1998) (No. 98-889) (State of
Washington’s alternative provider statute not preempted in its
application to HMOs which sell insurance); Prudential Ins.
Co. v. National Park Medical Center, Inc. , 154 F.3d 812 (8th
Cir. 1998) (Arkansas statute ensuring that participants may
see the physician of their choice specifically excludes ERISA
plans and therefore is preempted); Stuart Circle Hosp. Corp.
v. Aetna Health Management, 995 F.2d 500 (4th Cir. 1993)
(Virginia any willing provider statute is saved from
preemption because it “regulates the business of insurance”);
Corporate Health Ins., Inc. v. Texas Dep't of Ins., 12 F.
Supp.2d 597 (S.D. Tex. 1998) (independent review provision
mandates the administration of employee benefits and
therefore relates to an ERISA plan; statute is not saved
because it is not limited to the insurance industry); American
Drug Stores, Inc. v. Harvard Pilgrim Health Care, Inc. , 973
F. Supp. 60 (D. Mass. 1997) (Massachusetts any willing
provider statute was not preempted by ERISA); Community
Health Partners, Inc. v. Commonwealth, 14 F. Supp.2d 991
(W.D. Ky. 1998) (Kentucky any willing provider statute
specifically references ERISA plans but is not preempted
because all plans are affected and statute is no different than
mandated benefit statute). Pilot Life has acted as a significant
barrier to these attempts and has resulted in creative judicial
decisions to deal with its effects. See generally Nicole
Weisenborn, ERISA Preemption and Its Effect on State Health
Reform, 5-FALL KAN. J.L. & Pus. PoL’y 147 (1995); Wendy
E. Parmet, Regulation and Federalism: Legal Impediments to
State Health Care Reform, 19 AM. J.L. & MED. 121 (1993).

10

B. Under ERISA, State Laws Regulating the
Business of Insurance Are Unique and Require a
More Critical Analysis than Other Types of State
Laws.

When enacting ERISA’s preemption section, Congress
expressly provided that ERISA preempts state laws relating to
employee benefit plans. ERISA § 514(a), 29 U.S.C.
§ 1144(a). But Congress did something more; it created an
exception explicitly ceding back power to the states to enact
legislation concerning employee benefit plans if the legislation

regulated the business of insurance. ERISA § 514(b)(2)(A),

29 U.S.C. § 1144(b)(2)(A). AARP contends that such
express restoration of state power requires a more critical
analysis and irrefutable Congressional intent before it can be
found that a state insurance law is preempted by ERISA under
the Supremacy Clause.” U.S. Const. art. VI, cl. 2; Pacific
Gas & Elec. Co. v. State Energy Resources Conservation &
Dev. Comm’n, 461 U.S. 190, 206 (1983).

Indeed, this Court has recognized this critical analysis. In
its most recent case dealing with ERISA preemption and the
insurance industry, this Court recognized that “ERISA leaves
room for complementary or dual federal and state
regulation{.]” John Hancock, 510 U.S. at 98. Significantly,
this Court held that generally state law governing insurance is
not displaced. Federal preemption would only occur ““where
compliance with both federal and state regulations is a
physical impossibility,’” Boggs v. Boggs, 117 S. Ct. 1754,
1762 (1997) (quoting Gade v. National Solid Wastes

” See Stephen A. Gardbaum, The Nature of Preemption, 79 CORNELL
L. REV. 767 (1994), arguing that there should be no preemption
doctrine and providing an in-depth historical review of preemption
cases. See generally Kenneth Starr, et al., American Bar Ass’n, The
Law of Preemption: A Report of the Appellate Judges Conference (1991)
for issues surrounding preemption.

11

Management Ass'n, 505 U.S. 88, 98 (1992)), or “‘where
(that) law stands as an obstacle to the accomplishment of the
full purposes and objectives of Congress[.]’” John Hancock,
510 U.S. at 99 (first alteration in original) (quoting Silkwood
v. Kerr-McGee Corp., 464 U.S. 238, 248 (1984)). In
Hancock, the Court “call{ed] for federal supremacy [only]
when the two regimes cannot be harmonized or
accommodated.” Jd. at 98. In essence, the Court construed
ERISA to set minimum standards which insurance laws can
complement or supplement.

And so, the issue in this case is whether compliance with
California’s notice-prejudice rule and ERISA can be
harmonized or accommodated. AARP submits that these state
and federal laws can be harmonized. In this endeavor, we
must determine whether compliance with both laws is a
physical impossibility and whether the notice-prejudice rule
Stands as an obstacle to the accomplishment of the full

purposes and objectives of Congress. We address each of
these in turn.

1. Compliance with both California’s notice-
prejudice rule and ERISA is not a physical
impossibility.

California’s notice-prejudice rule provides that an insurer
may not deny a claim as untimely unless it can show actual
prejudice (other than payment of the claim itself or general
untimeliness) resulting from the delay. This rule neither
implicates nor impinges upon ERISA’s enforcement scheme.
It does not provide any additional remedies beyond those
which ERISA provides. All this rule does is to deem a claim
timely filed so that participants may receive benefits under the
plan. Moreover, if their claim is denied, participants must
still file suit under ERISA § 502(a), 29 U.S.C. § 1132(a), in
order to receive their benefit. The notice-prejudice rule is not
an alternative enforcement mechanism. Finally, although
fiduciaries may be obligated to administer their plans in

12

accordance with their written terms, see ERISA
§ 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D), the plans must be
administered in accordance with other ERISA provisions and

other federal and state laws. Cf. Arizona Governing Comm.
for Tax Deferred Annuity and Deferred Compensation Plans
v. Norris, 463 U.S. 1073 (1983) (s rege
Labor proscribed regulations ee Sees one

benefit plan must process claims. 29 C.F.R. § 2560.503-1
(regulation sets forth minimum requirements which the benefit
claims procedures of ERISA plans must meet to be deemed
reasonable); Claims Procedure for Employee Benefit Plans,
42 Fed. Reg. 27,426 (1977) (preamble explaining operation
and purpose of regulation). However, the statute and claims
procedure regulations are silent on the time by which
participants must file their claim. The only requirement is
that the amount of time be reasonable. Consequently, in this
case, the claims procedure in UNUM’s policy
provided a time frame in which to file his claim. All

14

California’s notice-prejudice rule does is to permit a claim to
be deemed timely filed unless the insurer can show it was
actually prejudiced. California’s notice-prejudice rule acts as
an interpretive or “deeming” rule in determining whether an
insurance claim has been timely filed.

Because an imsurer can physicaily comply with both
California’s notice-prejudice rule and ERISA’s claims
procedure, there is no direct conflict between these two laws.

2. California’s notice-prejudice rule does not stand
as an obstacle to the accomplishment and
execution of the full purposes and objectives of
Congress.

The second prong for determining whether there is a
conflict between state and federal law is much more nebulous
“stands as an obstacle” prong forces the Court to determine
the intent of Congress, which is not dissimilar to field
preemption and the determination whether Congress intended
to occupy the field. Paul Wolfson, Preemption and
Federalism: The Missing Link, 16 HASTINGS CONST. L.Q. 69
(1988). However, because Congress expressly ceded power
back to the states to regulate the business of insurance, AARP
contends that it is crucial not to conflate field and conflict
preemption principles. Thus, the Court’s test of whether
the state insurance law can be harmonized and accommodated
with ERISA recognizes this distinction and strikes the right

2 In contrast to conflict preemption, field preemption leaves no room
for states to supplement federal regulation because Congressional intent
is inferred from the comprehensiveness of the federal regulations.
English v. General Electric Co., 496 U.S. 72, 78-79 (1990).

15

balance in determining whether Congress intended to oust
state insurance law.” John Hancock, 510 U.S. at 97-98.

Analysis of whether a state law frustrates the
attainment of Congress’ objectives involves
several steps: an identification of congressional
purposes, an assessment of the effect of the state
law and a determination whether that effect
‘stands as an obstacle’ to one of the purposes

underlying the federal law.
Jordan, supra, at 1200.

In analyzing Congress’ purposes, the Court must look not
only at the stated purposes but at the structure of the statute as
a whole.” ERISA’s declared principal purpose is “to protect
plan participants and beneficiaries . ” Boggs, 117 S. Ct.
at 1762 (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85,
90 (1983)); ERISA § 2(b), 29 U.S.C. § '1001(b). The
purpose of ERISA’s claims procedure and its interpreting
regulations is to provide minimum standards to protect
participants and beneficiaries. See 29 C.F.R. § 2560.503-1;
Claims Procedure for Employee Benefit Plans, 42 Fed. Reg.
27,426 (1977). Consequently, AARP contends that the fact
that federal and state laws are different does not mean that
there is an impermissible conflict. In this instance, we would
further contend that state insurance laws may set additional

4 In determining whether there is preemption under the Supremacy
Clause, uniformity is not an appropriate purpose to be considered.
However, uniformity is an appropriate purpose to be considered in the
context of field preemption. Karen A. Jordan, The Shifting Preemption
Paradigm: Conceptual and Interpretive Issues, 51 VAND. L. REV. 1149,
1174-76 (October 1998).

Characterization of the federal and state purposes is determinative of
the outcome of the analysis. Erwin Chemerinsky, Constitutional Law:
Principles and Policies, § 5.2 (1997).

16

standards to ERISA’s minimum standards. In other words,
ERISA is not absolute, but explicitly recognizes a role for
state insurance regulation, thus permitting state insurance laws
to supplement or complement ERISA’s standards. John
Hancock, 510 U.S. at 97-98; of. Wisconsin Public Intervenor
v. Mortier, 501 U.S. 597 (1991) (federal law set the minimum
standard for pesticide use, and thus did not preempt local
rules); Florida Lime & Avocado Growers, Inc. v. Paul, 373
U.S. 132 (1963) (federal law did not preempt state law setting
other standards for measuring the maturity of avocados).

This analysis is consistent with this Court’s decisions in
FMC Corp. v. Holliday, 498 U.S. 52 (1990), and
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724
(1985). In Metropolitan Life, this Court held that ERISA did
not preempt a state law mandating minimum mental health
benefits because it was exempted under the saving clause. /d.
at 744. The court did not find that state laws regulating the
substantive terms of group health insurance contracts conflict
with ERISA. Similarly, in FMC Corp., this Court held that
a State anti-subrogation clause was preempted as applied to a
self-funded ERISA plan. The Court emphatically stated:

{I}f the plan is insured, a State may regulate it
indirectly through regulation of its insurer and
its insurer’s insurance contracts; if the plan is
uninsured, the State may not regulate it. As a

4’ We note that Congress has recently passed certain mandated benefit
laws. Newborns’ and Mothers’ Health Protection Act of 1996, Pub. L.
No. 104-204, 110 Stat. 2935, 2935-39 (codified at ERISA § 711, 29
U.S.C.A. § 1185 (West 1999)) (minimum hospital length of stay for
postpartum care); Mental Health Parity Act of 1996, Pub. L. No. 104-
204, 110 Stat. 2944, 2944-47 (codified at ERISA § 712, 29 U.S.C.A.
§ 1185a (West 1999)) (prohibiting annual or lifetime limits on mental
health benefits that are lower than any comparable limits for medical
and surgical benefits). Unlike the law at issue in Metropolitan Life,
these laws apply to both insured and self-funded ERISA plans.

17

result, employers will not face “‘conflicting or
inconsistent State and local regulation of
employee benefit plans.’”

FMC Corp., 498 U.S. at 64 (quoting Shaw, 463 U.S. at 99).
Clearly, the Court implicitly found that state insurance
regulation did not lead to conflict or inconsistency with

Here, the state insurance law protects participants and
beneficiaries by providing a complementary interpretive rule
which will deem their claims to be timely filed. The insurer
obviously meets the ERISA’s claims procedure standards by
providing a reasonable period of time to file a claim. The
effect of this state law is to provide additional time for a
participant to have his or her claim deemed timely filed, while
still protecting the insurer from stale claims. There is no
conflict or inconsistency with ERISA. Thus, California’s
notice-prejudice rule cannot be found to stand as an obstacle
to the accomplishment and execution of Congressional
purposes and objectives. Instead, this law can easily be
harmonized or accommodated with ERISA.

18
CONCLUSION

For the above reasons, AARP urges the Court to hold that
California’s notice-prejudice rule should not be preempted
under the Supremacy Clause because it can be harmonized
and accommodated with ERISA’s claims procedure.

January 8, 1999 “s Respectfully submitted,

Jha, Led jy Lt

Maty Ellen Signorille

(Cgunsel of Record)

AARP Foundation
Litigation

Melvin Radowitz

American Association
of Retired Persons

601 E Street, N.W.

Washington, DC 20049

(202) 434-2060

Counsel for Amicus
Curiae

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0180%3A22. Public record. Not legal advice.