# Amicus Curiae Brief — Rush Prudential HMO, Inc. v. Moran

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2002
- **Citation:** 536 U.S. 355

## Text

No. 00-1021

In The
Supreme Court of the United States

————e eo —

RUSH PRUDENTIAL HMO, INC.,

Petitioner,

DEBRA C. MORAN and STATE OF ILLINOIS,

Respondents

— ——____ ——— @ ------

On Writ Of Certiorari
To The United States Court Of Appeals
For The Seventh Circuit

_¢ ee

BRIEF OF UNITED POLICYHOLDERS AS AMICUS
CURIAE IN SUPPORT OF RESPONDENTS

o¢—- -— --- —

Amy BAcH ARNOLD R. Levinson

Of Counsel Counsel of Record
BacH Law Orfict TeRRENCE J. COLEMAN
42 Miller Avenue Piispury & Levinson, LLP
Mill Valley, CA 94941 One Embarcadero Center,
(415) 381-7627 38th FI.

San Francisco, CA 94111
(415) 433-8000

Counsel for Amicus Curiae

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
OR CALL COLLECT (402) 442-2831

BEST AVAILABLE COPY

QUESTION PRESENTED

Whether a law which is saved from preemption
under the terms of the saving clause of the Employee
Retirement Income Security Act of 1974 (“ERISA”),
ERISA Section 514(b)(2)\A), 29 U.S.C. § 1144(B)(2)(A), is
nonetheless preempted because it provides a remedy
other than those enumerated in ERISA’s remedial provi-
sion. ERISA § 502, 29 U.S.C. § 1132.

li

TABLE OF CONTENTS

Page
ee Be er ee ee i
TABLE OF AUTHORITIOS ......cccccccsccccccccess iii
INTEREST OF THE AMICUS CURIAE ............. 1
SUMMARY OF ARGUMENT.................000eee 1
RETRIUEEITD o 0600000 cenenentesseee 5

I. ERISA’S EXPRESS PREEMPTION CLAUSE CON-
TROLS OVER ANY CLAIM OF IMPLIED PRE-
EMPTION ARISING OUT OF ERISA SECTION
POs vcccccscccconcesesnessyedaeneninane 5

B. Pilot Life Does Not Control The Question Pre-
sented In This Action Because The State Law
At Issue In Pilot Life Was Not A Law Regulat-
ING GRGUSGRED. . oo s0scceneesensegbannenneen 8

C. ERISA’s Legislative History Is Unequivocal In
Disclosing That The Act Was Intended To Reg-
ulate Pension Benefits And Was Not Intended
To Impact The Field Of Insurance........... 14

D. This Court Has Recognized That Remedial
Laws Are At The Core Of The McCarran-Fer-
guson Act And Thus The Saving Clause... .. 21

E. ERISA’s Enforcement Mechanisms Leave
Insureds With No Effective Remedy And Do
Not Conform With ERISA’s Legislative His-
tory; Petitioner Is Not A Proper Party To An

Fe het EE 24
Il. THE TRIAL COURT LACKED SUBJECT MAT-
8 ltt RR) ot ae 30

COORG EG 8.0 0 v04ssssnecennadbensnsaebideucians 30

ili

TABLE OF AUTHORITIES

Page
Cases
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504
CD nceenbbabetesesccceucecencoececccscccececees 20
Andrews-Clarke v. Travelers Ins. Co., 984 F.Supp. 49
TD, BEROR. BOPP. cccccccccccscsccccccccccecccccces 26
Bast v. Prudential Ins. Co., 150 F.3d 1003 (9th Cir
1998) cert. denied, 120 S.Ct. 170 (1999)............. 26
Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir.
EEE CREMP POTTTTITTTITTT TT TTT TTL 27
Butero v. Royal Maccabees Life Ins. Co., 174 F.3d
Sy GEE GE, BOE ccnccccccccccccccsccocccccces 27
Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d
oe, Le TTT T TIT Terre eee 26
Cohen v. Equitable Life Assurance Soc. of the United
States, 196 Cal.App.3d 669 (1987) ............0005: 25
Corcoran v. United Healthcare, Inc., 965 F.2d 1321
LL EPPPPTTTTTITITITT TTT Tee 26
Everhart v. Allmerica Financial Life Ins. Co., 1999
WL 498244 (N.D. Cal. 1999) .......... 2.5 eee eeee 25
Florence Nightingale Nursing Serv., Inc. v. Blue Cross
& Blue Shield, 832 F.Supp. 1456 (N.D. Ala. 1993),
aff'd, 41 F.3d 1476 (11th Cir. 1995) ............-5+- 26
FMC Corp. v. Holliday, 498 U.S. 52 (1990)...........-- 7
Franchise Tax Board v. Construction Laborers Vacation
Trust for Southern Cal., 463 U.S. 1 (1983)....... 2, 11, W
Franklin H. Williams Ins. Trust v. Travelers Ins. Co.,
50 F.3d 144 (2nd Cir. 1995) ....... 6.6 c cece eee e ee ees 3

iv

TABLE OF AUTHORITIES - Continued

Garratt v. Knowles, 245 F.3d 941 (7th Cir. 2001) ..

Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d

See Gee Ga MI bbb dcdnceccsdocsdedvsceses

Gaylor v. John Hancock Mutual Life Ins. Co., 112 F.3d

ee? Ge GD. SU oc eer bas ceddhasennccsatane

Gelardi v. Pertec Computer Corp., 761 F.2d 1323 (9th

Sh Se caduabeousadndeedé otaatiebedketucie

Gibson v. Prudential Ins. Co. of N. Am., 915 F.2d 414
a Gh Sins coginsenskatechidadodesedeess

Hill v. Blue Cross Blue Shield of Alabama, 117
F.Supp.2d 1209 (N.D. Ala. 2000) ..............

Humana Inc. v. Forsyth, 525 U.S. 299 (1999)......

In Re Life Ins. Co. of N. Am., 857 F.2d 1190 (8th Cir.
Shes scuubssdécsenpscensccdiennsabesbeabnus

Jordan v. Reliable Life Ins. Co., 694 F.Supp. 822 (N.D.
Si, Ss ns btwannond beaekihealdee es

Kanne v. Connecticut General Life Ins. Co., 867 F.2d
489 (9th Cir. 1988), cert. denied, 492 U.S. 906
SUeSE DP oceccrnensneds ceccachscenecestseedbavees

Kransco v. American Empire Surplus Lines Ins. Co.,
23 Cal.4th 390, 2 P.3d 1 (2000)................

Lewis v. Aetna U.S. HealthCare, Inc., 78 F.Supp.2d
TAGS GUD. Clie. BORD)... wncccsccccccccescess

Malone v. White Motor Corp., 435 U.S. 497 (1978).

Marshall v. Bankers Life & Cas. Co., 2 Cal. 4th 1045,
ly treet

Massachusetts v. Morash, 490 U.S. 107 (1989).....

coos ae

v

TABLE OF AUTHORITIES - Continued .
age

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. |
FES CIDE wc ccccccccccccccccccccesccccvcesess passim

Nachman Corp. v. Pension Benefit Guar. Corp., 446
Gs BP GD cnccccccecccesscescesocccsvcecceces 20

New York State Conf. of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) ....6, 7

Pacific Gas & Elec. Co. v. State Energy Resources
Conservation & Dev. Comm'n, 461 U.S. 190 (1983) .... 12

Park’N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S.
BP CE s ccccccencapecceceesteceesecccceccccocee: 7

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987)..... passim
Ramirez v. Inter-Continental Hotels, 890 F.2d 760

BEE GOR BE oc ccccccccccccceecccscccccseccesece: 3
Roeder v. Chemrex, Inc., 863 F.Supp. 817 (E.D. Wis.
Bn vcdisctdvcccccccccccsveveesseccccctcepscccces 25

Rogers v. Tecumseh Bank, 756 P.2d 1223 (Okla. aa 4
Rosen v. TRW, Inc., 979 F.2d 191 (11th Cir. 1992)..... 25
SEC v. National Securities, Inc., 393 U.S. 453 (1969) .... 22
Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)....... 5
Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) .... 23
UNUM Life Insurance Co. of Am. v. Ward, 526 U.S.

BD GSO o ccc ceccsndccscccseccccesccoscvcvess passim
STATUTES
Employee Retirement Income Security Act of 1974
(“ERISA”)

OL TTT ee passim

vi

TABLE OF AUTHORITIES - Continued

Page
PT) séseudueesécuetencentbeddadedabnaaed 4,5
DEE nSoneevtabivadcacnabenssvdonnesedeveccsaul 5
PE cccnnéechendeuésbeunneoossbads 6, 11, 12
Br ee Ea svdevicasccssedcecededucsueneanous 5
Pe HE Wd ddcdveccacescedeecvicd baéanee 5
SP UR & PO occ ccccccccccccccccsccess 25
SP Sn a PE Rbdbadbadossdaunds woncdeoiedandon 10
Oe ee Oe BINS 6neccncccesdenessecdanwas 25
ee ee es din chivigvccess dobedecdedeus 25
er le id chncmenbctensncectbensde 2, 25
BP Mere TE BED cc ccccccvcccccescccvesscccesveses 10
ee Se OF nninatcncasegedestedencdheviecel 5
BP We & BRIO oc ccccccccccccccccccces 6, 10
Se Cs Se SDS s cen cccsececcccesososcees 28
Illinois Health Maintenance Organization Act,
Saw Gbbétdénstococteccecssanendcbune passim
Labor-Management Relations Act of 1947
(“LMRA”)
Section S01, 29 UGC. § 185 2... cccccccccccess 9, 10
thins atididt btdthe dubenadunissanie baka 11
DEcC ase ONION AE... occ cccsccccécccccccecs passim
SP Ey MO nd eve cintbastcloetscsesccandeuts 7

Welfare and Pension Plans Disclosure Act........... 15

vii

TABLE OF AUTHORITIES - Continued

Page
REGULATIONS
29 C.F.R. § 2520.104-20..........2 cece cece cence eeeees 27
29 C.PR. § 2520.106-21........ccccccccccccrcevescees 27
LEGISLATIVE MATERIALS
113 Cong. Rec. 4650-53 (1967)..........-0seeeeeeeees 16
119 ae 30,003 (1973), reprinted in 2 Legisla-
tive HistOry ..........ccceeeeececceceeceeceseesees 17
120 Cong. Rec. 29,933-34 (1974), reprinted in 3 Leg-
islative History ..........sccccccccecccccececcssess 16
120 Cong. Rec. 29,933-35 (1974), reprinted in 3 Leg-
tolative PHIStOTy ........ccccccccccccccccccccscceees 18
120 Cong. Rec. 29,934 (1974), reprinted in 3 Legisla-
tive History .........--ccceeeee reece eeeeeeeeeneees 14
120 Cong. Rec. 29,935-44 (1974), reprinted in 3 Leg-
islative History ...........sccccccccccccccecccccess 17
H.R. 2, 93d Cong. (1973), reprinted in 1 Legislative
PHISGOCY. . 0c cc ccccccccccccccccccsecesccsscscccees 17
H.R. Rep. No. 93-1280, 93rd Cong. 2d Sess. at 383,
reprinted in 3 Legislative History at 4650.......... 28
H.R. Rep. No. 93-533, at 1, 17-18, reprinted in 1974
U.S.C.C.A.N. at 4655-56... 2.0... cece cece eee ee eees 19
H.R. Rep. No. 93-533, at 1-28, reprinted in 1974
U.S.C.C.A.N. at 4639-70... 2.2... cece cece cece eee eees 18
H.R. Rep. No. 93-533, at 3, reprinted in 1974
US.C.C.A.N. at 4641 2.2... ccccccccccccccsccces 14, 15
H.R. Rep. No. 93-533, at 4, reprinted in 1974
USCICAIN. Ot 4642 2. .cccccccccccccccccccccccess 15

viii
TABLE OF AUTHORITIES - Continued

H.R. Rep. No. 93-533, at 5-8 (1973), reprinted in

1974 U.S.C.C.A.N. 4639, 4643-46 ..............

Interim Report of Activities of the Private Welfare and
Pension Plan Study, Subcommittee On Labor of the
Committee on Labor and Public Welfare, S. Rep.

No. 92-634, 92d Cong., 2d Sess. (1972) at 67-90...

President’s Comm. on Corporate Pension Funds
and Other Private Retirement and Welfare Pro-
grams, Public Policy and Private Pension Pro-
grams: A Report to the President on Private
Employee Retirement Plans, at vii-viii (1965). .

Pub. L. No. 85-836, 72 Stat. 997 (1958) (repealed
PPbsdhtebndibechndssancavess ukdbienwsdeetic

i I OI vend nti cdehenstccvadeds

S. Rep. No. 85-1440, at 2-11 (1958), reprinted in
BOD AE os acnnacddcscdsedocccccsnces

S. Rep. No. 92-634, at 1 (1972).............00005

S. Rep. No. 93-127 (1973), reprinted in 1974
2 tbccctinetitedediminedas ia 14, 15,

Special Comm. on Aging, U.S. Senate, 98th Cong.,
The Employment Retirement Incoine Security
Act of 1974: The First Decade 1-25 (Comm. Print

ODEN te ttcesdddddnnsvnes bdasdadndseteceinscds

Subcomm. on Labor of the Senate Comm. on
Labor and Pub. Welfare, 94th Cong., Legislative
History of the Employee Retirement Income
Security Act of 1974 (Comm. Print 1976)......

. 20

ocoe Me

ix
TABLE OF AUTHORITIES - Continued

OrHER AUTHORITIES

Catherine L. Fisk, The Last Article About the Lan-
ge of ERISA Preemption? A Case Study of the
ailure of Textualism, 33 Harvard J. on Legis. 35,

BB (1996)... cece cece cree eeeeeeeeeeeeeerenees

David Gregory, The Scope of ERISA Preemption of
State ewe A Study in Effective Federalism, 48 U.

Pitt. L. Rev. 427 1987) .....ssseccceeeceeceeees

Bogan, Protecting Patient Rights Despite

Donald T.
Court Allow States to Regu-

ERISA: Will the Supreme

late Managed Care? 74 Tul. L. Rev. 951 (2000).....

James D. Hutchinson & David M. Ifshin, Federal
Preemption of State Law Under the Employee
Retirement Income Security Act of 1974, 46 U. Chi.
L. Rev. 23, 24 (1978)......ccccceceeccecerecees

Solicitor General's Brief filed in Unum Life Ins. Co.

Stephen S. Ashley, Bad Faith Actions: Liability And
amages § 9:02, at 9-3 through 9-10, & n.38 (2d

Od. 1997)... cc ccccrccccvcccccersccessesenesees

Page

1
INTEREST OF THE AMICUS CURIAE

United Policyholders is a national, not-for-profit edu-
cational organization whose mission is to educate the
public, legislators and the courts on insurance issues and
consumer rights, and to assist policyholders in securing
prompt and fair insurance settlements.! As explained in
the Summary of Argument, the resolution of the issue
presented in this case is of great importance tq United
Policyholders and its members because of its potential
application to a wide range of laws affecting employees
insured through an ERISA plan.

SUMMARY OF ARGUMENT

The principal argument set forth by petitioner and its
supporting amici is that Section 4-10 of the Illinois Health
Maintenance Organization Act provides a remedy differ-
ent than those remedies set forth in ERISA Section 502, 29
U.S.C. § 1132. A fortiori, they argue, even though the law
may be saved from preemption under ERISA’s saving
clause, the law conflicts with ERISA’s exclusive remedies
and therefore is preempted under this Court’s holding in
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). They also
argue that the subject statute does not even fall within the
saving clause and therefore is subject to ERISA’s preemp-
tion clause.

We anticipate that respondents will thoroughly
address their contentions that (1) the Illinois law does fall

1 United Policyholders, as amicus curiae, has obtained the
consent of both the Petitioner and the Respondents to submit
this brief. The letters of consent have been lodged with the Clerk
of the Court. No counsel for any party in this case authored this
brief in whole or in part, and no person or entity other than
United Policyholders and its members made any monetary
contribution to the preparation or submission of this brief.

2

within the saving clause and (2) that it does not provide
an additional remedy, and therefore is not even subject to
the Pilot Life claim. This brief does not address those
questions. We only address the principal question
whether ERISA’s saving clause defeats a claim that the
law is preempted because it provides a remedy other than
those set forth in ERISA Section 502.

Petitioner relies almost exclusively upon Pilot Life.
Yet, this Court has recently pointed out that Pilot Life
does not address Section 502’s impact on laws encom-
passed by the saving clause. Rather, the issue presented
in this action is an open question. See UNUM Life Insur-
ance Co. of Am. v. Ward, 526 U.S. 358, 377 n.7 (1999) (“The
case therefore does not raise the question whether
§ 502(a) provides the sole launching ground for an ERISA
enforcement action”; Pilot Life's holding was “in the con-
text” of a law which was not saved from preemption).
Further, in Franchise Tax Board of Cal. v. Construction
Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 25
(1983), this Court clearly held that “[the saving clause]
makes clear that Congress did not intend to preempt

entirely every state cause of action relating to” ERISA
plans.

When one looks at the clear language of ERISA, its
legislative history and the language of this Court's deci-
sions, the conclusion is inescapable that ERISA does not
preempt state insurance laws, such as Section 4-10 of the
Illinois law, merely because they provide remedies other
than those set forth in ERISA’s Section 502. Further evi-
dence for this conclusion is that ERISA provides that
petitioner is not a proper party to this ERISA action. 29
U.S.C. § 1132(d)(2). Rather, ERISA’s remedies were
designed to address the ability to redress abuses in pen-
sion plans, not insurance disputes. Accordingly, under
ERISA, an insured, such as Moran, would be limited to an

3

action against the welfare benefit plan itself. Congress
did not intend this result for insurance disputes. It
intended that States were free to continue to regulate and
provide remedies appropriate to the regulation of insur-
ance and that Moran is therefore free to pursue petitioner
on her state-law claim. Moreover, because the claim at
issue is saved from preemption, this matter was improp-
erly removed to the federal district court and should be
remanded to the State court where the action originated.

United Policyholders further believes that this
Court’s decision in Pilot Life has resulted in great confu-
sion and the denial of appropriate redress to innumerable
insureds and that this Court should revisit its holding in

Pilot Life.

The issue before the Court is of great importance to
United Policyholders, which is devoted to protecting the
rights of insureds in a wide variety of contexts, including
life, health and disability insurance as well as property
and liability insurance. There are numerous actual and
potential state insurance laws which fall squarely within
the saving clause, but whose enforcement has been nulli-
fied by courts which have interpreted this Court's prece-
dents as barring any such laws which provide a remedy
other than those set forth in ERISA.? Thus, the determina-
tion in this case of whether ERISA’s remedial provisions
bar enforcement even of those laws which are explicitly

2 See, e.g., Kanne v. Connecticut General Life Ins. Co., 867 F.2d
489 (9th Cir. 1988), cert. denied, 492 U.S. 906 (1989); Ramirez v.
Inter-Continental Hotels, 890 F.2d 760, 763-64 (Sth Cir. 1989); In Re
Life Ins. Co. of N. Am., 857 F.2d 1190, 1194 (8th Cir. 1988); but see
Franklin H. Williams Ins. Trust v. Travelers Ins. Co., 50 F.3d 144,
151 (2nd Cir. 1995) (“It would be quixotic to rule that a
claim under a state statute that is saved from ERISA
preemption . . . may nonetheless be enforced only via ERISA
provisions and remedies”).

4

saved from preemption has ramifications far beyond the
particular law in question here.?

An additional concern of United Policyholders is
that, in the event this Court does find that the law in
question is preempted, that it not foreclose the applica-
tion of other laws, which are not preempted. In particu-
lar, petitioner here claims that Section 4-10 of the Illinois
law is merely a substitute procedure for an ERISA partici-
pant’s right to institute a civil action under Section
502(a)(1)(B). However, other state laws exist which would
not be substitutes for, but would be in addition to the
claims available under ERISA. These claims may well

° For example, many states provide either a common law
remedy against insurers who violate the covenant of good faith
and fair dealing where, unlike the state law at issue in Pilot Life,
the claim is available solely against the insurance industry. See,
e.g., Kransco v. American Empire Surplus Lines Ins. Co., 23 Cal.4th
390, 400, 2 P.3d 1 (2000) (“The availability of [common law] tort
remedies in the limited context of an insurer’s breach of the
covenant advances the social policy of safeguarding an insured
in an inferior bargaining position who contracts for calamity
protection, not commercial advantage”); Rogers v. Tecumseh
Bank, 756 P.2d 1223, 1226 (Okla. 1988) (“the implied-in-law duty
of good faith and fair dealing [is imposed] on the insurer
because of the special purpose for obtaining insurance: An
insurer has a special relationship to its insured and has special
implied-in-law duties toward the insured”). Additionally, in
many States insureds may maintain a private right of action
under the state’s Unfair Insurance Practices statute. See Humana
Inc. v. Forsyth, 525 U.S. 299, 312 (1999) (referencing private right
of action under Nevada Unfair Insurance Practices Act);
Stephen S. Ashley, Bad Faith Actions: Liability And Damages
§ 9:02, at 9-3 through 9-10, & n.38 (2d ed. 1997); see also Hill v.
Blue Cross Blue Shield of Alabama, 117 F.Supp.2d 1209 (N.D. Ala.
2000) (finding state common law bad faith claim saved and no
longer preempted under reasoning of Ward, 526 U.S. 358); Lewis
v. Aetna U.S. HealthCare, Inc., 78 F.Supp.2d 1202 (N.D. Okla.
1999) (same).

5

complement rather than conflict with ERISA’s remedial
scheme. Saving such claims from preemption would per-
mit the insured appropriate relief by being able to pursue
both a Section 502(a)(1)(B) action together with other
state-law claims which are aimed at the insurance indus-

try.*

ARGUMENT

I. ERISA’S EXPRESS PREEMPTION CLAUSE CON-
TROLS OVER ANY CLAIM OF IMPLIED PREEMP-
TION ARISING OUT OF ERISA SECTION 502.

A. Preface

ERISA was enacted as a pension reform bill intended
to protect the retirement benefits of workers. Shaw v.
Delta Air Lines, Inc., 463 U.S. 85, 90 (1983); 29 U.S.C.
§ 1001(b). Protecting “the continued well-being and secu-
rity of millions of employees and their dependents was
an express Congressional declaration of policy. 29 U.S.C.
§ 1001. ERISA comprehensively regulates pension plans.
Importantly, ERISA does not comprehensively regulate
the terms of non-pension employee benefit plans.°

In addition to its substantive provisions, ERISA
includes a preemption clause, which provides that,
“except as provided in [the saving clause] the provisions
of this title . . . shall supersede any and all State laws
insofar as they . . . relate to any employee benefit
plan....” ERISA § 514(a), 29 U.S.C. § 1144(a). This Court

4 See note 3, supra, and note 46, infra.

5 See Donald T. Bogan, Protecting Patient Rights Despite
ERISA: Will the Supreme Court Allow States to Regulate Managed
Care? 74 Tul. L. Rev. 951 (2000) (hereafter, Bogan, Protecting

Patient Rights).

6

has described the preemption clause as “expansive.”6
However, the preemption clause is modified by the sav-
ing clause, which declares “ . . . nothing in this title shall
be construed to exempt or relieve any person from any
law of any State which regulates insurance. ...” ERISA
Section 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A). This sav-
ing clause is “phrased with similar breadth” as the pre-
emption clause.”

In addition to ERISA’s express preemption language,
this Court has held that ERISA’s comprehensive civil
enforcement provisions, detailed in ERISA Section 502,
suggest that Congress intended all claims arising from an
ERISA-governed employee benefit plan which fall within
the ambit of ERISA Section 502 must be pursued exclu-
sively through ERISA.§ However, this Court has
explained that it has not yet determined whether Con-
gress’s express exemption from preemption for state laws
regulating insurance supersedes any inference of preemp-
tion arising from ERISA Section 502 when the state-law
remedy at issue provides a remedy aimed specifically at
the insurance industry. Ward, 526 U.S. at 377.

As the Court approaches this statutory interpretation
question, several guiding principles previously estab-
lished in the Court’s ERISA jurisprudence will apply. Like

© See New York State Conf. of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645, 655 (1995); Pilot Life, 481 U.S. at
46.

7 Ward, 526 U.S. at 363 (“[P]re-emption is substantially
qualified by an ‘insurance saving clause,’ . . . which broadly
[saves state insurance laws]... . ”); Metropolitan Life Ins. Co. v.
Massachusetts, 471 U.S. 724, 740-741 (1985) (“ .. . [W]hile the
general pre-emption clause broadly preempts state law, the
saving clause appears broadly to preserve the States’
lawmaking power over much of the same regulation”).

8 See Pilot Life, 481 U.S. 41.

7

all issues of statutory construction, preemption claims
turn on Congress's intent.? The Court must “begin with
the language employed by Congress and the assumption
that the ordinary meaning of that language accurately
expresses the legislative purpose.”!° Further, the Court
must also presume that Congress did not intend to pre-
empt areas of traditional State regulation.”

Not only is insurance an area of traditional State
regulation, but Congress has specifically designated
insurance as a special area of State regulation to be zeal-
ously protected from federal regulation. The McCarran-
Ferguson Act provides that federal laws shall not be
interpreted to supersede state laws regulating the busi-
ness of insurance. 15 U.S.C. § 1012(b); Humana, Inc. v.
Forsyth, 525 U.S. 299, 306 (1999). “Congress’ ‘primary
concern’ in enacting McCarran-Ferguson was to ensure
the States’ continued ability to regulate the business of
insurance.” Metropolitan Life Ins. Co. v. Massachusetts, 471
U.S. 724, 744 n.21 (1985). And the ERISA saving clause
was designed to preserve the McCarran-Ferguson Act's
reservation of the business of insurance to the States. Id.;

9 See Travelers, 514 U.S. at 655.

10 FMC Corp. v. Holliday, 498 U.S. 52, 57 (1990), citing Park’N
Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194 (1985).

11 See Travelers, 514 U.S. at 655 (“We have never assumed
lightly that Congress has derogated state regulation, but instead
have addressed claims of pre-emption with the starting
presumption that Congress does not intend to supplant state
law. Indeed, in cases . . . where federal law is said to bar state
action in fields of traditional state regulation, we have worked
on the ‘assumption that the historic police powers of the States
were not to be superseded by the Federal Act unless that was
the clear and manifest purpose of Congress’” (citations
omitted)).

Ward, 526 U.S. at 375 n.5. Moreover, “[t]here is no discus-
sion in [the legislative] history [of ERISA] of the relation-
ship between the general pre-emption clause and the
saving clause, and indeed very little discussion of the
saving clause at all.” Metropolitan Life, 471 U.S. at 745.
This Court therefore “decline[d] to impose any limitation
on the saving clause beyond those Congress imposed in
the clause itself... . If a state law ‘regulates insur-
ance,’ . . . it is not pre-empted. Nothing in the language,
structure, or legislative history of the Act supports a
more narrow reading of the clause... .” Id. at 746-47.

Given the unambiguous language of the saving
clause and the strong prohibitions against preemption of
state insurance laws, the conclusion that a state law that
falls within the saving clause is still preempted would
require a clear and manifest expression of Congressional
intent. Yet, as extensively discussed below, there is noth-
ing in the statutory history of ERISA even to suggest such
an intent, let alone a clear and manifest intention.

B. Pilot Life Does Not Control The Question Pre-
sented In This Action Because The State Law At

Issue In Pilot Life Was Not A Law Regulating
Insurance.

In Pilot Life, this Court held that ERISA preempted a
state-law claim for tortious breach of contract arising
from an insured ERISA disability benefits plan. The Court
found that the state-law claim related to ERISA and was
not saved from preemption because the Mississippi law
was not aimed specifically at the insurance industry.!2 As

? But cf., Humana, 525 U.S. 299. This holding in Pilot Life
appears to be in direct conflict with the Court’s later opinion in
Humana where the Court assumed, without analysis, that the
very same law in Nevada ~ a state common law tort remedy for
bad faith breach of an insurance contract - was within the ambit

9

part of the Court’s analysis of the saving clause issue in
Pilot Life, and in accordance with the views of the Solici-
tor General, it relied upon the structure and legislative
history of the civil enforcement provisions contained in
ERISA Section 502 to bolster its conclusion that Congress
intended ERISA to preempt the state-law remedy at issue
in that action. Pilot Life, 481 U.S. at 51-52.

Critically, the reasoning of the Court applied only to
laws of general application and does not logically extend
to laws that fall within the saving clause. Further, in the
recent case of Ward, 526 U.S. 358, 377 n.7, the Solicitor
General specifically pointed out that the Section 502
implied preemption analysis it presented in Pilot Life
would not apply in a case where the state-law remedy at
issue was a state law regulating insurance. The limited
application of Pilot Life's Section 502 implied preemption
analysis is reflected in the Court's final sentence:
“ .. [W]e conclude that Dedeaux’s state law suit assert-
ing improper processing of a claim for benefits under an
ERISA-regulated plan is not saved by [the saving clause}
and therefore is pre-empted by [the preemption clause].
Pilot Life, 481 U.S. at 57 (emphasis added).

In noting that ERISA’s remedies were intended to be
exclusive, the Pilot Life Court relied on two factors: (1) the
structure of ERISA itself and (2) reference in the legisla-
tive history of ERISA to the preemptive scope of Section
301 of the Labor-Management Relations Act of 1947
(“LMRA”), 29 U.S.C. § 185. Regarding the structure of
ERISA, the Court held that the ERISA remedies repre-
sented a comprehensive enforcement scheme, which, in
light of ERISA’s broad preemption clause, was intended
to be exclusive. The Court determined that parties were

of the McCarran-Ferguson Act. Id. at 311-313. See discussion in
text at Section D, infra.

10

not “free to obtain remedies under state law that Con-
gress rejected in ERISA.” Pilot Life, 481 U.S. at 54.

While this conclusion can be applied to generally
applicable state-law remedies, such as was before the
Court in Pilot Life, or more importantly, to laws affecting
pension benefits, the same is not true of laws which fall
within the specific Congressionally-carved exception,
which saves laws regulating insurance. Congress did not
“reject” remedies specifically provided for within the
confines of the saving clause. On the contrary, such laws
were specifically saved, not rejected. Further, the saving
clause is fundamental to the structure of the Act. It pro-
vides that “ . . . nothing in this subchapter shall be
construed to exempt or relieve any person from any law
of any State which regulates insurance. .. . ” 29 U.S.C.
§ 1144(b)(2)(A). Not only are the remedies contained in
the same subchapter as the saving clause (remedies in 29
U.S.C. § 1132, saving clause in 29 U.S.C. § 1144), but the
saving clause is in the very same statute as the preemp-
tion clause (29 U.S.C. § 1144). As such, the structure of
ERISA cannot serve as the clear and manifest intent of
Congress required to override the clear terms of the sav-
ing clause itself and, as set forth at length below, there is
nothing in the legislative history of the Act to support
such a conclusion. Thus, it is illogical to transfer this
Court's discussion of the structure of ERISA in Pilot Life
to the entirely different context of a law that the very
structure of the Act provides is “saved” from preemption.

The second claimed factor supporting the Pilot Life
conclusion is that the Conference Report contained refer-
ence to the LMRA. 481 U.S. at 55. The Pilot Life Court
determined that this statement reflected Congress’ intent
to compare ERISA’s preemptive effect with the powerful
preemptive force of Section 301 of the LMRA. Id. Once
again, this may apply with regard to laws of general

11

applicability or laws relating to pension benefits; how-
ever, it has no bearing with respect to a law that falls
within the saving clause. The LMRA has no saving clause
and thus is not comparable legislation when addressing a
law that is specifically saved from preemption. Indeed,
this Court has made this very point.

This Court has repeatedly pointed out that the saving
clause is just as broad as the preemption clause. Ward, 526
U.S. at 363; Metropolitan Life, 471 U.S. at 733. Thus, the
remedial clause cannot serve to trump the saving clause
simply because of reference in the legislative history to
the LMRA.

The phrasing of § 502 [ERISA’s remedial provi-

sion] is instructive. It does not purport to reach

every question relating to plans covered by

ERISA . . . Furthermore, § 514(b)(2)(A) of ERISA

[the saving clause] makes clear that Congress did not

intend to preempt entirely every state cause of action

relating to such plans. With important, but
express limitations, it states that “nothing in this
subchapter shall be construed to exempt or
relieve any person from any law of any State
which regulates insurance, banking, or securi-
ties.” In contrast, § 301 (a) of the LMRA applies
to all “suits for violation of contracts between an
employer and a labor organization representing
employees in an industry effecting commerce
. . or between any such organizations.”

Franchise Tax Board v. Construction Laborers Vacation Trust
for Southern Cal., 463 U.S. 1, 25 (1983) (emphasis added).

Even the Pilot Life decision makes this clear. In citing
to the legislative history, the Court quoted one of the
bill’s sponsors, Senator Williams as follows: “[W]ith the
narrow exceptions specified in the bill, the substantive and
enforcement provisions of the conference substitute are
intended to preempt the field... . ” 481 U.S. at 46

12 |

(emphasis added). Manifestly, the saving clause is the
principal exception.!5 Moreover, Senator Williams’ state-
ment, as well as those of the other sponsors of the bill,’
were made in the context of the intended purpose of the
Act. ERISA was intended as pension reform legislation. It
did not intend to deal with or replace state laws regulat-
ing insurance. ERISA is silent with regard to any mean-
ingful regulation of insurers. Instead, it saves to the
States the continuing responsibility to regulate insurers.

Field preemption “strips the states of all regulatory
authority in the defined field and is normally inferred by
the courts only when Congress has comprehensively reg-
ulated the subject area or when the subject is peculiarly
with the federal domain.”!5 Yet, ERISA’s comprehensive
regulations are entirely directed at pension benefits, and
insurance is a field in which regulation is traditionally
left to the states. Bogan, Protecting Patient Rights, supra
note 15, 74 Tul. L. Rev. at 974-75. Thus, to imply a Con-
gressional intent to preempt the field of nonpension ben-
efits is to void all state regulation, while failing to replace
it with any federal regulation, let alone comprehensive
federal regulation. It is apparent that the very purpose of
the saving clause was to avoid such a regulatory void by

3 Reference in Senator Williams’ remarks to the “narrow”
exception is “far too frail [to] support” a restricted reading of
the saving clause. Metropolitan Life, 471 U.S. at 746.

* Further, while these comments were persuasive to this
Court in the context of a law of general application, they are “of
little help in analyzing § 514(b)(2)(A) for . . . the saving clause is
broad on its face and specific in its reference.” Metropolitan Life,
471 U.S. at 746 n.24.

15 Bogan, Protecting Patient Rights, supra, at 956; see also
Pacific Gas & Elec. Co. v. State Energy Resources Conservation &
Dev. Comm'n, 461 U.S. 190, 204 (1983).

13

saving the entire field of state insurance regulation, for
which ERISA provides no meaningful substitute.

It makes little sense for Congress to have supplanted
an entire field of traditional state regulation and replace
it with virtually nothing. Similarly, it makes little sense to
have specifically saved state insurance laws and then
strip the States of their ability to enforce their state laws
by limiting the remedies only to those specifically drafted
for the unrelated field of pension benefits. While peti-
tioner repeatedly asserts that ERISA was intended to
provide uniformity and that an expansive application of
the saving clause would “swallow ERISA whole”, Pet'r
Br. at 36, this Court has already rejected such claims. “We
recognize that applying the States’ varying insurance reg-
ulations creates disuniformities for ‘national plans that
enter into local markets to purchase insurance.’ [citation]
As we have observed, however, ‘[s]uch disunifor-
mities . . . are the inevitable result of the congressional
decision to “save” local insurance regulation.’ ” Ward, 526

U.S. at 376 n.6.

Thus, the two reasons upon which this Court derived
its exclusive remedy discussion in Pilot Life have no
applicability to state insurance laws which are not only
saved from preemption, but which Congress in the
McCarran-Ferguson Act specifically mandated remain
free of federal interference. The position set forth herein
is precisely the view presented by the United States Solic-
itor General in Ward. See Br. of United States as Amicus
Curiae in Ward, No. 97-1868 (filed November 1998) at
22-25.

14

C. ERISA’s Legislative History Is Unequivocal In
Disclosing That The Act Was Intended To Reg-
ulate Pension Benefits And Was Not Intended
To Impact The Field Of Insurance.?®

ERISA was the direct outgrowth of the explosion in
private pension plans during the middle of the last cen-
tury. The number of employees covered by such plans
grew from approximately 4 million in 1940 to over 30
million by 1973.17 The estimated assets held by such plans
during this same period grew from $2.4 billion to $150
billion."* With this explosive growth came a similarly
expansive growth in the abuses of such funds.!9 In

16 See generally Subcomm. on Labor of the Senate Comm. on
Labor and Pub. Welfare, 94th Cong., Legislative History of the
Employee Retirement Income Security Act of 1974 (Comm. Print

1976) [hereinafter “Legislative History”]; Special Comm. on -

Aging, U.S. Senate, 98th Cong., The Employment Retirement
Income Security Act of 1974: The First Decade 1-25 (Comm.
Print 1984) [hereinafter “The First Decade”).

The legislative history discussed herein is carefully and
extensively set forth in greater detail in Bogan, Protecting Patient
Rights, supra, 74 Tul. L. Rev. 951; See also David Gregory, The
Scope of ERISA Preemption of State Law: A Study in Effective
Federalism, 48 U. Pitt. L. Rev. 427, 437-457 (1987).

17 See S. Rep. No. 93-127, at 3, reprinted in 1974 U.S.C.C.A.N.
at 4839-40, and in 1 Legislative History, supra note 16, at 589.

18 See H.R. Rep. No. 93-533, at 3, reprinted in 1974
U.S.C.C.A.N. at 4641, and in 2 Legislative History, supra note 16,
at 2350; The First Decade, supra note 16, at 5; James D.
Hutchinson & David M. Ifshin, Federal Preemption of State Law
Under the Employee Retirement Income Security Act of 1974, 46 U.
Chi. L. Rev. 23, 24 (1978).

19 See 120 Cong. Rec. 29,934 (1974), reprinted in 3 Legislative
History, supra note 16, at 4748 (remarks of Sen. Javits); The First
Decade, supra note 16, at 6 n.22 (citing congressional hearings
on abuse in pension plan administrations); see also David
Gregory, The Scope of ERISA Preemption of State Law: A Study in

15

addition, the enormous accumulation of such funds exer-
ted a major impact on the country’s financial markets.?°
This explosion occurred without the benefit of any effec-
tive federal or state regulation.”?

In 1954, at the request of President Eisenhower, Con-
gress undertook an extensive study of the private pension
industry.2? This study disclosed abuses, including incom-
petent management of pension funds, looting, embezzle-
ment, kickbacks, excessive administration costs and
imprudent investment practices.?> In response, Congress
enacted the Welfare and Pension Plans Disclosure Act
(“WPPDA”) in 1958.24 This law merely required the dis-
closure of certain financial information to the employees
and did not provide any meaningful regulation of the
funds themselves.?° ,

This legislation was wholly ineffective.* Conse-
quently, in 1962 President Kennedy appointed a special

ism, supra note 16, at 443-45 (referring to the
> naa trtonter niger: set pension plans listed in ERISA’s
legislative history).
20 Jd.; H.R. Rep. No. 93-533, at 3, reprinted in 1974
U.S.C.C.A.N. at 4641, and in 2 Legislative History, supra note 16,
at 2350. ;

21 See note 17 supra.

22 See S. Rep. No. 85-1440, at 2-11 (1958), reprinted in 1958
U.S.C.C.A.N. at 4137.

23 Id. at 4137-47.
24 Pub. L. No. 85-836, 72 Stat. 997 (1958) (repealed 1974).

25 See H.R. Rep. No. 93-533, at 4, reprinted in 1974
U.S.C.C.A.N. at 4642, and in 2 Legislative History, supra note 16,
at -2351; Malone v. White Motor Corp., 435 U.S. 497, 507 (1978)
(plurality opinion).

26 See S. Rep. No. 93-127, at 4, reprinted in 1974 U.S.C.C.A.N.
at 4841, and in 1 Legislative History, supra note 16, at 590; H.R.
Rep. No. 93-533, at 4, reprinted in 1974 U.S.C.C.A.N. at 4642, and
in 2 Legislative History, supra note 16, at 2351.

16

task force to study the problem.?” The task force con-
cluded that further federal regulation of private pension
plans to include mandatory minimum vesting and fund-
ing requirements was necessary and that further study
was required on other issues.?8 Significantly, the task
force specifically did not investigate or consider any
reforms of nonpension plans, such as health insurance
plans.?° In response to these concerns, New York Senator
Jacob Javits introduced legislation in 1967 to create fed-
eral funding and participation requirements for private
pension plans. This lead to further Congressional

27 See President’s Comm. on Corporate Pension Funds and
Other Private Retirement and Welfare Programs, Public Policy
and Private Pension Programs: A Report to the President on
Private Employee Retirement Plans, at vii-viii (1965)
{hereinafter “President's Committee Report”]; see also The First
Decade, supra note 16, at 8-10 (describing the formation of the
committee and its findings).

28 Id.

29 See President’s Committee Report, supra note 27, at iv
(“Although the area of investigation assigned to the Committee
included welfare plans as well as retirement programs, the
President’s memorandum specifically raised questions about
issues which arise primarily from retirement plans. Other types
of welfare plans, such as health and insurance plans, make
important contributions to the economic security of American
workers; they do not, however, have the impact of pension
plans on accumulation of savings, labor mobility, and similar
matters touched upon by the President. Consequently, the
Committee has confined its efforts to an inquiry into private
employee retirement plans (i.e., excluding plans for self-
employed persons) without any extensive study of other types
of welfare plans.”). T

30 See 113 Cong. Rec. 4650-53 (1967) (remarks of Sen. Javits);
see also 120 Cong. Rec. 29,933-34 (1974), reprinted in 3 Legislative
History, supra note 16, at 4748 (remarks of Sen. Javits)
(recounting his continued efforts to reform the private pension
and welfare system).

17

investigations and eventually ERISA. In 1970, the Sub-
committee on Labor of the Senate Committee on Labor
and Public Welfare began a three-year study “undertaken
to ascertain the need for statutory protections for
workers’ pension programs and to formulate appropriate
corrective legislation.”>!Like the previous investigations,
the subcommittee’s hearings disclosed a morass of abu-
sive practices resulting in the loss of retirement benefits
to employees as the result of inadequate funding, mis-
management and unreasonable vesting requirements.*? It
agreed with President Kennedy’s task force and recom-
mended comprehensive regulation of the pension indus-
try.33 Shortly thereafter, Senator Javits introduced Senate
Bill 4. It stated, “[t]he purpose of S.4 is to prescribe
legislative remedies for the various deficiencies existing
in the private pension plan systems which have been
determined by the Senate Subcommittee’s comprehensive
study of such plans.”*4 A corresponding House bill was
also introduced.%°

31 See S. Rep. No. 92-634, at 1 (1972); see also 119 Cong. Rec.
30,003 (1973), reprinted in 2 Legislative History, supra note 16, at
1598 (statement of Sen. Williams).

32 See H.R. Rep. No. 93-533, at 5-8 (1973), reprinted in 1974
U.S.C.C.A.N. 4639, 4643-46, and in 2 Legislative History, supra
note 16, at 2355.

33 See 120 Cong. Rec. 29,935-44 (1974), reprinted in 3
Legislative History, supra note 16, at 4748 (remarks of Sen.
Javits).

34 S. 4, 93d Cong. (1973); see S. Rep. No. 93-127 (1973), at 1,

reprinted in 1974 U.S.C.C.A.N. 4838, and in 1 Legislative History,
supra note 16, at 587.

35 See H.R. 2, 93d Cong. (1973), reprinted in 1 Legislative
History, supra note 16, at 3.

18

These bills were sent to their appropriate committees,
which issued their own reports. Each of these reports
concerned themselves solely with abuses in, and the con-
sequent need for, regulation of private pension plans.*
The Senate Committee on Labor and Public Welfare
report states:

The provisions of S.4 are addressed to the issue

of whether American working men and women

shall receive private pension plan benefits

which they have been led to believe would be
theirs upon retirement from working lives. It
responds by mandating protective measures and
prescribing minimum standards for promised
benefits. The purpose of S.4 is to prescribe legis-
lative remedies for the various deficiencies exis-

ting in the private pension plan systems... . 97

The report states that “[t]he principal issues affecting
the vital and basic needs for legislative reform involve
consideration of the essential elements of pensions: (1)
“vesting,” (2) “funding,” (3) “reinsurance,” (4) “por-
tability” and (5) “fiduciary responsibility and dis-
closure.”38 Similarly, the House Committee on Education
and Labor report states that the “primary purpose of the
bill is the protection of individual pension rights” and

36 See S. Rep. No. 93-127, at 1-36, reprinted in 1974
U.S.C.C.A.N. at 4838-89, and in 1 Legislative History, supra note
16, at 587-622; H.R. Rep. No. 93-533, at 1-28, reprinted in 1974
U.S.C.C.A.N. at 4639-70, and in 2 Legislative History, supra note
16, at 2348-75; 120 Cong. Rec. 29,933-35 (1974), reprinted in 3
Legislative History, supra note 16, at 4746-51 (remarks of Sen.
Javits).

37 S. Rep. No. 93-127, at 1, reprinted in 1974 U.S.C.C.A.N. at
4844-77, and in 1 Legislative History, supra note 16, at 587.

38 S. Rep. No. 93-127, at 8-11, reprinted in 1974 U.S.C.C.A.N.
at 4844-77, and in 1 Legislative History, supra note 16, at 594-97
(emphasis omitted).

19

that the legislation was designed to: (1) establish mini-
mum fiduciary standards for retirement plans, (2) pro-
vide for enforcement and public disclosure of finances,
(3) improve the equitable character and soundness of
private pension plans by requiring (a) appropriate vest-
ing and (b) minimum funding standards, and (4) guaran-
tee the adequacy of the plan’s assets prior to
termination.%9

ERISA’s legislative history is unequivocal that it was
intended as a pension reform bill. In describing ERISA,
Senator Javits said, “[T]he pension reform bill is the
greatest development in the life of the American worker
since social security. For the first time in our history most
workers will be able to truly retire at retirement age and
live decently on their social security and private pen-
sions.”4° Senator Williams, Chairman of the Senate Com-
mittee on Labor and Public Welfare, described his
committee’s study which lead to ERISA. “This study
clearly established that too many workers, rather than
being able to retire in dignity and security after a lifetime
of labor rendered on the promise of a future pension, find
that their earned expectations are not to be realized.”4! In
the House, one of the principal proponents, Representa-
tive Dent, described ERISA’s purpose in this way: “[W]e
started out with only one aim in view and that was to
give a pension participant his entitlements under the

39 H.R. Rep. No. 93-533, at 1, 17-18, reprinted in 1974
U.S.C.C.A.N. at 4655-56, and in 2 Legislative History, supra note
16, at 2348, 2364-65.

40 3 Legislative History, supra note 16, at 4747 (remarks of
Sen. Javits).

41 3 Legislative History, supra note 16, at 4733 (remarks of
Sen. Williams).

20

contract of the pension plan he belonged to.”42 The
record repeatedly references tragic examples of workers
deprived of pension benefits after 30, 40 and 50 years of
employment because they were a few days short of vest-
ing before retiring, the company was sold or went bank-
rupt, or because the employer could not afford to pay the
promised retirement benefits.*

While this Court has referred to ERISA as a “compre-
hensive and reticulated statute,” it is so only with
respect to pension plans, and the Court’s description of
the Act as such a statute originated in the context of
pension cases.*° The Act substantially regulated pension
plans but contained virtually no meaningful regulation of
insurers or insurance “plans.”

What is clear from this long and extensive legislative
history and the statute itself is that the exclusive concern
of Congress in passing ERISA was to address abuses in
the pension field. “ERISA was passed by Congress in
1974 to safeguard employees from the abuse and misman-
agement of funds that had been accumulated to finance
various types of employee benefits.” Massachusetts v.
Morash, 490 U.S. 107, 113 (1989). Not a single insurance
concern is expressed anywhere in the legislative history.

42 3 Legislative History, supra note 16, at 4665 (remarks of
Rep. Dent).

43 See, e.g., 3 Legislative History supra note 16, at 4749-50
(remarks of Sen. Javits on “Why Pension Reform Is Needed”),
(4791-96) (remarks of Sen. Bentson), (4664-65) (remarks of Rep.
Thompson), (4710) (remarks of Rep. McClory); Interim Report of
Activities of the Private Welfare and Pension Plan Study,
Subcommittee on Labor of the Committee on Labor and Public
Welfare, S. Rep. No. 92-634, 92d Cong., 2d Sess. (1972) at 67-90.

“4 See, e.g., Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504,
510 (1981); Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S.
359, 361 (1980).

45 Id.

21

Instead, Congress expressly saved all insurance regula-
tion to the States. This Court has endorsed this view,
noting that the broad preemption clause was added at the
last minute, that there is no legislative history discussing
the relationship between the saving clause and the gen-
eral preemption clause, and that there is a “complete
absence of evidence” to support a narrow reading of the
saving clause. Metropolitan Life, 471 U.S. at 745-46 n.21. As
one commentator who has extensively reviewed ERISA’s
legislative history reports:

ERISA’s legislative history is
remarkable .. . for what it does not contain.
ERISA’s legislative history provides no evidence
that Congress seriously investigated, studied, or
debated any issues or concerns with nonpension
employee benefit plans.

. +

There is no documentation anywhere in ERISA’s
legislative history of any study or investigation
of the history or growth of nonpension benefit
plans, or of any specific concern with the man-
agement of nonpension plan assets. Further,
ERISA’s legislative history fails to disclose any
concerted investigation of any complaints about
nonpension benefits, such as inadequate health
care, accident, death or disability coverage, or
problems with health, life, or disability benefits
claims. In short, Congress just was not dealing
with nonpension benefit plans when it enacted
ERISA.
Bogan, Protecting Patient Rights, supra, at 972, 976-77.

D. This Court Has Recognized That Remedial
Laws Are At The Core Of The McCarran-Fer-
guson Act And Thus The Saving Clause.

This Court has repeatedly made clear that insurance
enforcement mechanisms and laws regulating claims

22

practices are at the core of McCarran-Ferguson and thus
ERISA’s saving clause.

Congress was concerned [in the McCarran-Fer-
guson Act] with the type of state regulation that
centers around the contract of insurance. . . . The
relationship between insurer and insured, the
type of policy which could be issued, its
reliability, its interpretation, and enforcement -
these were the core of the “business of insur-
ance.” [T]he focus [of the statutory term] was on
the relationship between the insurance company
and the policyholder. Statutes aimed at protect-
ing or regulating this relationship, directly or
indirectly, are laws regulating the “business of
insurance.” SEC v. National Securities, Inc., 393
U.S. 453, 460 (1969) (emphasis added).

Metropolitan Life, 471 U.S. at 744 (emphasis added). Accord
Ward, 526 U.S. at 374 n.5 (stating that “laws regulating
claims practices . . . [are included] in catalogue of state
laws that regulate insurance.”).

That state remedial statutes are squarely protected by
McCarran-Ferguson was underscored again in Humana,
525 U.S. 299. Therein, insureds under certain health
insurance contracts brought suit under RICO claiming
that the insurers were secretly obtaining kickbacks from
hospitals in violation of the health insurance agreements.
The applicable Nevada state laws permitted the insured
to sue the insurer in tort for violation of the covenant of
good faith and fair dealing and for violation of the state’s
Unfair Insurance Practices Act. 525 U.S. at 312. The
insurers sought to prevent the application of the federal
RICO claim on the grounds that McCarran-Ferguson pre-
cluded the application of federal law in the face of these
state-law remedies. This Court found that the RICO claim
did not impair the state laws and therefore was not
barred by McCarran-Ferguson.

23

Most significant is the fact that this Court less than
three years ago specifically considered Nevada's state
insurance remedies to be protected by McCarran-Fer-
guson. Indeed, the conclusion was apparently so obvious
to this unanimous Court that its opinion reveals no
inquiry or analysis as to whether the state insurance
remedial laws were covered by McCarran-Ferguson.

Of even greater significance is that Humana appears
to be directly at odds with Pilot Life's holding that the
Mississippi insurance bad faith law at issue there was not
within the scope of McCarran-Ferguson and thus ERISA’s
saving clause. Indeed, the Nevada insurance bad faith
law appears to be indistinguishable from the Mississippi
law at issue in Pilot Life. In Pilot Life, the Court concluded
that the State bad faith law did not fall within the ambit
of the McCarran-Ferguson Act. Yet, in Humana, the Court
appears to have assumed it obvious that the identical
Nevada law did.

Humana is significant for another reason. Petitioners
claim that any law which provides a remedy other than
those set forth in ERISA’s Section 502 is necessarily in
conflict with Section 502 and therefore preempted by
principles of conflict preemption. Yet, under federal con-
flict analysis, preemption only occurs where it is impossi-
ble to comply with both state and federal law or where
the state law stands as an obstacle to the accomplish-
ments of the full purposes and objectives of Congress.
Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248 (1984).
Simply because a State may have an insurance remedy
which may be either an alternative to the ERISA remedies
or a supplement to them does not mean that it is either
impossible to comply with both state and federal law or
that the state law stands as an obstacle to the accomplish-
ments of ERISA. As noted in Humana, Nevada has a
“comprehensive administrative” scheme that prohibits
various forms of insurance fraud and misrepresentations.
RICO provides a different remedy. Nonetheless, the RICO

24

claims “complemented” the Nevada administrative reg-
ime and thus did not impair its laws. Humana, 525 U.S. at
313. The same can be said of the law in question here.
ERISA was intended to protect employee benefits. State
insurance laws which further that goal, do not frustrate
or impair ERISA. The fact that a remedy in addition to
those set forth in ERISA is available to Moran enhances
ERISA’s basic purpose through an appropriate applica-
tion of the saving clause.

E. ERISA’s Enforcement Mechanisms Leave
Insureds With No Effective Remedy And Do
Not Conform With ERISA’s Legislative History;
Petitioner Is Not A Proper Party To An ERISA
Action.

Strong evidence that ERISA was not intended to pre-
empt state insurance enforcement actions is the fact that
ERISA’s remedies were drafted with pension plans in
mind and are not suited to insurance claims. ERISA was
intended to remedy abuses rampant in the administration
of funds, which were held for the benefit of employees,
Morash, 490 U.S. at 112-113, and thus ERISA only pro-
vides a remedy against the plan itself. In most insurance
instances, however, there is no “fund,” only a group
insurance policy issued to an employer or employee orga-
nization insuring the employees, funded by premiums
paid directly by the employer, employees or both to the

“© An insured may proceed to collect benefits pursuant to a
Section 502 claim and seek additional appropriate relief by
proceeding under a state law which is directed solely at the
insurance industry, such as the Nevada bad faith claim or the
claims referenced in note 3, supra. Rather than conflicting with
ERISA, such state actions are entirely consistent with and
complement ERISA’s intent to protect employees by
encouraging the prompt and fair payment of claims.

25

insurer.*” The disputes in this context are fundamentally
between the insured/employees and a third party, the
insurer.

Strikingly, ERISA provides no effective remedy for an
insured to obtain insurance benefits wrongfully denied.
ERISA permits an insured to bring a civil action to
recover benefits due. 29 U.S.C. § 1132(a)(1)(B). However,
it does not permit a suit against the insurer, which owes
the benefits. “ERISA permits suits to recover benefits
only against the Plan as an entity.” Gelardi v. Pertec Com-
puter Corp., 761 F.2d 1323, 1324 (9th Cir. 1985); Garratt v.
Knowles, 245 F.3d 941, 949 (7th Cir. 2001). “An employee
benefit plan may sue or be sued . . . as an entity.” 29
U.S.C. § 1132(d)(1). “Any money judgment . . . against an
employee benefit plan shall be enforceable only against the
plan as an entity and shall not be enforceable against any
othér person... .” 29 U.S.C. § 1132(d)(2) (emphasis
added).

Because of this, courts have repeatedly held insurers
are not proper parties to an action under ERISA and have
repeatedly dismissed actions filed against insurers. See,
e.g., Gibson v. Prudential Ins. Co. of N. Am., 915 F.2d 414,
417 (9th Cir. 1990); Everhart v. Allmerica Financial Life Ins.
Co., 1999 WL 498244 (N.D. Cal. 1999); Roeder v. Chemrex,
Inc., 863 F.Supp. 817, 828 (E.D. Wis. 1994); Cohen v. Equita-
ble Life Assurance Soc. of the United States, 196 Cal.App.3d
669, 672-73 (1987).48 This, coupled with the Court’s hold-
ing in Pilot Life, has had the effect of granting insurers a

47 The exception is the instance of a self-funded plan, which

' is encompassed within ERISA and which is not typically

regulated comprehensively by the States.

48 Some courts have held, without statutory authority, that
the administrator who controls the plan may be sued. See, e.g.,
Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d 186, 187 (11th
Cir. 1997); Rosen v. TRW, Inc., 979 F.2d 191, 193 (11th Cir. 1992).
In any event, insurers generally are not administrators as
defined by ERISA. 29 U.S.C. § 1002(16)(A)(i).

26

broad-based immunity, a result wholly unintended under
ERISA. ERISA, a law enacted to protect employees, has
thus been turned on its head to deny any meaningful
relief against insurance industry abuses, a tragic result
that numerous courts have decried.*9

49 See Bast v. Prudential Ins. Co., 150 F.3d 1003, 1005 (9th Cir.
1998) cert. denied, 120 S.Ct. 170 (1999) (“Although this case
presents a tragic set of facts, the district court properly
concluded that under existing law the Basts are left without a
remedy”); Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d
1270, 1271 (10th Cir. 1996) (“Although moved by the tragic
circumstances of this case and the seemingly needless loss of life
that resulted, we conclude the law gives us no choice but to
affirm [the grant of summary judgment to the insurer]”);
Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1338 (5th Cir.
1992) (“The result ERISA compels us to reach means the
Corcorans have no remedy, state or federal, for what may have
been a serious mistake”); Andrews-Clarke v. Travelers Ins. Co., 984
F.Supp. 49, 52-53 (D. Mass. 1997) (“The tragic events set forth in
Diane Andrews-Clarke’s Complaint cry out for relief... . Under
traditional notions of justice, the harms alleged . . . should
entitle [her] to some legal remedy. . . . Nevertheless, this Court
had no choice but to pluck [her] case out of the state court in
which she sought redress (and where relief to other litigants is
available) and then, at the behest of Travelers .. . , to slam the
courthouse doors in her face and leave her without any
remedy.”) (footnotes omitted); Florence Nightingale Nursing
Serv., Inc. v. Blue Cross & Blue Shield, 832 F.Supp. 1456, 1457
(N.D. Ala. 1993), aff'd, 41 F.3d 1476 (11th Cir. 1995); Jordan v.
Reliable Life Ins. Co., 694 F.Supp. 822, 827 (N.D. Ala. 1988); see
also Bogan, Protecting Patient Rights, supra note 5, at 996-1002;
Catherine L. Fisk, The Last Article About the Language of ERISA
Preemption? A Case Study of the Failure of Textualism, 33 Harvard
J. on Legis. 35, 38 (1996) (“It is a rich irony that ERISA, which
was heralded at its enactment as significant federal protective
legislation, has through its preemption provision been the basis
for invalidating scores of progressive state laws.”) (footnote
omitted).

27

Thus, if Moran’s state-law claim is preempted, peti-
tioner is not a proper party to this ERISA action. While
this result seems illogical, it is what ERISA would
require. If Moran is precluded from asserting her state
claim against petitioner, Moran’s only permissible action.
under ERISA would be against her ERISA plan, not the
insurer or HMO. It would be far more reasonable to
believe that Congress intended to permit her to proceed
against the insurer pursuant to the saved Illinois law than
require her to proceed under Section 502 against the plan.

An action against a “plan” makes sense where the
plan consists of a fund out of which benefits are paid, as
in a pension plan or self-funded insurance, and it was
these plans that concerned Congress when it passed
ERISA. Yet, there is no such funded “plan” in existence
with regard to insurance policies. In fact, the “plan” in
many instances does not really exist at all, but is a fic-
tional entity created under ERISA. Indeed, the “plan”
often is nothing more than a group insurance policy
issued to an employer and insuring the employees.*° The
“plan” itself has no bank account, no assets, no address,
no office, no employees and no trustees. And while there
are a few regulations applying to such plans, in many
instances these regulations merely require financial
reporting, which is meaningless in the case of an insur-
ance plan, and there is often no one to comply with these
regulations.*! '

50 See, e.g., Gaylor v. John Hancock Mutual Life Ins. Co., 112
F.3d 460, 463-65 (10th Cir. 1970); Butero v. Royal Maccabees Life
Ins. Co., 174 F.3d 1207 1213-15 (11th Cir. 1999); Marshall v.
Bankers Life & Cas. Co., 2 Cal. 4th 1045, 1054, 832 P.2d 573 (1992).

51 Indeed, the department of labor regulations do not even
require such reporting if the plan has fewer than 100
participants. 29 C.F.R. §§ 2520.104-20, 2520.104-21. Moreover,
even if all of the regulations are ignored, a plan will be deemed
to exist anyway. See Blau v. Del Monte Corp., 748 F.2d 1348, 1352
(9th Cir. 1984).

28

Further, the statutory history of the preemption
clause itself confirms that ERISA was intended to apply
to funds and not to comprehensively regulate private
insurance arrangements. As noted above, the preemption
clause was significantly broadened during the House/
Senate conference committee. Yet, while simultaneously
broadening the preemption clause, it also included the
deemer clause,5? which preserved ERISA’s preemption
for self-funded plans.% In light of the saving clause, this
created a clear distinction in ERISA’s impact or self-
funded insurance arrangements as opposed to private
insurance arrangements.** The former were swept into
ERISA’s broad preemption provision, the latter were
specifically excluded.

United Policyholders respectfully submits that many
of the problems arising out of ERISA insurance claims
stem from this Court’s decision in Pilot Life. United Poli-
cyholders submits that the Court should re-examine its
holding in Pilot Life. In light of (1) ERISA’s clear purpose
to regulate pension and not insurance difficulties, (2) the
_ Saving clause, which saves “any” laws regulating insur-
ance and (3) the complete unsuitability of ERISA’s
remedies to insurance claims, we believe Congress
intended to save from preemption all state laws which
would have the effect of regulating the conduct of
insurers. This would include such basic claims as breach
of contract, fraud and certainly insurance bad faith, to the
extent they are exercised to enforce claims against
insurers or to define impermissible conduct by insurers.
United Policyholders submits that Congress never
intended to deprive an insured of her basic right to sue

52 29 U.S.C. § 1144(b)(2)(B).

°° H.R. Rep. No. 93-1280, 93rd Cong. 2d Sess. at 383,
reprinted in 3 Legislative History, supra note 16, at 4650.

54 See Metropolitan Life, 471 U.S. 724, 747.

29

an insurer for breach of contact, to deprive her of her
basic right of a jury trial, and to preclude the insured
from pursuing the basic right to sue the insurer for bene-
fits wrongfully denied, only to replace it with a remedy
which effectively permits an insurer to deny a claim as
long as it does not do so in an arbitrary and capricious
fashion. It is hard to imagine why Congress would have
intended (but not stated in the statute) that traditional
state insurance remedies forged by the States to address
the specific issues of insurance enforcement be replaced
with remedies completely unsuitable to the resolution of
insurance disputes.°> It is a particularly difficult leap of
faith in light of the complete absence of legislative history
to support such a conclusion and the explicit terms to the
contrary of the saving clause itself.

At the end of his dissent in the Seventh Circuit
opinion, Justice Posner writes of the inconsistency of the
majority opinion. He argues that a law cannot be both
written into an insurance contract and an ERISA plan.
The answer, however, is not to preempt the Illinois law,
but to apply the saving clause and permit the state-law
claim to survive on its own.

55 An example can serve to illustrate the absurdity of the
ERISA remedy. Suppose an individual becomes disabled while
insured under a group disability policy issued to his employer
and within the scope of ERISA. The evidence of the disability
“plan” is the group policy itself and perhaps the booklet
explaining coverage delivered to him by his employer. Benefits
are paid and shortly thereafter the employer goes out of
business. Five years later the insurer wrongfully terminates
benefits. The insured would have to file suit against the “long
term disability plan” (a non-existent entity) of a non-existent
employer. No action would lie against the insurer, which owes
the benefits.

30

Il. THE TRIAL COURT LACKED SUBJECT MATTER
JURISDICTION.

This action was originally filed in the State court of
Illinois and removed to federal court. The Court of
Appeals found jurisdiction to be proper, concluding that
Moran’s claim should properly be considered as one aris-
ing under Section 502 and that Section 4-10 of the Illinois
law should be applied in the context of a claim for ERISA
benefits. As such, the Court found that she had no sepa-
rate state claims and thus, the doctrine of complete pre-
emption permitted removal.

United Policyholders submits this was incorrect.
Moran’s claim against petitioner was not preempted. She
was entitled te wroceed under state law directly against
petitioner. Because her claims are not completely pre-
empted, the well-pleaded complaint rule precludes
removal, notwithstanding petitioner’s claim of a federal
defense. Franchise Tax Bd., 463 U.S. at 10-11.

CONCLUSION

ERISA’s statutory history as pension reform legisla-
tion is unequivocal. Its language saving any state law
regulating insurance is unambiguous and, because ERISA
was not intended to regulate insurance, it fails to provide
a meaningful remedy to resolve insurance disputes.
Under this Court’s long-established principles of statu-
tory construction, Moran’s claim should be returned to
the Illinois State court, where she may pursue her Section
4-10 claim against petitioner directly.

Respectfully Submitted,

Amy BacH ARNOLD R. LEVINSON
Of Counsel Counsel of Record
42 Miller Avenue TERRENCE J. COLEMAN
Mill Valley, CA 94941 Pmussury & Levinson, LLP
(415) 381-7627 One Embarcadero Cntr., 38th FI.
San Francisco, CA 94111
(415) 433-8000

Counsel for Amicus Curiae

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0441%3A17. Public record. Not legal advice.