American Council of Life Insurers v. Ross

• Decision Date: 18 March 2009
• Docket Number: No. 08-1406.,08-1406.
• Citation: 558 F.3d 600
• Parties: AMERICAN COUNCIL OF LIFE INSURERS; America's Health Insurance Plans; Life Insurance Association of Michigan, Plaintifs-Appellants, v. Ken ROSS, Acting Commissioner of the Office of Financial and Insurance Services, Michigan Department of Labor and Economic Growth, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

558 F.3d 600

AMERICAN COUNCIL OF LIFE INSURERS; America's Health Insurance Plans; Life Insurance Association of Michigan, Plaintifs-Appellants, v. Ken ROSS, Acting Commissioner of the Office of Financial and Insurance Services, Michigan Department of Labor and Economic Growth, Defendant-Appellee.

No. 08-1406.

United States Court of Appeals, Sixth Circuit.

Argued: January 13, 2009.

Decided and Filed: March 18, 2009.

ARGUED: Edward A. Scallet, Groom Law Group, Washington, D.C., for Appellants. William A. Chenoweth, Michigan Department of Attorney General, Lansing, Michigan, for Appellee. ON BRIEF: Edward A. Scallet, Groom Law Group, Washington, D.C., for Appellants. William A. Chenoweth, Michigan Department of Attorney General, Lansing, Michigan, Michael P. Farrell, Office of the Michigan Attorney General, Lansing, Michigan, for Appellee. Meir Feder, Jones Day, New York, New York, Mary Ellen Signorille, Aarp Foundation Litigation, Washington, D.C., for Amici Curiae.

Before MERRITT, COLE, and SUTTON, Circuit Judges.

OPINION

COLE, Circuit Judge.

Defendant-Appellee Ken Ross is the Commissioner ("Commissioner") of the Michigan Office of Financial and Insurance Services ("OFIS"). Under OFIS's authority to regulate insurance, it promulgated rules, Mich. Admin. Code Rules 500.2201-500.2202 and 550.111-550.112, prohibiting insurers from issuing, delivering, or advertising insurance contracts or policies that contain "discretionary clauses" (the "rules"). Such clauses provide that courts will give deference to a plan administrator's decision to award or deny benefits or interpretation of plan terms in any court proceeding challenging such decisions or interpretations. Plaintiffs-Appellants American Council of Life Insurers, America's Health Insurance Plans, and Life Insurance Association of Michigan (collectively, "Insurance Industry") filed suit, seeking declaratory and injunctive relief to prevent OFIS from enforcing the rules. Both parties moved for summary judgment, with the Insurance Industry arguing that the rules are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. § 1001 et seq. The district court concluded that because the rules constitute laws regulating insurance under ERISA's savings clause, ERISA § 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A), they are not preempted by ERISA, and granted summary judgment in favor of the Commissioner. The Insurance Industry appealed. For the following reasons, we conclude that Michigan's rules fall within the ambit of ERISA's savings clause insofar as they are state laws regulating insurance, and thus are not preempted by ERISA.

I. BACKGROUND

A. Background of the Rules

The parties stipulated to the following pertinent facts for the purpose of the cross-motions for summary judgment. (Stip. Facts, Joint Appendix ("JA") 44.)

OFIS is responsible for licensing, examining, and supervising insurers and non-profit health-care corporations doing business in the State of Michigan. To this end, OFIS's authority includes the power to disapprove insurance policy forms, and documents associated with such forms, which are filed by insurers and nonprofit health-care corporations doing business in Michigan. Pursuant to this authority, OFIS promulgated administrative rules, Mich. Admin. Code Rules 500.2201-500.2202 and 550.111-550.112, which generally prohibit insurers and nonprofit health-care corporations from issuing, advertising, or delivering to any person in Michigan, a policy, contract, rider, indorsement, certificate, or similar contract document that contains a discretionary clause and provide that any such clause is void and of no effect. The rules define discretionary clauses as:

[A] provision in a form that purports to bind the claimant to or grant deference in subsequent proceedings to the insurer's decision, denial, or interpretation on terms, coverage, or eligibility for benefits including, but not limited to, a form provision that does any of the following:

(i) Provides that a policyholder or other claimant may not appeal a denial of a claim.

(ii) Provides that the insurer's decision to deny policy coverage is binding upon a policyholder or other claimant.

(iii) Provides that on appeal the insurer's decision-making power as to policy coverage is binding.

(iv) Provides that the insurer's interpretation of the terms of a form is binding upon a policyholder or other claimant.

(v) Provides that on appeal the insurer's interpretation of the terms of a form is binding.

(vi) Provides that or gives rise to a standard of review on appeal that gives deference to the original claim decision.

(vii) Provides that or gives rise to a standard of review on appeal other than a de novo review.

Mich. Admin. Code Rules 500.2201(b) and 550.111(c).

The rules took effect June 1, 2007. Given that employee-benefit plans established or maintained under ERISA commonly contain discretionary clauses, the rules would prohibit any entity covered by them from "issuing, advertising, or delivering to any person in the State of Michigan, including an employee benefit plan subject to ERISA, an underwritten policy or certificate that includes a discretionary clause." (JA 46.)

Plaintiffs American Council of Life Insurers and America's Health Insurance Plans are national trade associations representing health plans, health insurers, and life insurers that conduct business in Michigan. Both trade associations "advocate public policies on behalf of their members in legislative, regulatory, and judicial forums at the state and federal levels." (JA 47.) Their members offer a variety of insurance products, including "health care coverage, medical expense insurance, long-term care insurance, disability income insurance, [and] dental insurance." (Id.) Plaintiff Life Insurance Association of Michigan represents life insurance companies licensed in Michigan that provide similar insurance products to Michigan customers that sponsor employee benefit plans subject to ERISA.

Because the Insurance Industry is subject to certain rules promulgated by OFIS, the Insurance Industry "would be affected if the [r]ules are upheld because some of their members have in the past used policy forms approved by OFIS that had discretionary clauses and the members may wish to use such clauses in future policy forms submitted to OFIS." (JA 48.) Similarly, many of the customers of the Insurance Industry's members " would be affected if the [r]ules are upheld because they have also purchased OFIS approved policies containing discretionary clauses to fund their employee benefit plans, and many may wish to do so again in the future." (Id.)

B. Procedural Background

On July 2, 2007, the Insurance Industry filed suit against OFIS, seeking declaratory relief that the rules do not govern the administration and enforcement of the terms of employee benefit plans subject to ERISA, and injunctive relief prohibiting the Commissioner and OFIS from enforcing the rules with respect to insurance policies issued for the purpose of funding or otherwise providing benefits in connection with plans subject to ERISA. Following discovery, both parties moved for summary judgment, with the Insurance Industry arguing, inter alia, that (1) the rules are preempted by ERISA because they interfere with that statute's objectives, and (2) the rules do not fall within the ambit of ERISA's savings clause, 29 U.S.C. § 1144(b)(2)(A). The district court rejected each of these arguments, granting summary judgment in favor of the Commissioner.

II. DISCUSSION

A. Standard of Review

We review the district court's grant of summary judgment on the issue of ERISA preemption de novo. Millsaps v. Thompson, 259 F.3d 535, 537 (6th Cir.2001); see also Briscoe v. Fine, 444 F.3d 478, 497 (6th Cir.2006) ("[T]his court reviews de novo the question of whether a state-law claim is preempted by ERISA."). In order to review the district court's grant of summary judgment in this case, we look to ERISA, the statutory scheme before us. Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982).

B. ERISA

ERISA regulates, among other things, employee welfare benefit plans that provide medical, surgical, or hospital care, or benefits in the event of sickness, accident, disability, or death through the purchase of insurance. ERISA § 3(1), 29 U.S.C. § 1002(1). ERISA permits a participant or beneficiary to bring a civil action (1) "to recover benefits due to him under the terms of his plan," (2) "to enforce his rights under the terms of the plan," or (3) "to clarify his rights to future benefits under the terms of the plan." ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). "This provision is relatively straightforward. If a participant or beneficiary believes that benefits promised to him under the terms of the plan are not provided, he can bring suit seeking provision of those benefits." Aetna Health Inc. v. Davila, 542 U.S. 200, 210, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). He can also sue to "enforce his rights under the plan, or to clarify any of his rights to future benefits." Id.

Because "Congress enacted ERISA to protect ... the interests of participants in employee benefit plans and their beneficiaries," it set out "substantive regulatory requirements for employee benefit plans and [provided] for appropriate remedies, sanctions, and ready access to the Federal Courts." Id. at 208, 124 S.Ct. 2488 (quoting 29 U.S.C. § 1001(b)) (internal quotations omitted). In order to effectuate these objectives, "ERISA includes expansive [preemption] provisions, which are intended to ensure that employee benefit plan regulation would be exclusively a federal concern." Id. (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981)) (internal citation and quotations omitted). Preemption occurs where a state law interferes with or is contrary to federal law; in...