Conover v. Aetna Us Health Care, Inc., No. 01-5172.

• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)
• Writing for the Court: Brorby
• Citation: 320 F.3d 1076
• Parties: Sallee A. CONOVER, Plaintiff-Appellant, v. AETNA US HEALTH CARE, INC.; Aetna Life Insurance Company, Defendants-Appellees.
• Docket Number: No. 01-5172.
• Decision Date: 20 February 2003

320 F.3d 1076 Sallee A. CONOVER, Plaintiff-Appellant,
v.
AETNA US HEALTH CARE, INC.; Aetna Life Insurance Company, Defendants-Appellees. No. 01-5172. United States Court of Appeals, Tenth Circuit. February 20, 2003.

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Joseph F. Clark, Jr., Tulsa, OK, for Plaintiff-Appellant.

Mark D. Spencer (Henry D. Hoss and Amy T. Kranenburg) of McAfee & Taft, P.C., Oklahoma City, OK, for Defendants-Appellees.

Before O'BRIEN and McWILLIAMS, Circuit Judges, and BRORBY, Senior Circuit Judge.

BRORBY, Senior Circuit Judge.

Ms. Sallee Conover appeals from a district court decision holding her state law bad faith claim is preempted under the Employee Retirement Income Security Act. See Conover v. Aetna U.S. Healthcare, Inc., 167 F.Supp.2d 1317 (N.D.Okla. 2001). Ms. Conover argues her claim is not preempted because the Act saves "any law of any State which regulates insurance." See 29 U.S.C. § 1144(b)(2)(A). We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

Ms. Conover was a participant in a long-term disability insurance plan through her employer. The plan was administered by Aetna U.S. Healthcare. Ms. Conover was injured in a car accident and submitted a claim to Aetna for disability benefits. Aetna approved her claim and began making monthly benefit payments to her. After further investigation, however, Aetna determined Ms. Conover could perform the material duties of her occupation and suspended her benefits. Ms. Conover responded by filing this lawsuit in Tulsa County District Court, alleging intentional breach of contract and bad faith. The bad faith cause of action was based on Oklahoma state law. Aetna removed the case to the United States District Court for the Northern District of Oklahoma.

A few months later, Aetna reviewed additional information regarding Ms. Conover's claim for disability benefits and determined she remained eligible for the benefits. Aetna reinstated her benefits and paid all back benefits due. This rendered moot Ms. Conover's cause of action for intentional breach of contract. Around the same time, Aetna moved the district court for a determination regarding preemption under the Employee Retirement Income Security Act. In addressing the motion, the district court ruled the Act preempted Ms. Conover's bad faith cause of action. See Conover, 167 F.Supp.2d at 1318-21. The court subsequently entered final judgement for Aetna, and Ms. Conover appeals.

Ms. Conover argues her bad faith claim is not preempted under the Employee Retirement Income Security Act.¹ We review this question de novo because it involves an issue of law. See Woodworker's Supply, Inc. v. Principal Mut. Life Ins. Co., 170 F.3d 985, 989 (10th Cir.1999).

The Employee Retirement Income Security Act preempts "any and all State laws insofar as they may now or hereafter

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relate to any employee benefit plan." 29 U.S.C. § 1144(a). The Act, however, saves from preemption state laws "regulat[ing] insurance." 29 U.S.C. § 1144(b)(2)(A). In determining whether a state law regulates insurance, we follow the two-step inquiry set forth by the Supreme Court in Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). We first inquire whether, from a "common-sense view of the matter," the state law regulates insurance. Id. at 740, 105 S.Ct. 2380; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). We then test this result against three factors derived from case law interpreting the McCarran-Ferguson Act, 15 U.S.C. § 1012(a) & (b): "first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry." Metropolitan Life, 471 U.S. at 743, 105 S.Ct. 2380 (quotation marks and citation omitted); Pilot Life, 481 U.S. at 48-49, 107 S.Ct. 1549. All three McCarran-Ferguson factors need not be met in order for a state law to regulate insurance. See Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 122 S.Ct. 2151, 2163, 153 L.Ed.2d 375 (2002); UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 373, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999). Instead, these factors should be "weighed" and serve as "guideposts" in determining whether a state law regulates insurance. Rush Prudential, 122 S.Ct. at 2163; Ward, 526 U.S. at 373-74, 119 S.Ct. 1380. If after applying this two-part inquiry, we are satisfied the state law regulates insurance, it is saved from preemption under the Act. See 29 U.S.C. § 1144(b)(2)(A). This does not, however, end our preemption analysis.

A state law otherwise regulating insurance within the meaning of § 514(b)(2)(A) may still be preempted if it allows plan participants and beneficiaries "to obtain remedies under state law that Congress rejected in [the Employee Retirement Income Security Act]." Pilot Life, 481 U.S. at 54, 57, 107 S.Ct. 1549; Rush Prudential, 122 S.Ct. at 2165.² The Act sets forth "`six carefully integrated civil enforcement provisions.'" Pilot Life, 481 U.S. at 54, 107 S.Ct. 1549 (quoting Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985)). See also 29 U.S.C. § 1132(a). Under these provisions, a plan participant or beneficiary may bring a civil action to recover benefits due, enforce rights, or clarify future benefits under the terms of the plan. See 29 U.S.C. § 1132(a)(1)(B). A plan participant or beneficiary may also bring an action to enforce provisions of the

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plan or Act, to enjoin or redress violations of the Act, or to remove the fiduciary for breach of fiduciary duty. See 29 U.S.C. §§ 1132(a)(1)(A), 1132(a)(3), and 1109(a). In an action under these civil enforcement provisions, a court may, in its discretion, award attorney's fees and costs to either party. See 29 U.S.C. § 1132(g)(1). The Supreme Court held these civil enforcement provisions are "exclusive." Pilot Life, 481 U.S. at 52, 54, 107 S.Ct. 1549. Therefore, if a state law "add[s] to the judicial remedies" available under the Act, the law is preempted. Rush Prudential, 122 S.Ct. at 2166.

It is undisputed Oklahoma's bad faith law falls within the Employee Retirement Income Security Act's language preempting state laws related to "any employee benefit plan." 29 U.S.C. § 1144(a). Oklahoma's bad faith law imposes on insurers "an implied duty to deal fairly and act in good faith with its insured." Christian v. American Home Assurance Co., 577 P.2d 899, 904 (Okla.1977). A "violation of this duty gives rise to an action in tort for which consequential and, in a proper case, punitive, damages may be sought." Id....