Pilot Life Insurance Company v. Dedeaux, 85-1043

Decision Date06 April 1987
Docket NumberNo. 85-1043,85-1043
CourtU.S. Supreme Court

The "pre-emption clause" (§ 514(a)) of the Employee Retirement Income Security Act of 1974 (ERISA) provides that ERISA supersedes all state laws insofar as they "relate to any employee benefit plan," but ERISA's "saving clause" (§ 514(b)(2)(A)) excepts from the pre-emption clause any state law that "regulates insurance." ERISA's "deemer clause" (§ 514(b)(2)(B)) provides that no employee benefit plan shall be deemed to be an insurance company for purposes of any state law "purporting to regulate insurance." On the basis of a work-related injury occurring in Mississippi in 1975, respondent began receiving permanent disability benefits under his employer's ERISA-regulated welfare benefit plan, under which claims were handled by petitioner, the employer's insurer. However, after two years petitioner terminated respondent's benefits, and during the following three years his benefits were reinstated and terminated by petitioner several times. Respondent ultimately instituted a diversity action against petitioner in Federal District Court, alleging tort and breach of contract claims under Mississippi common law for petitioner's failure to pay benefits under the insurance policy. The court granted summary judgment for petitioner, finding that respondent's common law claims were pre-empted by ERISA. The Court of Appeals reversed.

Held: ERISA pre-empts respondent's suit under state common law for alleged improper processing of his claim for benefits under the ERISA-regulated benefit plan. Pp. 44-57.

(a) The common law causes of action asserted in respondent's complaint, each based on alleged improper processing of a benefit claim under an employee benefit plan, "relate to" an employee benefit plan and therefore fall under ERISA's pre-emption clause. Cf. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728; Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-100, 103 S.Ct. 2890, 2899-3001, 77 L.Ed.2d 490 (1983). The pre-emption clause is not limited to state laws specifically designed to affect employee benefit plans. Pp. 47-48.

(b) Under the guidelines set forth in Metropolitan Life, respondent's causes of action under state decisional common law particularly the cause, presently asserted, based on the Mississippi law of bad faith—do not fall under ERISA's saving clause, and thus are not excepted from pre-emption. A common-sense understanding of the language of the saving clause excepting from pre-emption a state law that "regulates insurance" does not support the argument that the Mississippi law of bad faith falls under the clause. To "regulate" insurance, a law must not just have an impact on the insurance industry, but must be specifically directed toward that industry. Mississippi Supreme Court decisions establish that its law of bad faith applies to any breach of contract, not merely a breach of an insurance contract. Neither do the factors for interpreting the phrase "business of insurance" under the McCarran-Ferguson Act (which factors are appropriate for consideration here) support the assertion that the Mississippi law of bad faith "regulates insurance" for purposes of ERISA's saving clause. Pp. 48-51.

(c) Moreover, interpretation of the saving clause must be informed by the legislative intent concerning ERISA's civil enforcement provisions. The language and structure of those provisions support the conclusion that they were intended to provide exclusive remedies for ERISA-plan participants and beneficiaries asserting improper processing of benefit claims. ERISA's detailed provisions set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. The conclusion that ERISA's civil enforcement provisions were intended to be exclusive is also confirmed by the legislative history of those provisions, particularly the history demonstrating that the pre-emptive force of ERISA's enforcement provisions was modeled after the powerful pre-emptive force of § 301 of the Labor Management Relations Act, 1947. Pp. 51-56.

770 F.2d 1311, reversed.

O'CONNOR, J., delivered the opinion for a unanimous Court.

John E. Nolan, Jr., Washington, D.C., for petitioner.

William C. Walker, Jr., for respondent.

Justice O'CONNOR delivered the opinion of the Court.

This case presents the question whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq., pre-empts state common law tort and contract actions asserting improper processing of a claim for benefits under an insured employee benefit plan.


In March 1975, in Gulfport, Mississippi, respondent Everate W. Dedeaux injured his back in an accident related to his employment for Entex, Inc. (Entex). Entex had at this time a long term disability employee benefit plan established by purchasing a group insurance policy from petitioner, Pilot Life Insurance Co. (Pilot Life). Entex collected and matched its employees' contributions to the plan and forwarded those funds to Pilot Life; the employer also provided forms to its employees for processing disability claims, and forwarded completed forms to Pilot Life. Pilot Life bore the responsibility of determining who would receive disability benefits. Although Dedeaux sought permanent disability benefits following the 1975 accident, Pilot Life terminated his benefits after two years. During the following three years Dedeaux's benefits were reinstated and terminated by Pilot Life several times.

In 1980, Dedeaux instituted a diversity action against Pilot Life in the United States District Court for the Southern District of Mississippi. Dedeaux's complaint contained three counts: "Tortious Breach of Contract"; "Breach of Fiduciary Duties"; and "Fraud in the Inducement." App. 18-23. Dedeaux sought "[d]amages for failure to provide benefits under the insurance policy in a sum to be determined at the time of trial," "[g]eneral damages for mental and emotional distress and other incidental damages in the sum of $250,000.00," and "[p]unitive and exemplary damages in the sum of $500,000.00." Id., at 23-24. Dedeaux did not assert any of the several causes of action available to him under ERISA, see infra, at ----.

At the close of discovery, Pilot Life moved for summary judgment, arguing that ERISA pre-empted Dedeaux's common law claim for failure to pay benefits on the group insurance policy. The District Court granted Pilot Life summary judgment, finding all Dedeaux's claims pre-empted. App. to Pet. Cert. 16a.

The Court of Appeals for the Fifth Circuit reversed, primarily on the basis of this Court's decision in Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). See 770 F.2d 1311 (1985). We granted certiorari, 478 U.S. 1004, 106 S.Ct. 3293, 92 L.Ed.2d 708 (1986), and now reverse.


In ERISA, Congress set out to

"protect . . . participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." § 2, as set forth in 29 U.S.C. § 1001(b).

ERISA comprehensively regulates, among other things, employee welfare benefit plans that, "through the purchase of insurance or otherwise," provide medical, surgical, or hospital care, or benefits in the event of sickness, accident, disability, or death. § 3(1), 29 U.S.C. § 1002(1).

Congress capped off the massive undertaking of ERISA with three provisions relating to the pre-emptive effect of the federal legislation:

"Except as provided in subsection (b) of this section [the saving clause], the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." § 514(a), as set forth in 29 U.S.C. § 1144(a) (pre-emption clause).

"Except as provided in subparagraph (B) [the deemer clause], nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities." § 514(b)(2)(A), as set forth in 29 U.S.C. § 1144(b)(2)(A) (saving clause).

"Neither an employee benefit plan . . . nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies." § 514(b)(2)(B), 29 U.S.C. § 1144(b)(2)(B) (deemer clause).

To summarize the pure mechanics of the provisions quoted above: If a state law "relate[s] to . . . employee benefit plan[s]," it is pre-empted. § 514(a). The saving clause excepts from the pre-emption clause laws that "regulat[e] insurance." § 514(b)(2)(A). The deemer clause makes clear that a state law that "purport[s] to regulate insurance" cannot deem an employee benefit plan to be an insurance company. § 514(b)(2)(B).

"[T]he question whether a certain state action is pre-empted by federal law is one of congressional intent. ' "The purpose...

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