Jottings By An Employer's Lawyer

Friday, September 10, 2004

ERISA Pre-emption of Bad Faith Claim For Denial of Disability Benefits

Reversing the lower court, the 3rd Circuit holds that the latest decision by the Supreme Court makes clear that a state claim that would allow punitive damages for bad faith denial of benefits under an ERISA plan is preempted. Barber v. Unum Life (3rd Cir. 9/7/04) [pdf]. Barber had been granted benefits under his employer's long term disability policy which was provided by Unum. Later, Unum found he was no longer disabled under the policy terms and stopped the benefits. When Barber sued under a Pennsylvania statute which allows punitive damages for bad faith denial of benefits, Unum claimed ERISA preemption. Noting the complexities of past Supreme Court pronouncements on ERISA preemption, the Court found clarity in this year's Aetna Health Inc. v. Davila, 124 S. Ct. 2488 (2004) [pdf].

After Aetna Life, legislation which attempts to add remedies to what would be an ERISA claim is clearly preempted. This case, decided at the district court level before Aetna Life, was important enough to draw amicus briefs by the Chamber of Commerce of the United States and an advocacy group, United Policyholders.

In an aside, the 3rd Circuit had some good words of advice for advocates forced to rely to on "dicta" from a Supreme Court decision, quoting from their own earlier opinion:

[W]e should not idly ignore considered statements the Supreme Court makes in dicta. The Supreme Court uses dicta to help control and influence the many issues it cannot decide because of its limited docket. “Appellate courts that dismiss these expressions [in dicta] and strike off on their own increase the disparity among tribunals (for other judges are likely to follow the Supreme Court’s marching orders) and frustrate the evenhanded administration of justice by giving litigants an outcome other than the one the Supreme Court would be likely to reach were the case heard there.”

Amen, assuming it is me relying on the "dicta."

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