FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

JANUARY 23, 2002

THOMAS K. KAHN

CLERK

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

_______________

No. 01-12100

_______________

D. C. Docket No. 00-02253 CV-AR-S

JOHNNY E. WALKER,

Plaintiff-Appellee,

versus

SOUTHERN COMPANY SERVICES, INC., 

UNUMPROVIDENT CORPORATION,

Defendants,

PROVIDENT LIFE & ACCIDENT INSURANCE CO.,

Defendant-Appellant.

______________________________

Appeal from the United States District Court

for the Northern District of Alabama

______________________________

(January 23, 2002)
*

 Honorable Richard W. Goldberg, Judge, U.S. Court of International Trade, sitting by

designation.

1

 While Walker’s appeal was pending, we decided Gilbert v. Alta Health & Life Ins. Co.,

in which we concluded that the Alabama law of bad faith is not saved from ERISA preemption. 

See __ F.3d __ (11th Cir. Dec. 27, 2001). 

2

Before TJOFLAT and BIRCH, Circuit Judges, and GOLDBERG*, Judge.

BIRCH, Circuit Judge:

In this case, we decide whether the Supreme Court’s decision in UNUM Life

Ins. Co. of America v. Ward, 526 U.S. 358, 119 S. Ct. 1380 (1999) alters the

application of the savings clause of the Employee Retirement Income Security Act

(“ERISA”), 29 U.S.C. § 1144(b)(2)(A), such that the tort of bad faith under

Alabama law is now saved from preemption. At the district court, the plaintiff

Walker sought to amend his complaint to add the state law tort claim. After the

district court granted leave to amend, the defendant Provident Life Insurance

Company (“Provident”) brought this interlocutory appeal. We conclude that Ward

did not change ERISA’s preemptive effect on the Alabama law of bad faith, and

REVERSE the decision of the district court.1

I. BACKGROUND

Few facts are needed to resolve this appeal. Walker brought an ERISA plan
3

enforcement action pursuant to 29 U.S.C. § 1132(a)(1)(B), alleging that Provident

failed to pay disability benefits due to him under the long term disability plan of

Southern Company Services, Incorporated. After filing his complaint, Walker

sought leave to add a claim: Provident’s unwillingness to disperse benefits violated

Alabama Code § 27-12-24, which creates liability for bad faith refusal to pay

insurance claims. The district court granted Walker’s motion. Provident then

petitioned for interlocutory review, which was granted by our court. 

II. DISCUSSION

We review the district court’s decision to grant leave to amend the pleadings

for abuse of discretion. Butts v. County of Volusia, 222 F.3d 891, 892 n.2 (11th

Cir. 2000). When reviewing the district court’s ERISA preemption analysis, we

use a de novo standard. Hall v. Blue Cross/Blue Shield of Ala., 134 F.3d 1063,

1064-65 (11th Cir. 1998). 

Our preemption analysis begins with legislative intent. Jones v. Rath

Packing Co., 430 U.S. 519, 525, 97 S. Ct. 1305, 1309 (1977). Congress passed

ERISA to “protect . . . the interests of participants in employee benefit plans and

their beneficiaries, . . . by establishing standards of conduct, responsibility, and

obligation for fiduciaries of employee benefit plans, and by providing for
4

appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C.

§ 1001(b). In an attempt to ensure the scheme’s comprehensiveness, Congress

included a preemption provision: ERISA “shall supersede any and all State laws

insofar as they may now or hereafter relate to any employee benefit plan . . . .” 29

U.S.C. § 1144(a). 

The effect of ERISA’s preemption provision is tempered by a savings

clause: state laws which “regulate insurance” are not preempted. 29 U.S.C. §

1144(b)(2)(A). This clause provides that nothing in ERISA “shall be construed to

exempt or relieve any person from any law of any State which regulates insurance .

. . .” In this appeal, neither party disputes that the Alabama law “relates to”

employee benefit plans; the question is whether the Alabama law “regulates

insurance.” The question, in other words, is the interpretation of the savings

clause.

To determine whether a state law regulates insurance under the savings

clause, we follow a two part analysis developed by the Supreme Court. First, we

ask whether common sense suggests that the law regulates insurance. Metropolitan

Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740, 105 S. Ct. 2380, 2389 (1985). 

Under this inquiry, a law must be specifically directed toward the insurance

industry; mere impact on the industry is insufficient. Pilot Life Ins. Co. v.
5

Dedeaux, 481 U.S. 41, 50, 107 S. Ct. 1549, 1554 (1987). Second, we consider

whether the state law governs the “business of insurance” as defined by the

McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq. Metropolitan Life, 471 U.S. at

742-43, 105 S. Ct. at 2390-91. The McCarran-Ferguson Act definition is a

function of three inquiries: “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.” Union Labor Life

Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S. Ct. 3002, 3009 (1982).

The Supreme Court applied the Metropolitan Life framework to the state law

of bad faith is Mississippi, and found that the savings clause did not apply. 

Dedeaux, 481 U.S. at 57, 107 S. Ct. at 1558. Our court applied the reasoning of

Dedeaux to the Alabama law of bad faith in 1987. Belasco v. W.K.P. Wilson &

Sons, Inc., 833 F.2d 277 (11th Cir. 1987). We determined that 

the Alabama law of bad faith appears to us to have the

same roots ‘in the general principles of . . . tort and

contract law’ as was the case in Dedeaux. The other

factors considered by the Supreme Court in its analysis of

the saving clause in Dedeaux are not disputed by

plaintiffs and would apply to this case in the same

manner as they applied to the facts in Dedeaux. We

conclude that the saving clause does not apply in this

case.
2

 The order granting Walker leave to amend is explicitly based on the principles

announced in Hill v. Blue Cross Blue Shield of Alabama, an earlier decision by the same district

judge which addresses ERISA’s preemptive effect on the Alabama law of bad faith after Ward. 

See Hill, 117 F. Supp.2d 1209, 1211-12 (N.D. Ala. 2000). Although Hill is not on appeal, its

logic animates the order at issue.

6

Id. at 281 (internal citations omitted); accord Amos v. Blue Cross-Blue Shield of

Ala., 868 F.2d 430 (11th Cir. 1989) (per curiam).

Provident argues that Belasco and Amos dispose of this appeal. The district

court concluded otherwise, interpreting two footnotes from the Supreme Court’s

Ward decision to alter savings clause analysis such that the Alabama tort of bad

faith is no longer preempted.2

 In footnote six, the Ward Court acknowledged that

“applying the States’ varying insurance regulations creates disuniformities” for

national plans in local markets, but that “‘[s]uch disuniformities . . . are the

inevitable result of the congressional decision to ‘save’ local insurance

regulation.’” Ward, 526 U.S. at 376 n.6, 119 S. Ct. at 1390 (quoting Metropolitan

Life, 471 U.S. at 747, 105 S. Ct. at 2393). In the following footnote, the Ward

Court remarked that the Mississippi law at issue in Dedeaux was “not specifically

directed to the insurance industry and therefore not saved from ERISA

preemption.” Ward, 526 U.S. at 377 n.7, 119 S. Ct. at 1390. The district court,

whose position is championed for obvious reasons by Walker, reasons that these

two footnotes replace the Metropolitan Life preemption test with a single inquiry:
3

 “To this court, the only question that remains is whether Alabama’s cause of action for

bad faith is limited to the insurance industry.” Hill, 117 F. Supp.2d at 1212. The Metropolitan

Life standard was not applied. 

7

is the law at issue specifically directed to the insurance industry?3 

Our de novo review reveals that the district court’s analysis is flawed. In

footnote six, the Ward Court acknowledges and sanctions the fact that laws falling

under the protection of the savings clause will not be uniform across state lines. 

Footnote six does not address the analytical steps a court must take to reach a

savings clause decision: instead, the footnote comments only on the results of such

a decision. The calculus of Metropolitan Life is untouched.

Like footnote six, Ward’s footnote seven provides commentary on

preexisting law. As the Court held in Dedeaux, the common sense inquiry is

satisfied only in limited circumstances: “a law must not just have an impact on the

insurance industry, but must be specifically directed toward that industry.” 

Dedeaux, 481 U.S. at 50, 107 S. Ct. at 1554 (emphasis added). Ward’s footnote

seven uses identical language, commenting that Mississippi’s tort of bad faith

cannot survive preemption because it is “not specifically directed to the insurance

industry.” Ward, 526 at 377 n.7, 119 S. Ct. at 1390 (emphasis added). Footnote

seven merely comments on the fact that the Mississippi law failed the common
8

sense test; it does not create a new standard for analyzing ERISA’s savings clause.

Application of the Metropolitan Life standard reveals that the Alabama tort

of bad faith is preempted. To begin with, the tort fails the common sense test. The

Alabama law, as we have earlier held, is rooted in the common law of contract and

tort. Belasco, 833 F.2d at 281. Such common law roots, according to the Supreme

Court, make it less likely that the law regulates insurance under the common sense

inquiry. Dedeaux, 481 U.S. at 50, 107 S. Ct. at 1554. The fact that the Alabama

tort has been codified to apply specifically to the insurance industry does not erase

the presence of common law roots.

 Next we decide whether Alabama’s tort of bad faith regulates “the business

of insurance” as defined by the McCarran-Ferguson Act. With respect to the first

inquiry, whether the law spreads or transfers the policyholder’s risk, the Supreme

Court’s answer is “no.” In Dedeaux, the Court held that the correlative tort under

Mississippi law failed to achieve this goal. 481 U.S. at 50, 107 S. Ct. at 1554. 

Indeed, Walker does not even offer an argument on this point. 

The second inquiry under the McCarran-Ferguson Act is whether the law is

“an integral part of the policy relationship between the insurer and the insured.” 

Pireno, 458 U.S. at 129, 102 S. Ct. at 3009. While it is unclear exactly what this

factor requires, the Ward Court determined that it is certainly satisfied when the
9

law at issue “changes the bargain between insurer and insured.” 526 U.S. at 374,

119 S. Ct. at 1389-90. In Ward, the notice-prejudice rule created a new contract

term: the insurer must prove actual prejudice before refusing to pay a late claim. 

Id. The tort of bad faith, however, changes no contract term because the obligation

of good faith is implied in every contract under Alabama law. Ala. Code § 7-1-

203. As the Supreme Court observed, the effect of the law of bad faith is not on

the terms of the contract but on the nature of the remedy: the tort allows a plaintiff

to recover punitive damages. Dedeaux, 481 U.S. at 51, 107 S. Ct. at 1555. As

such, the tort “is no more ‘integral’ to the insurer-insured relationship than any

State’s general contract law is integral to a contract made in that State.” Id. 

The third inquiry under McCarran-Ferguson is whether the law applies only

within the insurance industry. While only applicable to insurance cases, American

Cast Iron Pipe Co. v. Williams, 591 So.2d 854, 857 (Ala. 1991), the statute is a

product of basic common law principles. Belasco, 833 F.2d at 281. These

principles may be summoned in any breach of contract case. Thus satisfying — at

best — one of the McCarran-Ferguson factors, the Alabama tort of bad faith is not

saved from preemption. When the Dedeaux Court reached an identical end to its

McCarran-Ferguson analysis, the Mississippi tort of bad faith fell outside the

savings clause. 481 U.S. at 51, 57, 107 S. Ct. at 1555, 1558. True, the state law at
10

issue need not satisfy all three of the McCarran-Ferguson factors, Ward, 526 U.S.

at 373-74, 119 S. Ct. at 1389, but the satisfaction of one factor will not save a state

law from preemption where the common sense test is unmet. 

Even if we did agree with the district court’s method of analyzing the

savings clause, post-Ward precedent in our circuit holds that ERISA preempts the

Alabama tort of bad faith. Butero v. Royal Maccabees Life Ins. Co., 174 F.3d

1207, 1215 (11th Cir. 1999). The decision in Butero is dispositive because “the

law of this circuit is ‘emphatic’ that only the Supreme Court or this court sitting en

banc can judicially overrule a prior panel decision.” Cargill v. Turpin, 120 F.3d

1366, 1386 (11th Cir. 1997). Thus, Butero, Belasco, and Amos remain good law. 

IV. CONCLUSION

The Alabama state law of bad faith relates to employee benefits, but does not

regulate insurance. Walker’s claim is therefore preempted by ERISA. 29 U.S.C. §

1144(b)(2)(A). Accordingly, we REVERSE the decision of the district court and

REMAND for a decision consistent with this opinion.