Woodworker's refused to pay, and Principal canceled the policy. Woodworker's went to federal court claiming unfair trade practices and fraud, which are state-law claims. However, said Principal Mutual, it would appeal because the policy provided an employee benefit. Principal Mutual's case went to the U.S. Court of Appeals for the Tenth Circuit in Denver. No such limitations applied to state claims.
Statutory language seems clear.
There are exceptions. After that, however, there was coverage and potential for pre-emption. Similarly, states can't enforce laws that govern reporting, disclosure and vesting requirements. Woodworker's based its case on unfair trade and insurance practices and on fraud. So the appellate court upheld the judgment against Principal Mutual for insurance violations and fraud.