Source: https://case-law.vlex.com/vid/471-u-s-202-604981862
Timestamp: 2019-04-24 16:26:43+00:00

Document:
The bad-faith handling of an insurance claim, including a claim under a disability insurance plan included in a collective bargaining agreement, is a tort under Wisconsin law. Petitioner and a labor union, of which respondent employee of petitioner is a member, are parties to a collective bargaining agreement that incorporates a self-funded disability plan administered by an insurance company and providing benefits for nonoccupational injuries to employees. The agreement establishes a disability grievance procedure that culminates in final and binding arbitration. Respondent, after suffering a nonoccupational injury, entered into a dispute over the manner in which petitioner and the insurer handled his disability claim. Rather than utilizing the grievance procedure, respondent brought a tort suit against petitioner and the insurer in a Wisconsin state court, alleging bad faith in the handling of his claim and seeking damages. The trial court ruled in favor of petitioner and the insurer, holding that respondent had stated a claim under § 301 of the Labor Management Relations Act, which provides that suits for violations of collective bargaining agreements may be brought in federal district court. In the alternative, if the claim were deemed to arise under state law, rather than § 301, it was preempted by federal labor law. The Wisconsin Court of Appeals affirmed. The Wisconsin Supreme Court reversed, holding that the claim did not arise under § 301 as constituting a violation of a labor contract, but was a tort claim of bad faith. The court reasoned that, under Wisconsin law, the tort of bad [105 S.Ct. 1907] faith is distinguishable from a bad-faith breach-of-contract claim, and that, although a breach of duty is imposed as a consequence of the relationship established by contract, it is independent from that contract.
would be subject to varying interpretations, and the congressional goal of a unified body of labor contract law would be subverted. Preemption is also necessary to preserve the central role of arbitration in the resolution of labor disputes. Pp. 208-221.
[105 S.Ct. 1909] The Supreme Court of Wisconsin, with one justice dissenting, reversed. Lueck v. Aetna Life Ins. Co., 116 Wis.2d 559, 342 N.W.2d 699 (1984). The court held, first, that the suit did not arise under § 301 of the LMRA, and therefore was not subject to dismissal for failure to exhaust the arbitration procedures established in the collective bargaining agreement. The court reasoned that a § 301 suit arose out of a violation of a labor contract, and that the claim here was a tort claim of bad faith. Under Wisconsin law, the tort of bad faith is distinguishable from a bad faith breach-of-contract claim: though a breach of duty exists as a consequence of the relationship established by contract, it is independent of that contract. Therefore, it said, the violation of the labor contract was "irrelevant to the issue of whether the defendants exercised bad faith in the manner in which they handled Lueck's claim." Id. at 566, 342 N.W.2d at 703. The action, thus, was not a § 301 suit.

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