Opinion ID: 162293
Heading Depth: 2
Heading Rank: 2

Heading: Claims Against Hartford

Text: 35 Moffett asserts two Wyoming state law claims against Hartford: one for the tort of insurance bad faith and one for breach of the statutory duty to accept or reject insurance claims within a specified time period and not to refuse to pay unreasonabl[y] or without cause. Wyo. Stat. Ann. § 26-15-124. Moffett also seeks punitive damages, an issue he does not pursue on appeal, and he alleges alternative claims against Hartford, identical to the ERISA claims he brought against the Halliburton defendants. The district court granted Hartford's motion to dismiss these claims for failure to state a claim. We affirm. 36 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. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (quoting 29 U.S.C. § 1002(1)). To facilitate that comprehensive regulation, Congress enacted a preemption clause which preempts any state law which relate[s] to any employee benefit plan. 29 U.S.C. § 1144(a). Two further provisions contain exceptions to that broad preemption clause: The saving clause excepts from the pre-emption clause laws that `regulat[e] insurance....' 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. Pilot Life, 481 U.S. at 45, 107 S.Ct. 1549 (quoting 29 U.S.C. §§ 1144(b)(2)(A) and (B)). The Supreme Court has expressly observed that ERISA's preemption provisions are deliberately expansive. Id. at 46, 107 S.Ct. 1549; see also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). 37 Because there is no question that the tort of insurance bad faith relates to the Halliburton Plan, an ERISA-regulated employee benefit plan, Moffett's state law claim for bad faith is preempted unless exempted from preemption by the saving clause. That clause exempts from preemption any law ... which regulates insurance. 29 U.S.C. § 1144(b)(2)(A). Moffett argues that the Wyoming law of bad faith insurance regulates insurance so as to escape ERISA's preemption clause. We agree with the district court that it does not. 38 Our precedent provides a framework for resolving whether a state law `regulates insurance' within the meaning of the saving clause. UNUM Life Ins. Co. v. Ward, 526 U.S. 358, 367, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999). The first inquiry is whether, from a `common-sense view of the matter,' the contested prescription regulates insurance. Id. (quoting Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985)). Second, we consider three factors employed to determine whether the regulation fits within the `business of insurance' as that phrase is used in the McCarran Ferguson Act. Id. The three McCarran-Ferguson factors are (1) whether the practice has the effect of transferring or spreading a policyholder's risk; (2) whether the practice is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities within the insurance industry. Metropolitan Life Ins., 471 U.S. at 743, 105 S.Ct. 2380 (internal citations and quotations omitted); see also Pilot Life, 481 U.S. at 48-49, 107 S.Ct. 1549. A state regulation need not satisfy all three factors in order to satisfy the regulate insurance requirement of ERISA's saving clause. Rather, the factors are guideposts, not separate essential elements. UNUM Life Ins., 526 U.S. at 374, 119 S.Ct. 1380 (internal quotation omitted). 39 Relying heavily on the Supreme Court's analysis in Pilot Life of the Mississippi law of bad faith, which the Court held did not regulate insurance and therefore was preempted by ERISA, the district court concluded that Wyoming's law of bad faith was also preempted. We agree. As the Supreme Court observed in Pilot Life: 40 A common-sense view of the word regulates would lead to the conclusion that in order to regulate insurance, a law must not just have an impact on the insurance industry, but must be specifically directed toward that industry. Even though the Mississippi Supreme Court has identified its law of bad faith with the insurance industry, the roots of this law are firmly planted in the general principles of Mississippi tort and contract law. Any breach of contract, and not merely breach of an insurance contract, may lead to liability for punitive damages under Mississippi law. 41 Pilot Life, 481 U.S. at 50, 107 S.Ct. 1549. The Court has further explained that a law regulates insurance if it homes in on the insurance industry and does `not just have an impact on [that] industry.' UNUM Life Ins., 526 U.S. at 368, 119 S.Ct. 1380 (quoting Pilot Life, 481 U.S. at 50, 107 S.Ct. 1549). Thus, in UNUM Life Ins. the Court found that California's notice-prejudice rule, whereby an insurer must prove prejudice from an insured's failure to give timely notice of a claim in order to enforce its proof-of-claim requirements, did specifically regulate insurance and therefore was not preempted by ERISA. Id. at 372, 119 S.Ct. 1380. 42 Moffett argues that Wyoming's tort of bad faith insurance homes in on the insurance industry and, like California's notice-prejudice rule, is more uniquely directed at that industry than is the Mississippi law of bad faith. We disagree. While the Wyoming tort-based claim of bad faith insurance breach may be more narrowly applied than Mississippi's law of bad faith, it does not home in on the insurance industry alone, as does California's notice-prejudice law. 43 As the Wyoming Supreme Court has observed, Wyoming has recognized a tort-based claim for breach of the implied covenant of good faith in limited circumstances. Scherer Constr., LLC. v. Hedquist Constr., Inc., 18 P.3d 645, 652 (Wyo. 2001). Those limited circumstances include employment cases where a `special relationship' exists between the employer and the employee, id., and insurance cases. The Wyoming Supreme Court has noted that [a] special relationship is also an element of a tort-based claim in the insurance context, which automatically exists by virtue of the unequal bargaining power the insurer has over an insured. Id. at n. 1. Thus, the tort of bad faith breach as developed in Wyoming is not unique to the insurance industry; rather, it is unique to those settings in which a special relationship exists, including the insurance and employment contexts. 44 Applying the McCarran-Ferguson factors to Wyoming's bad faith law, and considering Pilot Life and other cases applying those factors to comparable state laws, we conclude that Wyoming's law does not regulate insurance such that it falls within ERISA's saving clause. Wyoming's bad faith law does not have the effect of transferring or spreading policyholder risk. See Pilot Life, 481 U.S. at 50, 107 S.Ct. 1549 (holding that Mississippi bad faith law does not effect a spreading of policyholder risk); Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460, 466 (10th Cir.1997) (Oklahoma's bad faith law does not regulate the spreading of policyholder risk.); Kelley v. Sears, Roebuck & Co., 882 F.2d 453, 456 (10th Cir.1989) (holding that Colorado's common law of bad faith does not spread[] policyholder risk). 45 Nor is Wyoming's bad faith law an integral part of the policy relationship between the insured and the insurer. The law of bad faith does not define the terms of the relationship between the insurer and the insured; it declares only that, whatever terms have been agreed upon in the insurance contract, a breach of that contract may in certain circumstances allow the policyholder to obtain punitive damages. Pilot Life, 481 U.S. at 51, 107 S.Ct. 1549; see also Gaylor, 112 F.3d at 466; Kelley, 882 F.2d at 456. Further, although associated with the insurance industry, along with the employment industry, Wyoming's bad faith law has its roots in general principles of tort and contract law. Finally, as we have held with respect to Oklahoma and Colorado bad faith laws, and as the Supreme Court held with respect to Mississippi's bad faith law, Wyoming's bad faith law conflicts with ERISA's civil enforcement remedies. See Pilot Life, 481 U.S. at 54, 107 S.Ct. 1549 (The deliberate care with which ERISA's civil enforcement remedies were drafted and the balancing of polices embodied in its choice of remedies argue strongly for the conclusion that ERISA's civil enforcement remedies were intended to be exclusive.); see also Gaylor, 112 F.3d at 466; Kelley, 882 F.2d at 456. 46 We similarly hold that Moffett's claim under Wyo. Stat. Ann. § 26-15-124 is preempted because it conflicts with ERISA's exclusive remedial scheme. 6 We further uphold the dismissal of Moffett's alternative ERISA claims against Hartford, for the same reasons we affirmed dismissal of those claims against the Halliburton defendants.