Legal Document

526 U.S. 358119 S.Ct. 1380143 L.Ed.2d 462 UNUM LIFE INS. CO. OF AMERICA v. WARD(97-1868)135 F.3d 1276, affirmed in part, reversed and remanded. SUPREME COURT THE UNITED STATES119 No. 97 1868 INSURANCE COMPANY AMERICA, PETITIONER JOHN E. WARD ON WRIT CERTIORARI TO STATES APPEALS FOR NINTH CIRCUIT [April 20, 1999] Justice Ginsburg delivered the opinion of Court. 1 This case, brought under §502(a) Employee Retirement Income Security Act 1974 (ERISA), 88 Stat. 891, as amended, 29 U.S.C. § 1132(a), concerns ERISA's preemption saving clauses. The clause, §514(a), 1144(a), broadly states that ERISA provisions "shall supersede . State laws" to extent those laws "relate any employee benefit plan." §514(b)(2)(A), 1144(b)(2)(A), phrased with similar breadth, exempts from "any law which regulates insurance." key words "regulates insurance" to" once again require interpretation, for their meaning is not "plain"; sensible construction ERISA, our decisions indicate, requires we measure these context. See Pilot Life Ins. Co. Dedeaux, 481 41, 47 (1987) (noting repeated calls interpretation are surprising view "the wide variety state statutory decisional arguably affected" by clauses). 2 context here a suit recover disability benefits an ERISA-governed insurance policy issued defendant-petitioner Insurance Company America (UNUM). Plaintiff-respondent John Ward submitted his proof claim outside time limit set policy, therefore denied Ward's claim. 3 Ruling favor, reversing District Court's summary judgment UNUM, Court Appeals Ninth Circuit relied on California, worked employer operated. Circuit's rested two grounds. That court first California's "notice-prejudice" rule, insurer cannot avoid liability although untimely, unless shows it was prejudiced delay. notice-prejudice rule saved preemption, held, because "law Management Analysis Disability Benefit Plan, 135 1280 (1998). 4 announced further ground one would come into play if proved prejudice due delayed notice. Under decisions, said, could be deemed agent administering group policies. knew within allowed held generally applicable agency reflected California cases does plans, preempted. id., at 1281 1283, 1287 1288. 5 We granted certiorari, 525 ___ (1998), now affirm Appeals' disposition, reverse second. agree, insurance," ERISA. law, hold, occupy clause. 6 * long-term (MAC) insured welfare plan governed effective November 1, 1983. provides proofs must furnished latest, year 180 days after onset disability. 7 employed MAC 1983 until May 1992. Throughout this period, premiums were deducted paycheck. admitted facts became permanently disabled severe leg pain date resignation, 5, F.3d, 1280. 8 condition diagnosed diabetic neuropathy December In late February or early March 1993, he qualified thereupon informed inquired about continuing health benefits. July received determination eligibility Social forwarded copy MAC's human resources division. 1279. April 1994, discovered among papers booklet describing asked whether covered condition. When told him covered, completed application MAC. turn, filling information section, UNUM. 11, 1994. ibid. notice terms required submission 1993. By letter dated 13, advised untimely. 9 September filed against §502 1132 provided plan. appeared defendant answered behalf itself To Court, argued Elfstrom New York Co., 67 Cal. 2d 503, 512, 432 P.2d 731, 737 (1967) (en banc), administers should act company. Therefore, asserted, permanent MAC, sufficed supply timely App. Pet. Cert. 30a. rejected argument, concluding "relate[s] plans; hence preempted 1144(a). compass 1144(b)(2)(A). 31a. Accordingly, rendered UNUM's favor. 33a. 10 reversed, identifying grounds might prevail. First, following recent decision Cisneros 134 939 appeals insurance"; preclude absent suffered actual Second, contingently, insurer, reason (internal quotation marks omitted). accordingly remanded case account claim; so, whether, reasoning Elfstrom, nevertheless prevail had 1289. II 11 prescribes: 12 "[A] defense based insured's failure give [of claim] prove prejudice. Prejudice presumed alone. show prejudice, mere possibility prejudice." Shell Oil Winterthur Swiss 4th 715, 760 761, 15 Rptr. 815, 845 (1st Dist. 1993) (citations 13 parties agree falls plan.1 Their dispute hinges question: Does "regulat[e] thus escape §514(b)(2)(A).2 14 Our precedent framework resolving ask "common-sense matter," contested prescription insurance. Metropolitan Massachusetts, 471 724, 740 (1985); see Life, U.S., 48. consider three factors determine regulation fits "business phrase used McCarran-Ferguson Act, 59 33, 1011 et seq.: "first, practice has effect transferring spreading policyholder's risk; second, integral part relationship between insured; third, limited entities industry." U. S., 743 (emphasis, citations, internal omitted); also 48 49. concluded matter common sense. Cisneros, 945. do normally disturb court's issue so heavily dependent analysis Runyon McCrary, 427 160, 181 182 (1976), lack cause here. controls "requiring before enforcing proof-of-claim requirements." As observed, its very terms, "is directed specifically industry only contracts." Ibid.; Brief United States Amicus Curiae ("[O]ur survey reveals no where courts apply such area. Nor surprising, given stated 'insurer' resulting untimeliness notice."). appears satisfy common-sense homes "not just have impact [that] 50. 16 amici urge opposition conclusion merely industry-specific general principle "disproportionate forfeiture avoided enforcement American Council al. Amici 13; Association Health Companies ("[N]otice-prejudice branch broad doctrine harmless error."). Given tenet springs, maintains, resembles Mississippi Life; punitive damages sought "bad faith" denying claims without reasonably arguable basis refusal pay. determined "identified bad faith industry, roots firmly planted principles tort contract law." Ibid. "Any breach contract," "and contract, may lead [the faith]." concluded, did 17 find fair bracket contracts Mississippi's gauged relief. policies like frame conditions satisfied insurer's contractual obligation arises. B. Witkin, Summary Law, Contracts §726, p. 657 (9th ed. 1987); Zurn Engineers Eagle Star 61 3d 493, 499, 132 206, 210 (2d 1976). Ordinarily, "failure comply prevents action defaulting party enforce contract." Jur. 3d, §245, 542 (3d 1974). A decision, Platt Pacific Inc. Andelson, 307, 862 158 (1993) illustrative. Supreme adhered normal course: It refused excuse plaintiff's requirement demand arbitration, there allegation been lapse. plaintiff forfeited right pursue demand] neither legally excused nor changed modification parties' written agreement." Id., 321, P.2d, 167. "A contrary conclusion," stated, "would undermine vesting contracting power unilaterally convert other party's conditional independent, unconditional notwithstanding 314, 162. 18 doubt true diverse bear out maxim abhors forfeiture"3 maxim. But special order, mandatory contracts, pliably employ when circumstances warrant. Tellingly, identified authority insurance-specific indicating abide work Outside context, burden justifying departure contract's rests seeking departure. See, e.g., Bankers Mortgage Corp. Federal Home Loan Corp., 75 1401, 1413 (CA9 1996); CQL Original Products, National Hockey League Players' Assn., 39 1347, 1357 1358, n. 6, 46 412, 418, (4th 1995). short, distinctive most notably applied guiding discretion range matters.4 19 insistence insurers they deny coverage grounded specific industry. Governments 14. grounding decision. Announcing Campbell Allstate 60 303, 384 155 (1963) emphasized "public state" favor compensating insureds. 157; (weighing relative burdens insureds). Subsequent rulings likewise focused governance. Hanover Carroll, 241 558, 570, 50 704, 712 1966) (public respecting compensation injured parties); Northwestern Title Flack, 134, 143 144, 85 693, 698 1970) (extending "claims-type" policies, rejecting contention sound public limitation "occurrence-type" policies); Employers Superior 221 1348, 1359 1360, 270 779, 784 785 1990) (evaluating considerations reaching opposite conclusion). Decisions similarly indicate addresses Cooper Government Employees 51 N. J. 86, 94, 237 A. 870, 874 (1968) (failure adopt "disserve interest, instrument social victims negligence compensated"); Great C.G. Tate Construction 303 C. 387, 395, 279 S. 769, 774 (1981) ("The [notice-prejudice] today advantages promoting fulfilling reasonable expectations purchaser while fully protecting ability protect own interests."); Alcazar Hayes, 982 W. 845, 851 853 (Tenn. 1998) (surveying "compelling justifications" support departing traditional notice-prejudice). 20 sum, properly governing distinctively. reject restates disfavoring forfeitures conclude instead notice-prejudice, sense, B 21 next criteria Act. Preliminarily, assertion all order "regulate more supple than conceives be. indicated "considerations [to be] weighed" determining insurance, 49, "[n]one necessarily determinative itself," Union Labor Pireno, 458 119, 129 (1982). formulation assess purposes called "relevant"; describe them "required." 743; O'Connor America, 146 959, 963 (CADC ("That 'relevant' suggests need point same direction, else 'required.' "). correctly recognized, question "fit understanding regulation," 945, then looked checking points "guideposts, separate essential elements each satisfied" save State's 946. 22 factor asks "has risk." criterion "does alter allocation risk initially contracted, namely lost income disability." amicus curiae, however, found "risk-spreading" factor: "Insofar shifts stale evidence company some instances, raising policyholders." point, remaining factors, verifying view, securely satisfied. 23 Meeting second factor, serves "an insured." 743. changes bargain "effectively creates term" timeliness-of-claim provision. stated: "The dictates insured, consequently, relationship." Ibid.5 24 third well met. earlier explained, supra, focuses industry; aimed it." FMC Holliday, 498 52, (1990). III 25 assert even nonetheless conflicts substantive ways. contends altering fiduciaries "in accordance documents instruments §1104(a)(1)(D). According §1104(a)(1)(D) preempts term. Petitioner 32 33; Tr. Oral Arg. 8. 26 "contra argument overlooks controlling makes scant repeatedly mandating §1144(b)(2)(A). 758 ("Massachusetts' mandated-benefit 'law insurance' pre-empted applies purchased plans subject ERISA."); 64 ("[I]f regulate indirectly through contracts."). §1104(a)(1)(D), powerless displace simply inserting term documents. virtually "rea[d] clause ERISA." 741.6 27 civil provision, §502(a), rules notice-prejudice. Whatever merits §502(a)'s preemptive force,7 implicated sued §502(a)(1)(B) "to supplied relevant suit. raise sole launching action. 28 Finally, suggestion §503 1133 provide opportunity review claims, Department regulations providing "[a] requirements filing procedure met," CFR 2560.503 1(d) allowing longer period file minimum mandated federal complements rather contradicts regulations. 19, 9. IV successfully maintained served theory administrator acted agent. otherwise: 30 "For policyholder [MAC] acts employee. will [UNUM] authorization." 44a. 31 provision ineffective, conclude, 2d, 737, performing duties policies." Thus, instructed that, remand, claim, Elfstrom. argue comprehended Circuit, Respondent 35 (the "general law," "employers who administer agents law"). Indeed, difficult tell precisely what derived ("[T]he below actually case."); (endorsing Paulson Western Co, 292 Ore. 38, 636 935 (1981), Oregon purported reconcile apparently conflicting body law). contours be, emerging "relat[e] §1144(a), escapes preemption. 1287. 33 determination, mistaken. elaboration, dictate manner administered," consistent precedent. Conference Blue Cross & Shield Plans Travelers 514 645, 658 (1995) (identifying "mandat[e] structures administration"). statement grounded. 34 persuasively urged curiae brief, deeming policyholder-employer marked administration. "forc[e] employer, administrator, assume role, attendant legal consequences, undertaken voluntarily"; affect plan's bookkeeping obligations regarding whom checks sent, but [would] regulat[e] basic services participants beneficiaries." 27. Satisfied determination. 36 For reasons proceedings opinion. 37 ordered. Notes 38 1. Common-law developed "State law" 1144(c)(1) 'State law' includes laws, rules, regulations, having law."). 2. purport "deem[ing]" remain §1144(b)(2)(B). Self-insured therefore, sheltered regulation. 747 (1985). Because involve self-insured plan, regulatory 40 3. cites handful genre. They cast disposition. Conservatorship Rand, 49 835, 57 119 1996), county conservatee potential fees costs requirements, defective 838 841, 121 123. Rand all; concerned consequences violation state-created judicial proceeding. Industrial Asphalt Garrett 1001, 226 1986), imposed mechanics lien turned interpretation. 1005 1006, Rptr., 19. Asphalt, moreover, complaining underlying lien. Neither unwilling reluctant private written. older relies instructive. Ballard MacCallum, 439, 101 692 (1940) contained contradictory clauses, appearing event default, others contemplate cure. 442, 694. invoked presumption resolve conflict. 444, 695. Henck Lake Hemet Water 136, 69 849 (1937) water supplier attempted delivery recipient made annual payment. supplier's plea, observing proper case," equity permits lapse recipient's forfeiture. 141, 142, 852. carefully weighed competing interests fault inducing 144 145, 853; cf. Restatement (Second) §229, Comment c, Reporter's Note (1979) (courts likely obligor's strictly adhere performance timetable obligee induced failure). These uncontested propositions disfavors case-specific inequitable None remotely failures periods prejudice; none, routine antiforfeiture principle. 41 4. features §229 (1979), urges compass. Section 229 "[t]o non-occurrence disproportionate forfeiture, occurrence material agreed exchange." permissive; whenever carry showing allows over materiality prescription. 42 5. administration relationship. 728, (including regulating practices requiring grace catalogue insurance). 43 6. recognize applying States' varying disuniformities "national enter local markets purchase 747. "[s]uch inevitable result congressional 'save' regulation." 44 7. discussed (1987). creating Solicitor General, exclusivity observed modeled exclusive remedy §301 Relations 1947 (LMRA), 185. General's submission. 52 56. instant endeavored qualify advanced Life. 25. Noting "LMRA 301 contain exception analogous savings provision," General maintains discussion 'regulates insurance,' comes state-law remedy." 25; face, saves conferring causes affecting remedies mandated-benefits laws."). address current due, seeks

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