Court Opinion

ID: 9487208
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:11:07.632672+00
Date Added: 2024-06-11T17:52:09.234458
License: Public Domain

LUTTIG, Circuit Judge,
dissenting:
The majority holds that the unfair trade practices article of the West Virginia insurance code, which was enacted “to regulate trade practices in the business of insurance,” W.Va.Code § 33-11-1, is not a state “law ... which regulates insurance,” 29 U.S.C. § 1144(b)(2)(A). Thus, it concludes, TriState’s improper claims processing action under that statute is not saved from preemption. According to the majority, this result is dictated by our recent decision in Custer v. Pan American Life Ins. Co., 12 F.3d 410 (4th Cir.1993), in which we interpreted the Supreme Court’s decision in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), as holding that all state improper claims processing actions filed against an insurance company are not saved from preemption. In my view, Pilot Life did not sweep quite so broadly, and applying here the saving clause analysis undertaken by the Supreme Court in Pilot Life requires us to hold that Tri-State’s state action is saved from preemption. Accordingly, I dissent.
In Pilot Life, the Supreme Court addressed whether ERISA preempts a beneficiary’s or participant’s cause of action for improper claims processing brought under Mississippi’s common law of bad faith, holding that the action was not saved from preemption under ERISA’s “saving clause,” 29 U.S.C. § 1144(b)(2)(A). In reaching this conclusion, the Court first determined that a “common-sense understanding” of the language of the saving clause confirms that a state law only “regulates insurance” when it is “specifically directed toward th[e insurance] industry.” 481 U.S. at 50, 107 S.Ct. at *3171554. Applying this commonsense understanding of the clause’s text, it concluded that the Mississippi common law of bad faith does not regulate insurance, because it is rooted in general principles of Mississippi tort and contract law. Id. It next reviewed Mississippi’s bad faith doctrine under the three criteria the Court employs to interpret the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq., and found that these factors also did not support a conclusion that the Mississippi law “regulates insurance.” 481 U.S. at 50-51, 107 S.Ct. at 1554-55. And finally, the Court looked to the “role of the saving clause in ERISA as a whole,” id. at 51, 107 S.Ct. at 1555, concluding that Congress intended as exclusive the civil remedies that ERISA provides to beneficiaries and participants alleging improper claims processing. Id. at 52-57, 107 S.Ct. at 1555-58.
Only last term, in Custer, we considered whether ERISA preempted a beneficiary’s improper claims processing action brought under West Virginia’s insurance code, see W.Va.Code § 33-11. In that case, we assumed, mistakenly I believe, that Pilot Life broadly held that all “state eause[s] of action for improper claims processing filed against an insurer [are] not saved from preemption under § 1144(a).” 12 F.3d at 420. Proceeding on this assumption as to the scope of Pilot Life, we reasoned that Pilot Life directly controlled Custer’s West Virginia action, which was filed against an insurance company for improper claims processing, and, without even engaging in the actual Pilot Life analysis, held that Custer’s state action was not saved from preemption.*
Now, relying on Custer’s, assumption that the Pilot Life holding extended to all state law improper claims processing actions, and again largely ignoring the three-step saving clause analysis employed by the Court in Pilot Life, the majority summarily concludes in this case that Custer requires a holding that Tri-State’s improper claims processing action is not saved from preemption.
In my view, the Supreme Court did not hold in Pilot Life that all state actions for improper claims processing fall outside the saving clause. The only question before the Court in Pilot Life was whether a claim by a beneficiary or a participant under a state common-law doctrine of bad faith (indeed, only Mississippi’s law) was saved from preemption. In deciding that it was not, the Supreme Court neither addressed state’improper claims processing actions by parties other than beneficiaries and participants or different actions brought under other state laws.
In Custer, our mistake was immaterial because the beneficiary’s cause of action there in question was one specifically identified by the Court in Pilot Life as governed exclusively by ERISA. 481 U.S. at 56, 107 S.Ct. at 1557. Thus, our holding that Custer’s cause of action was preempted was correct notwithstanding our misapprehension of the contours of the Pilot Life holding and our attendant failure to engage in the full inquiry undertaken by the Court in Pilot Life. Here, however, the majority is not saved by happenstance.
*318Unlike in Pilot Life, a “common-sense understanding” of the statutory text, 481 U.S. at 50, 107 S.Ct. at 1554, does support the argument that the West Virginia law before us “regulates insurance.” If any law can be said to be “specifically directed toward th[e insurance] industry,” id., it is this statute, which, by terms, was enacted to, and does,” regulate trade practices in the business of insurance_” W.Va.Code § 33-11-1.
Also here, unlike in Pilot Life, the West Virginia statute as applied to Tri-State’s action (and, in my view, to the action in Custer) regulates “the business of insurance” under the McCarran-Ferguson Act. 15 U.S.C. § 1012. Tri-State alleges that Nationwide violated the West Virginia insurance code by deliberately and fraudulently delaying its charging of benefit claims against Tri-State’s account in order to avoid coverage for those claims under its stop-loss policy with TriState. See Appellant’s Br. at 5. Applying the West Virginia statute to regulate the determination of which claims are covered under Tri-State’s stop-loss insurance policy with Nationwide certainly affects an “integral part of the policy relationship between the insurer and the insured,” Pilot Life, 481 U.S. at 48-49, 107 S.Ct. at 1553-54 (quoting Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 3009, 73 L.Ed.2d 647 (1982)), since it certainly would “define the terms of the relationship between the insurer and the insured,” Pilot Life, 481 U.S. at 51, 107 S.Ct. at 1555. It also would, by regulating when and how liability on benefit claims would be transferred from Tri-State to Nationwide, directly involve, if not actually “effect[,] a spreading of [Tri-State’s] risk.” Id. at 50, 107 S.Ct. at 1554. And, as noted above, the statute by terms is “specifically directed toward[the insurance] industry.” Id. Tri-State’s action plainly does, therefore, regulate “the business of insurance” in accordance with the McCarran-Ferguson Act. See United States Dept. of Treasury v. Fabe, - — • U.S. -, -, 113 S.Ct. 2202, 2209, 124 L.Ed.2d 449 (1993) (“There can be no doubt that the actual performance of an insurance contract falls within ‘the business of insurance’ [for purposes of McCarran-Ferguson Act]_”); SEC v. National Securities, Inc., 393 U.S. 453, 460, 89 S.Ct. 564, 568-69, 21 L.Ed.2d 668 (1969) (“The relationship between the insurance company and the insured, the type of policy which could be issued, its reliability, interpretation and enforcement — these were the core of the ‘business of insurance’ [that Congress addressed in the McCarran-Ferguson Act].” (Emphasis added)).
Finally, and most importantly, Tri-State’s state action does not, as the state actions in both Custer and Pilot Life did, run afoul of “the legislative intent concerning the [exclusivity of the] civil enforcement provisions provided by ERISA § 502(a), 29 U.S.C. § 1132(a).” Pilot Life, 481 U.S. at 52, 107 S.Ct. at 1555. While it is plain that the remedies provided in section 502(a) to beneficiaries and participants were intended to be exclusive, and therefore preempt state actions such as those in Pilot Life and Custer, it is equally plain that that section does not expressly provide any remedy to employers such as Tri-State, let alone one that Congress clearly intended to be exclusive.
In sum, I believe that we misassessed the reach of the Pilot Life holding in Custer and therefore failed to engage in the full Pilot Life analysis. We ultimately reached the correct conclusion in Custer, but for reasons that we never considered. However, for the same reasons that we did not consider in Custer, we, as a court, are incorrect here.
Because, in my view, Tri-State’s state cause of action alleging that Nationwide fraudulently processed claims to avoid coverage on those claims is, under Pilot Life, saved from preemption, I cannot join the majority’s opinion holding otherwise.
I also disagree with the majority’s alternative holding that, because the ERISA plan here was essentially self-funded, the deemer clause applies to preempt Tri-State’s claims. Ante at 335-336. The deemer clause, by its terms, only applies to “employee benefit plan[s]” and “trust[s] established under such [ ] plants],” 29 U.S.C. § 1144(b)(2)(B). It does not speak at all to insurance companies such as Nationwide or claims against them. “By forbidding States to deem employee benefit plans ‘to be an insurance company or other insurer ... or to be engaged in the business of insurance,’ the deemer clause relieves plans from state laws ‘purporting to *319regulate insurance.’” FMC Corp. v. Holliday, 498 U.S. 52, 61, 111 S.Ct. 403, 409, 112 L.Ed.2d 356 (1990) (emphasis added). Nationwide obviously is not an “employee benefit plan,” and the deemer clause has no application to Tri-State’s claims against it. Powell v. Chesapeake & Potomac Telephone Co. of Virginia, 780 F.2d 419, 423 (4th Cir.1985), cert. denied, 476 U.S. 1170, 106 S.Ct. 2892, 90 L.Ed.2d 980 (1986) (“Since Connecticut General [Life Insurance Company] is not an ‘employee benefit plan,’ the deemer clause is inapplicable to it.”); see FMC Corp., 498 U.S. at 61, 111 S.Ct. at 409 (“An insurance company that insures a plan remains an insurer for purposes of state laws ‘purporting to regulate insurance’ after application of the deem-er clause.”). Thus, the district court’s holding that the deemer clause preempts TriState’s claims is, I believe, incorrect. Accordingly, I dissent from the majority’s affir-mance of that holding as well.

We also concluded in Custer that the case was controlled by our decision in Powell v. Chesapeake & Potomac Telephone Co. of Virginia, 780 F.2d 419, 423 (4th Cir.1985), cert. denied, 476 U.S. 1170, 106 S.Ct. 2892, 90 L.Ed.2d 980 (1986). In Powell, we addressed a beneficiary's state law claims against her former employer and the insurance company that administered the employer's uninsured ERISA plan for maladministration of her benefits claims. We held that each of Powell's state law claims related to the employer’s ERISA plan, and were therefore preempted. In a passage relied on by the majority for the proposition that improper claims processing actions are pre-empted, ante at 314-15, we rejected Powell's argument that her claim against Connecticut General, the plan’s administrator, was saved from pre-emption because it was brought under a state law that regulated insurance. Id. at 423-24. Although Connecticut General is, in fact, an insurance company, we held that, in its capacity as administrator, it was not at all engaged in the "business of insurance” but rather served purely administrative functions, and therefore that the state law, as applied to Connecticut General, did not constitute a state regulation of insurance that was saved from preemption. Id.
Our holding in Powell turned, therefore, on the fact that Connecticut General was not engaged in the business of insurance, rather than on the fact that Powell's action was for improper claims processing. That an insurance company that administers but does not insure an ERISA plan is not engaged in the business of insurance for purposes of the saving clause hardly bears on this case, since Nationwide, which provided TriState with stop-loss insurance, obviously was engaged in the business of insurance.