Bush v. Insurers Administrative Corp.

Citations: 785 F. Supp. 595; 1991 U.S. Dist. LEXIS 20498; 1991 WL 325262Docket: Civ. A. No. S90-0330(P)

Court: District Court, S.D. Mississippi; May 20, 1991; Federal District Court

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The Court addressed the Defendants' Motion for Summary Judgment concerning a case involving Plaintiff Alan L. Bush, who filed a complaint regarding unpaid medical bills stemming from a group health insurance plan provided by his employer, Bush Office Supply Company, Inc., and underwritten by NN Investors Life Insurance Company, Inc. The case was removed to federal court based on diversity of citizenship and federal preemption of state law. Bush alleged breaches of fiduciary duty, bad faith insurance claims, and violations of public policy related to unpaid claims for a back injury and additional premium charges for dependent coverage. 

The Defendants contended that all claims were preempted by the Employee Retirement Income Security Act (ERISA), which governs employee benefit plans. The Court examined the nature of the health plan and determined it qualified as an "employee welfare benefit plan" under ERISA, given it was fully funded by the employer. Consequently, the Court indicated that it is likely to uphold the preemption argument, potentially leading to the dismissal of Bush's state law claims.

Bush is insured under a plan maintained by his employer, Bush Office Supply Company, Inc., and seeks benefits from this plan. The United States Supreme Court's decision in Pilot Life Insurance Company v. Dedeaux establishes that Bush's common law claims are preempted by ERISA if they relate to an employee welfare benefit plan. Bush's claims are based on state law concerning the alleged improper denial of benefits, but he argues that these claims fall under the ERISA savings clause, which exempts certain state laws that regulate insurance. The Court expresses skepticism regarding the applicability of Iowa and Arizona law, noting that its jurisdiction is based on diversity of citizenship and federal preemption. The Court finds no compelling reason to apply these state laws and believes Bush's claims should be evaluated under Mississippi common law and federal ERISA law.

Furthermore, a Fifth Circuit ruling in Ramirez v. Inter-Continental Hotels reinforces that ERISA preempts state laws providing private rights of action for improper insurance claims handling. The Supreme Court has asserted that ERISA's civil enforcement provisions are the exclusive means for plan participants to address claim processing issues. The Iowa Supreme Court has determined that the state statute cited by Bush is preempted by ERISA. Although there is no Arizona ruling specifically addressing this issue, similar statutes in other states have consistently been found preempted by ERISA. Generally, such state laws do not satisfy the McCarran-Ferguson Act's requirements for the savings clause in ERISA.

The Supreme Court has established that Mississippi’s bad faith law is preempted by ERISA, as determined in Pilot Life. Although Bush's state law claims are preempted, he still has remedies under ERISA to contest the denial of his benefits, arguing that it was arbitrary and capricious. ERISA’s civil enforcement provisions allow plan participants and beneficiaries to sue for benefits owed, enforce rights, or clarify future benefits, and also permit claims for breach of fiduciary duty. The court affirms that despite the Defendants' lack of engagement with Bush's claims, it cannot rule out the validity of his claim for benefits under ERISA. Consequently, while Bush's state law claims are dismissed with prejudice, he may amend his complaint to pursue an ERISA claim. The court declines to impose costs or fees on Bush, recognizing his good faith attempt to extend legal interpretations. Although future claims of this nature may attract sanctions, that situation does not apply here. The court stresses that claims should be clearly framed under ERISA and that both sides should engage in good faith during litigation. The Defendants' Motion for Summary Judgment on state law claims is granted, while their Motion for Costs and Fees is denied, allowing Bush 20 days to amend his complaint.