NO.: 01-10829-GG
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
BILL GILBERT,
Plaintiff-Appellee/Cross-Appellant,
vs.
ALTA HEALTH & LIFE INSURANCE CO.
and GREAT-WEST LIFE & ANNUITY INS.,
Defendants-Appellants/Cross-Appellee.
______________________________________________________
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
DISTRICT COURT NO.: CV-00-J-1703-J
_________________________
BRIEF OF UNITED POLICYHOLDERS AS AMICUS CURIAE
IN SUPPORT OF PETITION FOR REHEARING EN BANC
_________________________
Arnold R. Levinson, Esq.
Terrence J. Coleman, Esq.
Pillsbury & Levinson, LLP
One Embarcadero Center, 38th Floor
San Francisco, CA 94111
Tel. 415-433-8000
Fax 415-433-4816
Amy Bach, Esq.
Bach Law Office
42 Miller Avenue
Mill Valley, CA 94941
Tel. 415-387-7627
Fax 415-381-5572
Attorneys for Amicus Curiae
STATEMENT OF COUNSEL
United Policyholders is a national, not-for-profit educational organization
whose mission is to educate the public, legislators and the courts on insurance
issues and consume rights, and to assist policyholders in securing prompt and fair
insurance settlements. United Policyholders has filed amicus briefs in many cases
throughout the country. Its amicus brief was cited with approval by the Supreme
Court in Humana Inc. v. Forsyth (1999) 525 U.S. 299, 314.
The resolution of the issue presented in this case is of great important to
United Policyholders and its members because of its potential application to the
rights of individual insured throughout the country to obtain adequate redress for
the wrongful denial of insurance benefits. We expect that other trial and appellate
courts which are presented the ERISA preemption issue in question here, will
carefully consider the views of the 11th Circuit in this case.
i
TABLE OF CONTENTS
CERTIFICATE OF INTERESTED PERSONS...................................................C-1
STATEMENT OF COUNSEL................................................................................ i
TABLE OF CONTENTS ....................................................................................... ii
TABLE OF AUTHORITIES................................................................................. iii
I.
SUMMARY OF ISSUES AND ARGUMENT .............................................1
II.
ARGUMENT................................................................................................1
III.
CONCLUSION.............................................................................................8
CERTIFICATE OF SERVICE.............................................................................. --
ii
TABLE OF AUTHORITIES
Cases
Belasco v. W.K.P. Wilson & Sons, Inc. 833 F. 2d 277 (11th Cir. 1987) ....................1
Chamblin v. Reliance Standard Life Ins. Co., -- F. Supp. 2d --, 2001
WL 1250365 ** 7, 11 (N.D. Cal. 2001) ..............................................................3
Coffman v. Metropolitan Life Ins. Co., 138 F.Supp.2d 764, 767 (S.D.
W.Va. 2001) ........................................................................................................3
Corporate Health Ins. Inc. v. Texas Dep’t of Ins., 215 F.3d 526 (5th
Cir. 2000), further opinion on pet. for reh’g 220 F.3d 641 (5th Cir.
2000), pet. for cert. filed sub. nom........................................................................1
Humana, Inc. v. Forsyth, 525 U.S. 299, 306 (1999) ..............................................7*
Kanne v. Connecticut General Life Ins. Co., 867 F.2d 489, 493-94
(9th Cir. 1988) cert. denied, 492 U.S. 906 (1989) ................................................1
Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985) ....................1, 6*
Montemayor v. Corporate Health Ins. Inc., 69 U.S.L.W. 3317 (Oct.
24, 2000)(No. 00-665) ........................................................................................1
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987).........................................passim
Rush Prudential HMO Inc. v. Moran, 230 F. 3d 959 (7th Cir. 2000),
cert granted, 150 L. Ed. 2d 749 (2001) ...............................................................1
SEC v. National Securities, Inc., 393 U.S. 453, 460 (1969).....................................6
UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 377 (1999) ................... passim*
Statutes
28 U.S.C. § 1292(b) ................................................................................................3
iii
Regulations
Alabama Code §27-12-24(2001) .............................................................................5
iv
I.
SUMMARY OF ISSUES AND ARGUMENT
The panel opinion in this case addresses the scope of ERISA preemption
after the decision in UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358 (1999). It
is an issue which has been repeatedly addressed by federal district courts
throughout the country with widely varying results. This is the first federal
appellate decision to address the matter at length since Ward.1 Unfortunately, the
decision is deeply flawed and stands in direct conflict with numerous Supreme
Court authorities.
II.
ARGUMENT
ERISA’s saving clause broadly saves from preemption “any” laws which
regulate insurance. Ward, 526 U.S. at 363; Metropolitan Life Ins. Co. v.
Massachusetts, 471 U.S. 724, 740-741 (1985). After the Supreme Court’s holding
in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) a number of Courts believed
that all state bad faith insurance claims were necessarily preempted. See e.g.
Belasco v. W.K.P. Wilson & Sons, Inc. 833 F. 2d 277 (11th Cir. 1987); Kanne v.
Connecticut General Life Ins. Co., 867 F.2d 489, 493-94 (9th Cir. 1988) cert.
denied, 492 U.S. 906 (1989).
1
Two other federal appellate decision have touched on the question, but not addressed them in detail. Moreover,
both of these cases are not pending before the Supreme Court. Rush Prudential HMO Inc. v. Moran, 230 F. 3d 959
(7th Cir. 2000), cert granted, 150 L. Ed. 2d 749 (2001); Corporate Health Ins. Inc. v. Texas Dep’t of Ins., 215 F.3d
526 (5th Cir. 2000), further opinion on pet. for reh’g 220 F.3d 641 (5th Cir. 2000), pet. for cert. filed sub. nom.
Montemayor v. Corporate Health Ins. Inc., 69 U.S.L.W. 3317 (Oct. 24, 2000)(No. 00-665). The Supreme Court
is apparently holding the Corporate Health matter pending its decision in Rush.
1
However, in Ward, the Court addressed whether California’s notice
prejudice law regulated insurance and was therefore saved from preemption. The
insurer pursued the same argument employed by the panel decision in Gilbert – i.e.
that under the reasoning of Pilot Life, the notice prejudice rule had its roots in the
common law and therefor did not regulate insurance. The Supreme Court found
this analysis incorrect. While the notice prejudice rule clearly grew out of general
principles,
it is an application of a special order, a rule mandatory for insurance
contracts, not a principle a court may pliably employ when the
circumstances so warrant. Tellingly, UNUM has identified no
[applicable] California authority outside the insurance-specific noticeprejudice context. . . . [The notice prejudice rule is] grounded in
policy concerns specific to the insurance industry. [cite omitted] That
grounding is key to our decision.
Ward, 526 U.S. at 371-2.
In Ward, the United States Solicitor General also argued that the sweeping
language in Pilot Life regarding the exclusivity of ERISA’s remedial scheme,
should be refined because the circuit court opinions following Pilot Life were in
significant tension with the express language of the statute. Ward, 526 U.S. 3772.
The Supreme Court determined that it did not need to reach the issue in Ward but
explained that this language in Pilot Life was only issued “in the context of a law”
which was not saved from preemption. 526 U.S. 377 n.7. Moreover, it declared
2
The Solicitor General's brief is available on Westlaw at 1998 WL 839957.
2
the question of whether ERISA’s remedies preempted even laws which were saved
from preemption to be an open question. 526 U.S. 377.
Thereafter, numerous courts have disagreed over the question of
whether state bad faith claims are saved from preemption after Ward. See
Statement of Counsel in Support of Petition for Rehearing En Banc. Even
some of the Courts which have found such claims preempted have suggested
that the law may be otherwise. See Chamblin v. Reliance Standard Life Ins.
Co., -- F. Supp. 2d --, 2001 WL 1250365 ** 7, 11 (N.D. Cal. 2001)3 (“The
Ward case represents a sea change, not only on the preemption issue but also
on the question of whether ERISA provides the exclusive remedies for
plaintiff policy holders”; however court bound by pre-existing controlling
circuit authority); Coffman v. Metropolitan Life Ins. Co., 138 F.Supp.2d 764,
767 (S.D. W.Va. 2001) (“Arguably, state law claims arising from the violation
of specific insurance regulations would fit within the ambit of the savings
clause exception to preemption, particularly in light of the recent Supreme
Court opinion in [Ward]. . . . [However,] . . . it is not the office of this Court to
alter the force and effect of settled circuit law.”).
The Gilbert decision decides that the Alabama law is preempted because it
does not regulate insurance. To determine whether a law regulates insurance, the
3
On December 5, 2001, the district court certified the question to the 9th Circuit pursuant to 28 U.S.C. § 1292(b).
3
Court employs its “common sense” and then checks this against the McCarranFerguson guideposts. The Gilbert Court, however, did not employ common sense.
It merely held that the law was the same as the law in Pilot Life and therefore, did
not regulate insurance. But the law here is clearly distinct from that in Pilot Life.
It is a statute limited solely to insurance claims. The Pilot Life law was a common
law claim of general application not limited to the insurance industry. This makes
all the difference.
The Circuit panel held, in short, that an Alabama statute which is directed
solely to the regulation of insurance policies does not “regulate insurance” within
the meaning of the saving clause because its “roots” are in the common law. Thus,
according to the Gilbert opinion, Pilot Life means that we must now examine the
legislative history of any statute claimed to be saved from preemption under
ERISA in order to determine whether the law is, in fact, saved. Indeed, the
decision appears to have treated Gilbert’s claims as if the statute never existed,
assuming instead that his claims were common law claims.
The statute in question here provides, “No insurer shall, without just cause,
refuse to pay or settle claims arising under coverages provided by its policies in
this state. . . .” Thus, the statute on its face regulates insurance and only insurance.
Applying “common sense,” the Gilbert panel concluded that the statute does not
regulate insurance. This conclusion, however, does not make any sense. If this
4
statute does not regulate insurance, what does it regulate? As it is indisputably
directed solely at the insurance industry, if it does not regulate insurance, it is a
statute that regulates nothing.
Indeed, if “common sense” dictates that a statute such as this, which begins
“No insurer shall . . . ”, does not regulate insurance, we submit that the use of
“common sense” as the litmus test for whether a law regulates insurance provides
parties and courts with no meaningful guidance whatsoever. If asked, “Does
Alabama Code §27-12-24(2001) regulate insurance?” it is hard to imagine that an
overwhelming percentage of legislators and ordinary citizens would not
immediately respond with a “yes.” Common sense tells us that when a state
legislature passes a law prohibiting specific insurer conduct and only insurer
conduct, that the legislature intended to regulate insurance companies.
Gilbert states that in evaluating the common sense analysis, the Court must
look to whether the law “sets forth ‘a rule mandatory for insurance contracts, not a
principle a court may pliably employ when the circumstances so warrant.’” Yet
the statute on its face is a mandatory rule only for insurance contracts.
Nonetheless, the decision held that there was no distinction between the statutory
Alabama law and the clearly distinct common law of general application, which
was before this Court in Pilot Life.
5
Further, in addressing the McCarran-Ferguson factors, the Court completely
ignored the Supreme Court’s examination of those factors in UNUM Life Ins. Co.
of Am. v. Ward, 526 U.S. 358 (1999). In applying these factors, there is no
significant difference between the notice prejudice rule in Ward and the Alabama
statute here. The Court denies that the statute is integral to the relationship
between insurer and insured because it is “attenuated” at best. Yet, the statute is
mandatory and is required in all insurance contracts. Similarly, the Court denied
that the law was limited to insurers when the statute, on its face, applies only to
insurers.
Moreover, the Court completely ignored the Supreme Court’s clear
statements that laws which relate to the enforcement of insurance claims and those
related to claims processing are the very type of statutes which are commonly
understood to regulate insurance.
Congress was concerned [in the McCarran-Ferguson Act] with the
type of state regulation that centers around the contract of
insurance . . . The relationship between insurer and insured, the type
of policy which could be issued, its reliability, its interpretation, and
enforcement -- these were the core of the 'business of insurance.'
[T]he focus [of the statutory term] was on the relationship between the
insurance company and the policyholder. Statutes aimed at protecting
or regulating this relationship, directly or indirectly, are laws
regulating the 'business of insurance.'
SEC v. National Securities, Inc., 393 U.S. 453, 460 (1969) (emphasis added).
Metropolitan Life, 471 U.S. at 744 (emphasis added). Accord, Ward, 526 U.S. at
6
374 n.5 (stating that “laws regulating claims practices . . . [are included] in
catalogue of state laws that regulate insurance.”).
That state remedial statutes are squarely protected by McCarran-Ferguson
was underscored again in Humana, Inc. v. Forsyth, 525 U.S. 299 (1999). Therein,
insureds under certain health insurance contracts brought suit under RICO
claiming that the insurers were secretly obtaining kickbacks from hospitals in
violation of the health insurance agreements. The applicable Nevada state laws
permitted the insured to sue the insurer in tort for violation of the covenant of good
faith and fair dealing and for violation of the state’s Unfair Insurance Practices
Act. 525 U.S. at 312. The insurers sought to prevent the application of the federal
RICO claim on the grounds that McCarran-Ferguson precluded the application of
federal law in the face of these state-law remedies. The Supreme Court found that
the RICO claim did not impair the state laws and therefore was not barred by
McCarran-Ferguson.
Most significant is the fact that the Supreme Court less than three years ago
specifically considered Nevada’s state insurance remedies to be protected by
McCarran-Ferguson. Indeed, the conclusion was apparently so obvious to a
unanimous Supreme Court that its opinion reveals no inquiry or analysis as to
whether the state insurance remedial laws satisfied the McCarran – Ferguson
guideposts.
7
III.
CONCLUSION
The panel decision is in direct conflict with all of these authorities.
Respectfully submitted,
Dated: January 18, 2002
PILLSBURY & LEVINSON, LLP
By:_________________________
Arnold R. Levinson
Attorney of Record for
Amicus United Policyholders
8