Pilot Life Insurance Company v. Dedeaux

PETITIONER: Pilot Life Insurance Company
RESPONDENT: Dedeaux
LOCATION: Adult Book Store

DOCKET NO.: 85-1043
DECIDED BY: Rehnquist Court (1986-1987)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 481 US 41 (1987)
ARGUED: Jan 21, 1987
DECIDED: Apr 06, 1987

ADVOCATES:
John E. Nolan, Jr. - on behalf of Petitioner
William C. Walker, Jr. - for respondent
William G. Walker - on behalf of Respondent

Facts of the case

Question

Media for Pilot Life Insurance Company v. Dedeaux

Audio Transcription for Oral Argument - January 21, 1987 in Pilot Life Insurance Company v. Dedeaux

William H. Rehnquist:

Mr. Nolan, you may proceed whenever you are ready.

John E. Nolan, Jr.:

Thank you, Mr. Chief Justice.

May it please the Court:

This case involves the issue of federal preemption of state common law claims of general application in the context of ERISA.

The real significance of the case is whether or not the federal system of regulation of employee benefit plans, as governed by ERISA, will now be largely supplanted by the varying state laws that Congress intended ERISA to replace.

Congress believed, and believes, that there are great advantages to ERISA, that those advantages admittedly do not include jury trials, punitive damages, consequential damages, de novo review of claims, decisions and other features that may be available from time to time under state law.

If such state remedies are available, as the Court of Appeals opinion holds, then ERISA will effectively be nullified for all insured plans.

Now, this is more than 80 percent of the health benefit plans in the United States, the vast majority of them.

We argue that Congress could never have intended this result and expressly provided against it in ERISA.

The focus of this case is an employee benefit plan governed by ERISA in its claims procedure as provided in Section 503 of ERISA.

Pilot Life, the petitioner in this case, is the named fiduciary for that plan as provided in ERISA and as designated in the plan itself, and Pilot Life has full responsibility for all claims decisions and claims administration.

Mr. Dedeaux, the respondent here is a participant in that plan and his claim for benefits was denied by Pilot Life.

When it was denied, Mr. Dedeaux did not avail himself of the statutorily-mandated claims review procedure in ERISA, in Section 503.

Instead, he filed suit in a Federal District Court in Mississippi, diversity jurisdiction.

He claimed tortious breach of contract, fraud, and breach of fiduciary relationship.

He sought disability benefits, consequential damages for mental and emotional distress in the amount of $250,000, and punitive damages in the amount of $500,000.

There was a demand of jury trial, no mention of ERISA in the case.

The District Court granted summary judgment for defendant.

It held that ERISA provided the exclusive remedy.

The Court of Appeals for the 5th Circuit reversed, holding that Mr. Dedeaux's state common law claims of general application were preserved by the so-called insurance saving clause of ERISA which keeps from preemption the state laws that regulate insurance.

Now we say that that decision is wrong.

The Congress in enacting ERISA sought to preempt all of the state law that came within the sphere of the statute, that the saving clause is not applicable to state laws like this because they don't regulate insurance and that, in any event, it was plain that Congress sought to prevent the direct application of any state law to an employee benefit plan.

In cases like this which involve federal preemption of state law, this Court has said, as it did most recently in California Federal v. Garrett, decided last week, that its sole task is to ascertain the intent of Congress, and to do that it looks at the language and the legislative history, and the structure and purpose of the statute.

The key language here is found in Section 514 of ERISA, it's entitled, "Effect on Other Laws".

Section 514(a), is a sweeping, express provision for preemption.

It says that ERISA supersedes any and all state laws that may now, or hereafter, relate to any employee benefit plans.

It's followed in 514(b), by the so-called saving clause, which provides that nothing in ERISA shall exempt any person from any law of any state that regulates insurance.

And that clause is immediately followed and modified by the so-called "deemer clause" which provides that no employee benefit plan shall be deemed to be an insurance company or engaged in insurance for purposes of any state law purporting to regulate insurance.

Now there are two things to notice about the language in 514.

The first is that when Congress uses the term, "state law that regulates insurance", it is using a term of art and in this instance one that has acquired very specific meaning through years of interpretation under the McCarran-Ferguson Act.