Background
An employee was injured at work and claimed long-term disability benefits under his employer’s plan. The plan was funded by a group policy from Pilot Life, which decided the claims. Over several years Pilot Life terminated and reinstated his benefits more than once. He sued under Mississippi common law for tortious breach of contract, breach of fiduciary duty and fraud, seeking emotional-distress and punitive damages. He did not plead any ERISA claim.
What the court held
The Court unanimously held that the claims were preempted. They were based on improper processing of a claim under an ERISA plan, so they “relate to” the plan under section 514(a). The insurance saving clause did not rescue the bad-faith claim. To “regulate insurance,” a law must be specifically directed at that industry, and Mississippi’s bad-faith rule grew out of general tort and contract law. More fundamentally, the civil enforcement scheme in section 502(a) was meant to be the exclusive set of remedies for participants and beneficiaries. That scheme lets a claimant recover benefits due, clarify rights, seek equitable relief and, in the court’s discretion, attorney’s fees.
Why it matters
Pilot Life involved disability benefits, but its rule applies to employer-provided group life and AD&D coverage too. When a group life claim is delayed or denied under an ERISA plan, the usual recovery is the benefit itself through an ERISA suit, not punitive or extra-contractual damages under a common-law bad-faith theory. Individually purchased policies, government and church plans, and some other arrangements can fall outside ERISA, so whether the plan is covered is often the first question. Compare Gruenberg v. Aetna for the bad-faith tort on individual policies, and Firestone for how courts review ERISA denials.
Read the opinion
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) (Justia).
Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.