2/4/2009 1:59:19 AM
ERISA Preemption of Damages for Withholding Benefits
Although there is little chance, if any at all, that New York’s Timothy’s Law would be broadly preempted by the national ERISA legislation, it is still possible for recovery of damages under the new law to be preempted. In Pilot Life Insurance Co. v. Dedeaux,187 the Court held that state common law causes of action arising from the improper processing of a claim are preempted by federal law.188 Therefore, where a claimant has been injured by improper handling or processing of a claim arising under an employee benefits plan, he or she may be preempted from recovering damages because the suit falls within the preemption of ERISA.189 This case set the precedent to “bar state court damages suits against private-sector employee health plans for injuries due to a plan’s coverage denial or delay.” 190
The Pilot Life court based its decision on two forms of federal law preemption: 1) the well established doctrine that federal law prevails over a directly conflicting state law; and 2) state common law damages remedies relate to ERISA plans. 191
First, the Court stated that because ERISA furnishes a remedy under the statute, which is a federal lawsuit to either recover due benefits or to enforce the terms of the plan, those remedies that are not included were purposely excluded because Congress intended to prohibit them. Therefore, an employee cannot sue for “lost wages, pain and suffering or punitive damages” under a state law, because this state law would be in direct conflict with the express intent of ERISA. 192 193
Second, the Court held that state common law damages affect the way in which benefits disputes are addressed, which is a plan administration responsibility as defined under the ERISA statute. Therefore, this would again put the state common law in direct conflict 194
with the damages
federal could be
sought from institutions other than
the common law insurers, the court
413 F.3d. 897, 912 (8th Cir. 2005).
481 U.S. 41 (1987).
Id. at 57 & n.4.
See id. at 48, 56.
PATRICIA A. BUTLER, STATE COVERAGE INITIATIVES, ERISA PREEMPTION MANUAL FOR
STATE HEALTH POLICYMAKERS 24 (2000).
Id.; Pilot Life, 481 U.S. at 45, 47-48.
BUTLER, supra note 190, at 24; see Pilot Life, 481 U.S. at 54.
BUTLER, supra note 190, at 24.