Mary Fontaine v. Metropolitan Life Insurance Co
800 F.3d 883
| 7th Cir. | 2015Background
- Mary C. Fontaine, a former Mayer Brown partner, paid for and was covered by a MetLife long‑term disability policy issued in Illinois; she retired in 2011 and claimed disability benefits based on vision problems.
- MetLife denied benefits and upheld the denial on internal appeal; Fontaine sued under ERISA § 502(a)(1)(B) to recover benefits.
- The policy contained a discretionary clause vesting MetLife with authority and prescribing deferential judicial review ("arbitrary and capricious").
- Illinois regulation 50 Ill. Admin. Code § 2001.3 bars policy provisions that "purport to reserve discretion" to a health carrier to interpret contracts or provide interpretation/review standards inconsistent with Illinois law.
- The district court applied § 2001.3, reviewed the denial de novo, found Fontaine entitled to benefits, and entered judgment for Fontaine; MetLife appealed arguing § 2001.3 is preempted by ERISA and, alternatively, that the clause still controls.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Illinois § 2001.3 is saved from ERISA preemption as a law that "regulates insurance" | § 2001.3 regulates insurers and materially affects insurer–insured risk‑pooling; thus it falls within ERISA's saving clause | § 2001.3 is not specifically directed at insurers (it affects plan sponsors/plan documents) and therefore is preempted | Held: § 2001.3 is a law "regulating insurance" and is not preempted |
| Whether § 2001.3 substantially affects risk pooling between insurer and insured | Prohibition of discretionary clauses narrows permissible bargains and changes conditions under which insurers assume risk | Prohibition is too narrow to affect class coverage, create new procedures, or materially alter risk pooling | Held: Prohibition substantially affects risk pooling (analogous to Miller and Ward) |
| Whether § 2001.3 conflicts with ERISA's civil enforcement scheme (Aetna v. Davila preemption) | § 2001.3 does not create or augment causes of action; it restores ERISA's default de novo review and therefore does not conflict with ERISA remedies | § 2001.3 intrudes on ERISA's coverage of plan‑based standards and would frustrate uniform federal enforcement | Held: § 2001.3 does not duplicate, supplement, or supplant ERISA remedies and is not preempted by Davila logic |
| Whether § 2001.3 applies here as a matter of scope/interpretation | Regulation applies to any policy or document that purports to reserve discretion to a health carrier, regardless of whether inserted by employer or insurer | MetLife: clause is in an ERISA plan document, not an insurance policy; employer is the issuer; delegation, not reservation, of discretion; clause addresses benefit determinations not contract interpretation | Held: § 2001.3 covers this policy and clause—distinctions between plan vs. policy, issuer vs. delegator, and benefit determination vs. contract interpretation are not dispositive |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (defining de novo default and discretionary‑authority exception)
- Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329 (two‑part test for laws that "regulate insurance")
- UNUM Life Ins. Co. v. Ward, 526 U.S. 358 (rejecting artificial plan/policy distinction for saving‑clause analysis)
- Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (state regulatory scheme that changes review process but does not create new ERISA remedies is saved)
- Aetna Health Inc. v. Davila, 542 U.S. 200 (state causes of action that duplicate or supplement ERISA remedies are preempted)
- Conkright v. Frommert, 559 U.S. 506 (deference to administrators where discretionary authority exists; not a preemption decision)
- Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir.: state ban on discretionary clauses not preempted)
- American Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir.: similar holding that prohibition of discretionary clauses survives ERISA preemption)
- Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (ERISA preemption principles for state remedies)
- Chamber of Commerce v. Whiting, 563 U.S. 582 (caution on implied preemption where Congress provided express preemption framework)