COMMERCIAL LIFE INSURANCE COMPANY et al., Petitioners, v. THE SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent; JOSEPH V. JULIANO, Real Party in Interest.
No. S003129
Supreme Court of California
Dec. 15, 1988.
47 Cal. 3d 473
Rogers, Joseph, O‘Donnell & Quinn, Joseph W. Rogers, Jr., Susan M. Popik, Joe W. Peel, Terri Sorota, Jack H. Blaine and Phillip E. Stano as Amici Curiae on behalf of Petitioners.
No appearance for Respondent.
Wingert, Grebing, Anello & LaVoy, Michael M. Anello, Thomas O. LaVoy, Robert M. Caietti, Shernoff, Scott & Bidart and Bill Shernoff for Real Party in Interest.
PANELLI, J.---We are asked to decide whether the Employee Retirement Income Security Act of 1974 (ERISA) (
Joseph V. Juliano‘s employer sponsored an employee benefit plan insured by Commercial Life Insurance Company and Automatic Data Processing, Inc. (collectively referred to as Commercial). It is undisputed that the plan was the type regulated by ERISA. The benefits under the plan included group term life insurance, accidental death and dismemberment insurance, major medical expense benefits, prescription drug and medicine benefits, and dental care benefits.
Juliano suffered from diabetes, which adversely affected his eyesight. Doctors recommended surgery. Following the surgery, Juliano forwarded his medical bills to Commercial. Commercial refused payment, claiming that the treatment was not covered by the plan because it arose from a preexisting condition.
Juliano brought suit against Commercial. The complaint alleged eight common law causes of action for bad faith, waiver, and estoppel. The complaint also alleged a single statutory cause of action for bad faith under
Commercial filed a petition for writ of mandate and/or prohibition in the Court of Appeal. The Court of Appeal summarily denied the petition. We granted review and issued an alternative writ.
In his return to the writ, Juliano argues that
I
ERISA comprehensively regulates employee pension and welfare plans. (Metropolitan Life Ins. Co. v. Massachusetts (1985) 471 U.S. 724, 732 [85 L.Ed.2d 728, 735-736, 105 S.Ct. 2380];
ERISA‘s civil remedies are comprehensive in their scope. A participant or beneficiary of an ERISA plan may bring a civil action for monetary relief from an administrator‘s failure to provide requested information, or to recover benefits or enforce present or future rights under the terms of the plan. (
In addition, ERISA contains detailed provisions for claims enforcement and procedure. (
ERISA also contains a broad preemption provision. The “preemption clause” provides: “Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.” (
II
Our resolution of this case is aided by previous decisions of the United States Supreme Court. In Metropolitan Life Ins. Co. v. Massachusetts, supra, 471 U.S. 724, the Supreme Court addressed the question whether ERISA preempted a Massachusetts statute which required certain minimum mental-health-care benefits to be included in employee health-care plans. The Massachusetts statute regulated the substantive terms of insurance contracts by requiring health insurance policies to provide, among other things,
Noting that there is a presumption against preemption (Metropolitan Life, supra, 471 U.S. at p. 741 [85 L.Ed.2d at p. 741]), the court concluded that the Massachusetts statute was saved from preemption because it regulated insurance within the meaning of ERISA‘s saving clause.
The court applied the following analysis to determine whether the Massachusetts statute regulated insurance. Initially, the court took a “common sense” view of the matter, concluding that the Massachusetts statute regulated insurance because it controlled the substantive terms of insurance policies. (Metropolitan Life, supra, 471 U.S. at p. 740 [85 L.Ed.2d at p. 741].)
Next, the court applied three criteria adopted by case law to define the “business of insurance” under the McCarran-Ferguson Act (
The United States Supreme Court found that all three McCarran-Ferguson factors were satisfied. Addressing the first factor, the court held that the Massachusetts statute “obviously” effected the spreading of risk, because the statute “was intended to effectuate the legislative judgment that the risk of mental-health care should be shared.” (Metropolitan Life, supra, 471 U.S. at p. 743 [85 L.Ed.2d at p. 742].) Turning to the second factor, the court held that “mandated-benefit laws directly regulate an integral part of the relationship between the insurer and the policyholder by limiting the type of insurance that an insurer may sell to the policyholder.” (
The Supreme Court had a further opportunity to determine the scope of ERISA preemption in Pilot Life Ins. Co. v. Dedeaux, supra, 481 U.S. 41 [95
The Supreme Court reversed the court of appeals. Stating that “the express pre-emption provisions of ERISA are deliberately expansive, and designed to ‘establish pension plan regulation as exclusively a federal concern‘” (Pilot Life, supra, 481 U.S. at pp. 45-46 [95 L.Ed.2d at p. 46, 107 S.Ct. at p. 1552]), the Supreme Court concluded that Dedeaux‘s claims were preempted. Although the Supreme Court applied the Metropolitan Life analysis to support its conclusion, it relied primarily on the “clear expression of congressional intent that ERISA‘s civil enforcement scheme be exclusive” to find preemption. (Id. at p. 57 [95 L.Ed.2d at p. 54, 107 S.Ct. at p. 1558].)
Proceeding first with the Metropolitan Life analysis, the court applied the “common-sense view” to find that the Mississippi common law of bad faith could not be construed as a law that regulated insurance within the meaning of the saving clause. “A common-sense view of the word ‘regulates’ would lead to the conclusion that in order to regulate insurance, a law must not just have an impact on the insurance industry, but be specifically directed toward that industry.” (Pilot Life, supra, 481 U.S. at p. 50 [95 L.Ed.2d at p. 49, 107 S.Ct. at p. 1554].)
The court next applied the McCarran-Ferguson factors. Regarding the first factor---whether the practice has the effect of spreading policyholder risk---the court determined, without explanation, that unlike the mandated-benefits law in Metropolitan Life, the Mississippi common law did not effect a spreading of policyholder risk. (Pilot Life, supra, 481 U.S. at p. 50 [95 L.Ed.2d at p. 49, 107 S.Ct. at p. 1554].) Addressing the second factor---whether the practice is an integral part of the policy relationship between the insurer and the insured---the court stated that the Mississippi common law could perhaps be considered a part of the insurer-insured relationship, but that the connection was attenuated at best. “In contrast to the
The court easily distinguished its Pilot Life holding from the holding in Metropolitan Life. (Pilot Life, supra, 481 U.S. at p. 57 [95 L.Ed.2d at p. 54, 107 S.Ct. at p. 1558].) Metropolitan Life did not involve a state law that conflicted with a substantive provision of ERISA, because ERISA---unlike the Massachusetts law in Metropolitan Life---“does not regulate the substantive content of welfare-benefit plans.” (Metropolitan Life, supra, 471 U.S. at p. 732 [85 L.Ed.2d at p. 735].) However, in Pilot Life the common law remedies asserted by Dedeaux conflicted with ERISA‘s remedies. Therefore, the court in Pilot Life went on to determine whether Congress intended the ERISA remedies to be exclusive.
The Supreme Court concluded that Congress clearly expressed an intent that the civil enforcement provisions of ERISA be the exclusive vehicle for actions by ERISA-plan participants and beneficiaries asserting improper processing of a claim for benefits. (Pilot Life, supra, 481 U.S. at pp. 51-52 [95 L.Ed.2d at p. 50, 107 S.Ct. at p. 1555].) The court‘s determination of exclusivity is supported by the language and structure of ERISA‘s civil enforcement provisions and by the legislative history of the act.4 (
Metropolitan Life and Pilot Life provide helpful guidance in this case, but the Supreme Court has not addressed the precise issue posed here. A number of other courts, however, have faced this issue.
Roberson v. Equitable Life Assur. Soc. of U.S. (C.D.Cal. 1987) 661 F.Supp. 416 involved facts almost identical to those at bar. Plaintiff Donald Roberson brought an action in state court against The Equitable Life Assurance Society of the United States (Equitable), alleging that Equitable failed to pay all benefits due under an ERISA-regulated employee benefit plan. Roberson‘s complaint stated seven common law causes of action. The complaint also stated a single statutory cause of action under
The district court applied the analysis set forth in Metropolitan Life and Pilot Life. The court initially concluded that “common sense” suggested that
The court determined, however, that
Finally, the court in Roberson followed Pilot Life‘s holding that ERISA‘s remedies are exclusive. In Pilot Life, “because the civil enforcement provisions of ERISA were intended to provide the exclusive remedies for mishandling of claims, the Mississippi law was in conflict with ERISA and was therefore pre-empted. [¶] The same potential for conflict with ERISA‘s civil enforcement provisions exists with respect to California Insurance Code Section 790.03(h). . . . Section 790.03(h) . . . provides that either an insured or third-party claimant may sue an insurer for engaging in unfair claims settlement practices. . . . Such provisions reach impermissibly beyond the scope of ERISA. See, e.g. [Massachusetts Mut. Life Ins. Co. v. Russell (1985) 473 U.S. 134, 145-148] (holding that ERISA does not grant a private right of action for delay in processing benefit claims).” (Roberson, supra, 661 F.Supp. at p. 423, original italics.) The court concluded: “Thus, even assuming that section 790.03(h) regulates insurance and is therefore within the scope of the saving clause, it must be pre-empted for infringing on the same exclusive civil remedy provisions that were dispositive in Pilot Life.” (Id. at p. 424, fn. omitted.)
In Kanne v. Connecticut General Life Ins. Co. (9th Cir. 1988) 859 F.2d 96, the Ninth Circuit Court of Appeals began where Roberson left off: It found the conclusion inescapable that
The Kanne court rejected the plaintiffs’ argument for limiting Pilot Life‘s preemption holding to only those state laws which do not fall within the savings clause: “To accept this argument, . . . we would have to ignore the second half of Pilot Life, 107 S.Ct. 1555-58, in which the Court made abundantly clear that its preemption holding was equally based on its acceptance of the Solicitor General‘s view that ‘Congress clearly expressed an
III
Our reading of Pilot Life accords with that of the Ninth Circuit in Kanne. We are persuaded that
In Pilot Life, the Supreme Court held that Congress intended the remedies set forth in ERISA to be the exclusive remedies available to ERISA-plan claimants. (Pilot Life, supra, 481 U.S. at pp. 50-56 [95 L.Ed.2d at pp. 50-53, 107 S.Ct. at pp. 1555-1557].) However,
We find no merit in the argument that if there is any conflict between ERISA remedies and
IV
We conclude that ERISA preempts private causes of action under
Although our decision in this case prevents Juliano from stating a cause of action for breach of statutory duties under
Let a peremptory writ of mandate issue directing the Superior Court of San Diego County to vacate its order denying defendants’ motion for judgment on the pleadings as to plaintiff‘s fifth count for breach of statutory duties under
Lucas, C. J., Arguelles, J., Eagleson, J., and Kaufman, J., concurred.
MOSK, J.---I dissent. I strongly disagree not only with the majority‘s result but also with their reasoning.
I.
With due deference to the United States Supreme Court, I doubt that it gives the bench and bar helpful guidance when it relies on “common sense” as authority for a decision. Nevertheless the high court has done so in Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41 [95 L.Ed.2d 39, 107 S.Ct. 1549] and the majority herein hold that conclusion to be controlling.
In Pilot Life, the court finds a “broad common-sense meaning” (id. at p. 47 [95 L.Ed.2d at p. 48, 107 S.Ct. at p. 1553]), a “common-sense view” (
In reliance on Pilot Life, the majority seem to assume that there is some pandemic “common sense” that can guide us in the place of reason and authority. It would indeed be comforting if that were so. But unfortunately it is not: “common sense” is in the eye, or mind, of the beholder.
United States Supreme Court cases have used the term “common sense” in a wide variety of contexts. Indeed, a cursory count indicates the expression can be found in more than 500 cases over the past 4 decades alone.
As a review of the foregoing cases and others like them establishes beyond any dispute, “common sense” is a convenient term. But it is also practically devoid of content.
For instance, in attempting to justify the holding of the court in Peak v. United States (1957) 353 U.S. 43, 46 [1 L.Ed.2d 631, 635, 77 S.Ct. 613], on behalf of the majority Justice Douglas stated, “That seems to us to be the common sense of the matter; and common sense often makes good law.” But Justice Harlan, writing for himself and two others in dissent, drily observed, “Thus is bad law made.” (Id. at p. 52 [1 L.Ed.2d at p. 638] [dis. opn. of Harlan, J.].) Can it be said that by disagreeing with the majority on a point of law Justice Harlan and his colleagues were guilty of not using “common sense“? I think not.
In Roschen v. Ward (1929) 279 U.S. 337, 339 [73 L.Ed.722, 728, 49 S.Ct. 336], Justice Holmes declared, “there is no canon against using common sense in construing laws as saying what they obviously mean.” Sounds simple. But as Justice Story noted in Barlow v. United States (1833) 7 Pet. (32 U.S.) 404, 411 [8 L.Ed. 728, 731], “There is scarcely any law which does
In The Kronprinzessin Cecilie (1917) 244 U.S. 12, Justice Holmes referred to what is apparently a specialized form of “common sense“: “Business contracts must be construed with business sense . . .” (id. at p. 24 [61 L.Ed. at p. 966].) Apparently that did not satisfy the entire court, for Justices Pitney and Clarke dissented. What kind of sense they preferred was not indicated.
Members of the high court have not been altogether unmindful of the problems associated with “common sense.” In Jacksonville Bulk Terminals, Inc. v. International Longshoremen‘s Association (1982) 457 U.S. 702 [73 L.Ed.2d 327, 102 S.Ct. 2672], one of the parties argued that a “common sense” interpretation of a statute should be applied. Said Chief Justice Burger in dissent, “the ‘common sense’ meaning of a term is not controlling when Congress has provided . . . an explicit definition of a labor dispute. ‘Common sense’ and legislative history ought not to change the meaning of unambiguous words of a statute.” (id. at p. 727 [73 L.Ed.2d at p. 346] [dis. opn. of Burger, C. J.].)
In In re Primus (1978) 436 U.S. 412 [56 L.Ed.2d 417, 98 S.Ct. 1893], then Justice Rehnquist wrote in dissent that the majority‘s “common-sense, distinction [between speech proposing a commercial transaction and other varieties of speech] is subject to manipulation by clever practitioners.” (id. at pp. 441-442 [56 L.Ed.2d at p. 441] [dis. opn. of Rehnquist, J.].)
In short, I believe that the implied invocation of “common sense” as authority for an opinion of this court is insufficient and as such cannot be helpful to the parties in this case or to the bench and bar in future matters. As Justice Rehnquist explained, the term is “subject to manipulation” and therefore lacks substance.
II.
Real party in interest Joseph V. Juliano (hereinafter Juliano) brought the underlying action for damages against petitioners Commercial Life Insurance Company and Automatic Data Processing, Inc. (hereinafter collectively Commercial Life). In his complaint Juliano alleged in substance that Commercial Life had issued a policy of insurance, sponsored by his employer, establishing an employee welfare benefit plan that provided group term life insurance, accidental death and dismemberment insurance, and benefits
The majority hold that the Employee Retirement Income Security Act of 1974 (hereinafter ERISA) (88 Stats. 829, as amended,
ERISA regulates, among other matters, “employee welfare benefit plans” that, “through the purchase of insurance or otherwise,” provide “medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death, or unemployment . . . .” (ERISA § 3(1),
It is plain that ERISA regulates the plan in which Juliano participated. As stated above, Juliano‘s employer sponsored a plan providing a variety of insurance coverage and other benefits for its employees.
It is also plain that
But it is plainer still that
Thus, ERISA does not preempt
There is a growing and ominous trend toward federal preemption of issues that belong within the sphere of control by the individual states. And these inroads into traditional federalism are taking place despite their inconsistency with pious rhetoric emanating from Washington about returning government to the people at state and local levels.
. . .
The first Californian to sit on the United States Supreme Court, Stephen Field, saw the problem clearly as long ago as the period immediately following the Civil War. In Ex parte Virginia (1880) 100 U.S. 339, 357 [25 L.Ed. 676, 683], he wrote: “Now, if we look into the Constitution, we shall not find a single word, from its opening to its concluding line, nor in any of the amendments in force before the close of the civil war, nor in those subsequently adopted, which authorizes any interference by Congress with the States in the administration of their governments, and the enforcement of their laws with respect to any matter over which jurisdiction was not surrendered to the United States. The design of its framers was not to destroy the States, but to form a more perfect union between them, and, whilst creating a central government for certain great purposes, to leave to the States in all matters the jurisdiction of which was not surrendered the functions essential to separate and independent existence.”
Justice Field took the same position in Virginia v. Rives (1880) 100 U.S. 313, 337 [25 L.Ed. 667, 676]: “It is difficult to believe that the wise men who sat in the convention which framed the Constitution and advocated its adoption ever contemplated the possibility of a State being required to assert its authority over offenders against its laws in other tribunals than those of its own creation, and least of all in an inferior tribunal of the new government. I do not think I am going too far in asserting that had it been supposed a power so dangerous to the independence of the States, and so calculated to humiliate and degrade them, lurked in any of the provisions of the Constitution, that instrument would never have been adopted.”
In the instant case we have a state regulatory statute at issue. In the Sinking-Fund Cases (1879) 99 U.S. 700 [25 L.Ed. 496, 25 L.Ed. 504], a state-created corporation was involved. On that subject Justice Field was emphatic: “In a word, the law of the State undertakes to control and manage the corporation, in all particulars required for the service, convenience, and protection of the public; and can there be a doubt in the mind of any one that over its own creations the State has, within its own territory, as against the United States, the superior authority? . . . Under the Constitution the management of local affairs is left chiefly to the States, and it never entered into the conception of its framers that under it the creations of the
In our case the law regulating insurance was brought into existence by the state. Under these circumstances it could not have been contemplated, within constitutional limitations, that enforcement of this state creation should pass exclusively to Washington.
IV.
In conclusion, I would hold that Juliano‘s
Broussard, J., concurred.
Notes
“A civil action may be brought---
“(1) by a participant or beneficiary---
“(A) for the relief provided for in subsection (c) of this section [concerning requests to the administrator for information], or
“(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;
“(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title [for breach of fiduciary duty];
“(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan;
“(4) by the Secretary, or by a participant, or beneficiary for appropriate relief in the case of a violation of 1025(c) of this title [concerning information to be furnished participants];
“(5) except as otherwise provided in subsection (b) of this section, by the Secretary (A) to enjoin any act or practice which violates any provision of this subchapter, or (B) to obtain other appropriate equitable relief (i) to redress such violation or (ii) to enforce any provision of this subchapter; or
“(6) by the Secretary to collect any civil penalty under subsection (i) of this section [for breach of fiduciary duty].”
In Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880 [153 Cal.Rptr. 842, 592 P.2d 329], we held that private litigants could sue to enforce certain provisions of
Although some federal courts have determined that section 790.03, subdivision (h) is not preempted by ERISA, those cases were decided prior to Metropolitan Life and Pilot Life and did not have the benefit of the Supreme Court‘s guidance on the issue. (See Everole v. Metropolitan Life Ins. Co., Inc. (C.D.Cal. 1980) 500 F.Supp. 1162; Presti v. Connecticut General Life Ins. Co., Inc. (N.D.Cal. 1985) 605 F.Supp. 163.)
We are aware that other decisions have been rendered on both sides of the issue presented. Because those decisions are unpublished, they are not discussed here.