The scope of pre-emption of state laws under the Employee Retirement Income Security Act (ERISA) is so broad that it generally precludes recovery of any damages or remedies beyond the limited remedies enumerated in 29 U.S.C. Section 1132(a).
Thus, the availability of any recompense in a denial of benefits case beyond the benefits claimed, plus interest and fees, is almost unheard of except in situations involving an independent breach of fiduciary duty. A recent ruling from California, however, recognized an exception to the general rule in an alleged tort claim brought against a disability insurance company.
In Kresich v. Metropolitan Life Insurance Co., 2016 WL 1298970 (N.D. Cal. April 4, 2016), a federal court denied an insurance company’s motion to dismiss a claim for intentional infliction of emotional distress raised within the context of a disability insurance dispute.
The plaintiff, John Kresich, was the vice president and controller for Kaiser Permanente who sought disability benefits under his employer-sponsored group disability insurance plan issued by Metropolitan Life Insurance Co.
Kresich asserted he was unable to work on account of severe back pain and resulting treatment with pain medications that caused job-limiting side effects, such as fatigue and cognitive impairment.
According to the assertions made in the complaint, after Kresich submitted his claim, MetLife subjected him to an investigation that constituted “extreme and outrageous conduct with the aim of forcing [him] to drop his claim and return, in pain, to work.”
The plaintiff further alleged that MetLife’s conduct also included “ignoring his correspondence, demanding time extensions, intentionally delaying the scheduling of Independent Medical Examinations (IMEs), intimidating plaintiff to attend multiple IMEs that defendant knew would cause him pain and emotional distress, falsely alleging that plaintiff was lying about and exaggerating his physical disability and purposely misstating and misrepresenting statements made by plaintiff and his treating physicians.”
Although MetLife challenged the intentional infliction of emotional distress (IIED) claim as pre-empted by ERISA, the court disagreed. While recognizing the broad scope of ERISA pre-emption, which includes efforts to impose “alternative enforcement mechanisms” beyond the remedies enumerated in the ERISA statute, the court cited Dishman v. UNUM Life Insurance Company of America, 269 F.3d 974 (9th Cir. 2001), which involved an invasion of privacy that occurred during the course of a disability claim.
Dishman found that if the separately alleged harm did not “depend on or derive from his claim for benefits in any meaningful way,” it is not pre-empted even if the conduct occurs in the course of investigating an ERISA claim. 269 F.3d at 983.
The court observed that Kresich’s complaint made no mention as to whether his benefits had been granted or denied and was thus not based on issues relating to the processing of the claim.
The court also cited other U.S. District Court rulings that supported the plaintiff’s IIED claim. Hence, the court concluded, “Here, there are no allegations regarding defendant’s breach of fiduciary duty in administering the plan or whether plaintiff’s benefits have been approved or denied – plaintiff’s IIED claim stems from independent harassing and oppressive conduct allegations. This claim is wholly independent of any duty or legal remedy under ERISA.”
Cases such as this one are rare. The governing rule is that so long as the claim could result in relief irrespective of the outcome of the ERISA claim, the plaintiff states a viable cause of action and is able to survive a motion to dismiss.
However, if the claim is linked to or intertwined with the underlying ERISA claim such that the success or failure of the claim would depend on a favorable decision on the benefit claim, it will be pre-empted.
Dishman is an excellent example. There, the court concluded that the conduct at issue, which involved an investigator impersonating John Dishman in order to gain access to his financial records, presented a plausible cause of action for invasion of privacy irrespective of whether Dishman ultimately won or lost his disability benefit claim.
Here, the court used the identical reasoning in concluding that the intentional infliction of emotional distress claim was not preempted. However, if Kresich had alleged an entitlement to emotional distress damages solely on account of the claim denial or alleged consequential damages on account of a delay in processing his claim, such as asserting an eviction from his home due to the delay, such a claim would easily have been found pre-empted.
Although Kresich may have won the opening skirmish in this ruling, whether he can ultimately win his claim is yet to be determined.
This article was initially published in the Chicago Daily Law Bulletin.