Pre-Emption Under ERISA - Can You File a Lawsuit in State Court or Does it Have to be Federal Court?

What is Pre-Emption?

Pre-emption is basically when a federal law overrides and trumps a state law.  In the context of the Employee Retirement Income Security Act of 1974 (ERISA), pre-emption basically means that if you file a lawsuit that falls within the purview of ERISA, then it has to be filed in federal court instead of state court.  If the lawsuit is filed in state court and the claims fall within the purview of ERISA, then most likely the Defendant in that lawsuit (most ERISA Defendants are insurance companies) will file a motion to "remove" the lawsuit from state court and put it in its proper place of federal court.  

Most Plaintiffs in ERISA lawsuits are people who have had their insurance benefits or claim denied for an insurance benefit that was part of an employee benefit package.  Most plaintiffs would ideally like their claim for insurance claim denials to be brought in state court.  This is because state laws, especially Ohio (where the attorneys at Harris & Engler practice), are much more favorable to individuals than federal law.  In Ohio, state law for insurance policies requires that anytime there is a confusing or ambiguous provision in the insurance policy, then it has to be interpreted in favor of the insured (and against the drafter).  This makes it a lot easier for folks who have had their insurance claims denied to win a lawsuit against the insurance company.

This is contrasted to the federal ERISA law, which through the years of various important federal court decisions has come to be very much in favor of insurance companies.  Whereas under state law when there is an ambiguous term in an insurance policy, and the insurance company denies your claim based on that confusing term, the person has a good shot of beating the insurance company in court.  In federal court, under ERISA, all the insurance company has to do is do their best to enforce the terms of the insurance policy in a non-arbitrary and capricious way.  The dictionary defines "capricious" as "given to sudden and unaccountable changes of mood or behavior," so naturally this is not very favorable to ERISA plaintiffs.  That's why ideally, most folks would rather try their insurance denial cases in state court rather than federal court.  However, if it is an employee benefit related insurance denial then it's got to be tried in federal court.  Despite ERISA's favorable interpretation for insurance companies, Evan T. Engler, the ERISA attorney at Harris & Engler, has had much success and obtained favorable results for his clients in bringing Plaintiff side federal ERISA cases.

What Kind of Cases Have To Be Brought In Federal Court Under ERISA?

Pursuant to 29 U.S.C. 1144(a), ERISA pre-empts all state laws that "relate to" employee benefit plans.  ERISA defines an "employee welfare benefit plan" as follows, in pertinent part:

"Any plan fund, or program ... established or maintained by an employer or by an employee organization ... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeships or other training programs, or day care centers, scholarship funds, or prepaid legal services[.]"

29 U.S.C. 1002(1).  Employee welfare benefit plans cover generally all employee benefits (except for government workers and other certain exceptions).  Most of the time ERISA lawsuits are brought for wrongful denial of medical, disability, or life insurance benefits.  

The ERISA pre-emption clause is laid out in 29 U.S.C. 1144(a), and the exceptions to that clause are laid out in what are referred to as the "savings clause" and "deemer clause."  

The pre-emption clause provides, in pertinent part:  "The provisions of [ERISA] shall supercede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan[.]"  29 U.S.C. 1144(a).

The savings clause provides in part, as follows: "[n]othing in this chapter shall be construed to exempt or relieve any person from any law of any state which regulates insurance, banking, or securities."  29 U.S.C. 1144(b)(2)(A).  The savings clause basically says that if there is a state law that regulates insurance, banking, or securites, then ERISA does not trump those specific laws. 

The deemer clause in 29 U.S.C. 1144(b)(2)(B) basically says that an employee benefit plan or a trust established under an employee benefit plan shall not be deemed to be an insurer, bank, trust company, or investment company nor shall be considered to be in the business of banking or insurance under state law.  

What Does All of This ERISA Pre-Emption Mean?

ERISA pre-emption basically boils down to this: when you've had an insurance claim denied, does state law apply or federal law?  If you're a person and not an insurance company, then you probably want state law to apply.  However, most of the time that health insurance, disability insurance, and life insurance claims are denied then it is governed under federal ERISA law.  If your claim was denied under federal ERISA law and you live in Ohio, then you can give attorney Evan T. Engler, partner at Harris & Engler, a call at (614) 610-9988 to discuss your case.
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