Mealey's (August 5, 2016, 11:10 AM EDT) -- SCRANTON, Pa. — A Pennsylvania federal judge on Aug. 2 partially denied a life insurance company’s motion to dismiss a putative class action for benefits under an Employee Retirement Income Security Act plan, finding that a section of a state motor vehicle statute “regulates insurance” and is therefore saved from ERISA preemption (Eric Yost, et al. v. Anthem Life Insurance Co., No. 3:16-cv-00079, M.D. Pa.; 2016 U.S. Dist. LEXIS 101202).
(Opinion available. Document #54-160810-041Z.)
U.S. Judge Robert D. Mariani of the Middle District of Pennsylvania wrote that the U.S. Supreme Court and the Third Circuit U.S. Court of Appeals have both recognized that ERISA’s savings clause rescues Section 1720 of Pennsylvania’s Motor Vehicle Financial Responsibility Law (MVFRL) from preemption.
Eric Yost, on behalf of himself and others similarly situated, filed a putative class action complaint Dec. 11 in the Pike County Common Pleas Court alleging three counts. The case was removed to federal court on the basis of federal question jurisdiction on Jan. 21.
Yost’s Claims
In Count I, Yost seeks a declaratory judgment that Anthem Life Insurance Co. may not obtain reimbursement or assert a right of subrogation against the proceeds of personal injury settlements or verdicts on motor vehicle claims in accordance with the MVFRL. Count II asserts a claim for unjust enrichment, and Count III is a claim for bad faith.
Yost was insured for disability benefits under a group plan issued by Anthem through Finisar Corp., Yost’s former employer. On Feb. 2, 2013, Yost was injured in a motor vehicle accident, rendering him temporarily disabled. As a result of his temporary disability, Yost submitted a claim for short-term disability benefits to Anthem. Anthem paid disability benefits of $5,654.40 to Yost for Feb. 4, 2013, to April 23, 2013.
Yost sought damages against the alleged tortfeaser, whose insurer settled the action and made payment to Yost in compensation for his personal injuries. Anthem then asserted a claim for reimbursement of the short-term disability benefits of $6,997.25 paid to Yost. The parties attempted to negotiate a settlement.
Anthem has continued to assert a claim for reimbursement of the short-term disability benefits paid to Yost. As a result, Yost’s counsel has “been forced to refuse to distribute to Mr. Yost the money in dispute,” leaving Yost “subject to suit and loss of benefits based on the dispute over the subject funds,” Judge Mariani wrote.
Anthem’s Motion
In Anthem’s Jan. 21 motion to dismiss, it sought dismissal of Yost’s declaratory judgment claim on the theory that ERISA completely preempts the cause of action because it relates to an “employee welfare benefit plan” under 29 U.S. Code Sections 1002(1) and (3) and therefore Section 514 of ERISA preempts the state statute on which Yost bases his claim. In his Feb. 18 response, Yost directed Judge Mariani to decisions of the Supreme Court and the Third Circuit that Yost maintains have explicitly held that the statute at issue — Section 1720 of the MVFRL — is not preempted by ERISA. Oral argument was held July 29.
Judge Mariani wrote that the group plan at issue is an ERISA employee welfare benefit plan within the meaning of the statute. He wrote that ERISA’s preemption clause provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter related to any employee benefit plan.” Judge Mariani said ERISA’s savings clause rescues certain state laws from preemption, providing that “nothing in this subchapter [29 U.S. Code Section 1144(b)(2)(a)] shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.”
Anthem maintained that Section 1720 of the MVFRL is not specifically directed toward the insurance industry and is therefore preempted, but Judge Mariani wrote that the U.S. Supreme Court in FMC Corp. v. Holliday (498 U.S. 52, 59 111 S.Ct. 403, 112 L.Ed. 2nd 356 [1990]) held that it “regulates insurance” and therefore is saved from preemption. The Third Circuit recognized the Supreme Court’s FMC Corp. decision in Wirth v. Aetna U.S. Healthcare (469 F.3d 305, 309 n.6 [3d Cir. 2006]), the judge wrote.
“Accordingly, the Court concludes that Section 1720 of the MVFRL ‘regulates insurance’ and is therefore saved from ERISA preemption,” Judge Mariani wrote in denying Anthem’s dismissal motion.
Unjust Enrichment
Judge Mariani granted Anthem’s motion to dismiss Counts II and III of Yost’s complaint, for unjust enrichment and bad faith.
‘Because Plaintiff’s unjust enrichment claim results from a contractual relationship between the Plaintiff and the Defendant, it necessarily must fail,” Judge Mariani wrote, citing Eastern Roofing Sys., Inc. v. Simon Prop. Grp., Inc. (No. 3:14-cv-00717 [M.D. Pa. April 5, 2016]).
In dismissing the bad faith claim, Judge Mariani wrote that the Third Circuit has ruled that ERISA preempts Pennsylvania’s bad faith statute, 42 Pennsylvania Consolidated Statutes Section 8371, citing Barber v. UNUM Life Ins. Co. of Am. (383 F.3d 134 [3rd. Cir. 2004]).
Yost is represented by Charles Kannebecker of Kannebecker & Lokua in Milford, Pa., and James C. Haggerty of Haggerty, Goldberg, Schleifer & Kupersmith in Philadelphia.
Anthem is represented by Dan J. Hofmeister Jr. of Reed Smith in Chicago and Douglas R. Widin, John N. Ellison and Miranda A. Jannuzzi of Reed Smith in Philadelphia.
(Additional documents available: Anthem motion to dismiss. Document #54-160810-042M. Answer to motion to dismiss. Document #54-160810-043W.)...