with the particularity required by Federal Rule of Civil Procedure 9(b). The plaintiff, on the other hand, contends that under Rule 8(a) all that is required is fair notice of the cause of action.
III. THE SUBROGATION COUNTS: ERISA PREEMPTION
A. General Principles
Section 514(a) of ERISA outlines the preemptive effect of ERISA on state laws and provides that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan," 29 U.S.C. § 1144 (a) -- even if the state law is consistent with ERISA's substantive requirements. See, e.g., Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 85 L. Ed. 2d 728, 105 S. Ct. 2380 (1985). The broad application of this preemption clause is narrowly limited by section 514(b), the so-called "saving clause," which provides that ERISA will not preempt any state law that "regulates insurance, banking, or securities." 29 U.S.C. § 1144(b)(2)(A). The subsequent "deemer clause," however, qualifies the saving clause and states that an employee benefit plan "shall [not] be deemed to be an insurance company . . . for purposes of any law of any State purporting to regulate insurance companies [or] insurance contracts . . . ." Id. § 1144(b)(2)(B).
The first step in ERISA preemption analysis is the determination whether a state law falls within the scope of the express preemption clause. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987). This step has two requirements: 1) There must be an employee welfare benefit plan within the meaning of 29 U.S.C. § 1002(1),
and 2) the state law must "relate to" the employee benefit plan.
With respect to the plan requirement, there must be "(1) a plan, fund or program, (2) established or maintained, (3) by an employer or by an employee organization, or by both, (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits, . . . (5) to participants or their beneficiaries." Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d 732, 738 (7th Cir. 1986), cert. denied, 482 U.S. 915, 96 L. Ed. 2d 676, 107 S. Ct. 3188 (1987); see Brundage-Peterson v. Compcare Health Servs. Ins. Corp., 877 F.2d 509, 510-11 (7th Cir. 1989) (discussion of welfare benefit plans); Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 491-93 (9th Cir. 1988) (same), cert. denied, 492 U.S. 906, 109 S. Ct. 3216, 106 L. Ed. 2d 566 (1989); cf. 29 C.F.R. § 2510.3-1(j) (1988) (Department of Labor regulation excluding certain group insurance programs from ERISA definition of "employee welfare benefit plan").
As for the second requirement, the phrase "relate[s] to" should be given a broad, commonsense meaning; thus, a state law will relate to an employee benefit plan "'if it has a connection with or reference to such a plan.'" Metropolitan Life, 471 U.S. at 739 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 77 L. Ed. 2d 490, 103 S. Ct. 2890 (1983)). The preemption clause is not limited to "state laws specifically designed to affect employee benefit plans," Shaw, 463 U.S. at 98, and can encompass both state common law and statutory causes of action. See, e.g., Scott v. Gulf Oil Corp., 754 F.2d 1499, 1504 (9th Cir. 1985) ("Preemption of state law claims by ERISA depends on the conduct to which such law is applied, not on the form or label of the law.").
If the state law relates to an ERISA plan, then the next step is to determine whether the law is excepted from preemption by the saving clause -- the relevant exception in this case being state laws that regulate insurance. The Supreme Court has been guided by two considerations in determining whether a state law "regulates insurance." The first factor looks to a commonsense interpretation of the language of the saving clause, particularly the word "regulate"; for the state law to regulate insurance, it "must not just have an impact on the insurance industry, but be specifically directed toward that industry." Pilot Life, 481 U.S. at 50.
Nevertheless, the fact that a state law seems to regulate insurance under this commonsense test does not mean that it is saved from ERISA preemption, for a court also determine whether the state law regulates the "business of insurance," as that phrase is defined by case law interpreting the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 (1982).
See, e.g., Pilot Life, 481 U.S. at 47. The McCarran-Ferguson test has three inquiries:
First, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.
Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 73 L. Ed. 2d 647, 102 S. Ct. 3002 (1982) (emphasis in original).
The third inquiry of the McCarran-Ferguson test overlaps to a great extent with the commonsense approach to the saving clause, since both look to whether the state law is directed to entities in the insurance industry. Under the McCarran-Ferguson test, however, a court also must determine whether the state law transfers or spreads a policyholder's risk and whether the state law is integral to the insured/insurer relationship. To "regulate insurance," then, the state law must govern the substantive content of the insurance contract, see, e.g., Metropolitan Life, 471 U.S. at 740-44, and not merely the procedural aspects of claims processing. See, e.g., Dutenhaver v. Teachers Ins. & Annuity Ass'n of Am., No. 85 C 1740, slip op. at 3 (N.D.Ill. Dec. 1, 1987) (Holderman, J.).
Finally, even if the state law is determined to regulate the "business of insurance" (and, therefore, falls within the literal scope of the saving clause), it still may be preempted if ERISA's civil enforcement provisions provide the exclusive remedy for the conduct alleged.
The saving clause cannot be read in isolation; rather, a court's "understanding of the saving clause must be informed by the legislative intent concerning the civil enforcement provisions provided by ERISA" -- section 1132(a). Pilot Life, 481 U.S. at 52. For example, section 1132(a) delineates a number of remedies available to a participant or beneficiary asserting improper processing of a claim for benefits under an ERISA-regulated plan. The participant may sue 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," 29 U.S.C. § 1132(a)(1)(B), and relief may take the form of "accrued benefits due, a declaratory judgment on entitlement to benefits, or an injunction against a plan administrator's improper refusal to pay benefits." Pilot Life, 481 U.S. at 53. A participant also may bring an action for breach of fiduciary duty, 29 U.S.C. § 1132(a)(2) (incorporating section 1109), and seek removal of the fiduciary. Under these civil enforcement provisions a court in its discretion may award the participant his attorneys' fees, id. § 1132(g), but the participant may not recover extracontractual compensatory or punitive damages for improper processing of his benefits claim.
Congress intended that these civil enforcement provisions be the exclusive remedy for beneficiaries and participants seeking to recover benefits under an ERISA-regulated plan. Pilot Life, 481 U.S. 41, 52-56, 107 S. Ct. 1549, 95 L. Ed. 2d 39. In fact, ERISA's preemptive force is as sweeping as that of section 301 of the Labor-Management Relations Act of 1947, 29 U.S.C. § 185 (1982), and will displace all state-law remedies applicable to conduct prescribed by ERISA -- whether the state law conflicts with, is consistent with, or even is identical to ERISA's remedial provisions:
The detailed provisions of [section 1132(a)] set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. "The six carefully integrated civil enforcement provisions found in [section 1132(a)] . . . provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot to incorporate expressly."