the issue in the context of a petition to enforce a settlement
agreement, this novel posture bears little significance for the reasons
stated above. Accordingly, for purposes of this enforcement action,
Plaintiff's request for relief under section 155 "relates to" Defendant's
ERISA benefit plan and therefore falls within the general preemption
clause of § 1144(a).
As per the second prong, ERISA's savings clause, a state law will be
saved from preemption only if it satisfies three requirements: (1) a
common-sense interpretation of the state law must suggest that it
regulates insurance, (2) the state law must regulate the "business of
insurance" as defined by case law interpreting the McCarran-Ferguson
Act, and (3) allowing the state claim to proceed must not undermine
ERISA's civil enforcement procedures. See Gawrysh, 978 F. Supp. at 793.
Because section 155 provides remedies for unreasonable or vexatious
delay in paying insurance claims, a common-sense interpretation of
section 155 suggests that it regulates insurance. See id. With regard to
the second requirement, an analysis of what have been termed the
McCarran-Ferguson factors,*fn2 the district courts in this circuit are
split when it comes to section 155. See id. For instance, some courts have
found that section 155 is not an integral part of the relationship
between the insured and insurer, while others have. See id. However, just
like the Gawrysh court, this Court need not weigh in on the debate
because the third savings clause requirement is controlling. It is clear
that § 1132(a) is meant to be the exclusive provision for civil
enforcement of rights under ERISA. See Pilot Life Ins. Co. v. Dedeaux,
481 U.S. 41, 51-54(1987). Allowing Plaintiff to assert a claim under
section 155 would undermine ERISA's enforcement procedures; therefore,
Plaintiff's claim under the Illinois Insurance Code is preempted. See
Gawrysh, 978 F. Supp. at 793-94. If Plaintiff wants relief, Plaintiff
must look to ERISA.
Plaintiff's reliance on the Supreme Court's holding in UNUM Life
Insurance Co. of America v. Ward, 526 U.S. 358(1999), is unfounded.
There, the Court did not address § 1132(a)'s exclusivity except to
state explicitly that the issue was not implicated by the facts of the
case.*fn3 See id. at 376-77; Moran v. Rush
Prudential HMO, Inc.,
230 F.3d 959, 971-72 (7th Cir. 2000) (similarly not addressing §
1132(a)'s exclusivity). Hence, UNUM did not dramatically alter the
landscape when it comes to the preemptive effect of ERISA on state law
enforcement actions such as those based on section 155, and Pilot Life
remains good law. According to Pilot Life, Plaintiff cannot obtain the
penalties and fees available under section 155 because that claim is
preempted by ERISA. See Pilot Life Ins. Co., 481 U.S. at 51-54.
B. Section 1132(g) of ERISA
However, Plaintiff's claim for attorney's fees falls squarely within
§ 1132(g) of ERISA. ERISA grants this Court discretion to award
attorney's fees to either party. See 29 U.S.C. § 1132(g)(1). To
determine whether to award attorney's fees under ERISA, courts may use
one of two tests. The substantially justified test simply looks at
whether the losing party's position was substantially justified. See
Brewer v. Protexall, Inc., 50 F.3d 453, 458 (7th Cir. 1995). While the
five-factor test takes a broader approach to determine if fees are
warranted. See id. at 458-59. Because Plaintiff is the one seeking fees,
the five-factor test is better suited to the instant dispute. See Bittner
v. Sadoff & Rudoy Indus., 728 F.2d 820, 829 (7th Cir. 1984).
Factors to consider while applying the five-factor test are (1) the
degree of the offending party's culpability or bad faith, (2) the
offending party's ability to satisfy an award of fees, (3) whether an
award of fees would deter other persons under similar circumstances, (4)
the amount of benefit conferred on members of the plan as a whole, and
(5) the relative merits of the parties' positions. See Brewer, 50 F.3d at
458. The five-factor test is not meant for rigid application, but rather
it provides a general outline for awarding fees. See Denzler v.
Questech, Inc., 80 F.3d 97, 104 (4th Cir. 1996) (quoting Quesinberry v.
Life Ins. Co. of N. Am., 987 F.2d 1017, 1029 (4th Cir. 1993)). Some
factors may not apply to any given case. See id.
Three of the factors lead us to believe that an award of attorney's
fees is proper in this case. First, with respect to Defendant's degree of
culpability or bad faith, the length of time it has taken Defendant to
perform under the settlement agreement is good evidence of bad faith,
especially because Defendant has not proffered an adequate excuse for all
of the delays. See, e.g., Tyler v. Ploof Truck Lines, Inc., No. Civ.A.
96-T-1192-E, 1999 WL 961262, at *2 (M.D.Ala. Sept. 17, 1999)
("[P]rolonged failure to pay the claims pursuant to the settlement
agreement and . . . lack of an excuse for doing so constitute bad
faith."). Although the instant petition deals primarily with late
payments to Chicago Hospitals and the other medical service providers, we
note that Defendant's casual approach to performing its obligations under
the settlement agreement began much earlier than that. Defendant did not
timely deliver the written settlement agreement, did not timely reimburse
Plaintiff for certain out-of-pocket prescription expenses and premium
payments, and did not timely pay Plaintiff's attorney's fees. Defendant
belatedly performed these obligations, and only after Plaintiff dragged
Defendant back to court. Furthermore, Defendant never provided an
explanation for the delay.
This same pattern of conduct continued for another five months. It took
until late December 2000 for a single payment to be made to the medical
service providers. Again, payment was not made until after Plaintiff
dragged Defendant back into court, and again Defendant offered no good
explanation for the delay.
True, Defendant did offer one reason for the delay — its attempt
to avoid liability for certain bills under the Illinois Probate Act.
Nonetheless, Defendant presented no evidence that this matter took seven
months to resolve (or that it could have). Entire lawsuits are often
resolved in seven months.
The excessive length of time that it took Defendant to perform under
the settlement agreement paints only part of the picture of Defendant's
bad faith. Certainly Chicago Hospitals's frustration with Defendant
evidences bad faith as well. Chicago Hospitals experienced periods of
time in the dark regarding Defendant's intent to pay. Several unreturned
telephone calls did nothing to help the matter. Additionally, the fact
that this Court deemed it necessary to impose a reporting requirement on
Defendant to monitor Defendant's efforts in settling claims evidences
Defendant's bad faith. Finally, we do not believe it to be mere
coincidence that Defendant only performs its obligations under the
settlement agreement after this Court intervenes. Under the
circumstances, the requisite level of Defendant's culpability and bad
faith is properly established.
In terms of the second factor, the ability of the party to pay an award
of attorney's fees, Defendant, one of the nation's largest insurance
companies, fails to proffer any reason why it would be unable to satisfy
Plaintiff's requested amount of attorney's fees. Lastly, with regard to
deterrence, the third factor, an award of attorney's fees in this
situation would deter other insurers from engaging in similar stalling
tactics or foot-dragging after a settlement agreement has been put in
place. Altogether, these three factors provide ample support for awarding
attorney's fees.*fn4 Defendant's inexcusable delay cannot be
overlooked. Accordingly, Defendant must pay Plaintiff's attorney's fees
in bringing this petition in the amount of $3,687.50.*fn5