383 F.

3d 134

James BARBER
v.
UNUM LIFE INSURANCE COMPANY OF AMERICA,
Appellant.
No. 03-4363.

United States Court of Appeals, Third Circuit.

Argued May 25, 2004.
September 7, 2004.

Appeal from the United States District Court for the Eastern District of
Pennsylvania, Clarence C. Newcomer, J. COPYRIGHT MATERIAL
OMITTED E. Thomas Henefer, (Argued), Stevens & Lee, Reading, PA,
for Appellant.

Joseph F. Roda, (Argued), Roda & Nast, Lancaster, PA, for Appellee.

Glen D. Nager, Jones Day, Washington, DC, for Amicus Curiae-Appellant,

Chamber of Commerce of the United States.

Arnold R. Levinson, Pillsbury & Levinson, San Francisco, for Amicus CuriaeAppellee, United Policyholders.

Before SCIRICA, Chief Judge, RENDELL and ALARCON,* Circuit Judges.

OPINION OF THE COURT

5

SCIRICA, Chief Judge.

At issue is whether ERISA preempts Pennsylvania's bad faith statute for

insurance claims, 42 Pa.C.S. 8371, through express or conflict preemption.
The District Court denied defendant's Fed.R.Civ.P. 12(b)(6) motion moving for
dismissal of plaintiff's bad faith claim based on ERISA preemption. Barber v.
UNUM Life Ins. Co. of Am., No. 03-3018 (E.D. Pa. filed Sept. 9, 2003).

Because we hold 42 Pa.C.S. 8371 is conflict preempted by ERISA, or

alternatively expressly preempted under ERISA 514(a), we will reverse the
judgment of the District Court and remand with instructions to dismiss Barber's
bad faith claim.
I.
Facts
7

This matter involves a dispute over disability benefits provided to plaintiff

James Barber by his employer under an employee benefit plan governed by the
Employee Retirement Income Security Act of 1974, as amended 29 U.S.C.
1001-1461. Benefits under the plan were insured under a group long-term
disability policy Barber's employer obtained from defendant UNUM Life
Insurance Company of America.

After Barber became disabled, he applied for and received long-term disability
benefits. But UNUM subsequently terminated the benefits after determining
Barber was no longer disabled under the policy's terms. Barber brought suit for
breach of contract and for bad faith, requesting punitive damages under 42
Pa.C.S. 8371 for UNUM's alleged bad faith in denying benefits.1

UNUM moved under Fed.R.Civ.P. 12(b)(6) to dismiss the bad faith claim,
citing ERISA preemption. UNUM contends conflict preemption applies
because 42 Pa.C.S. 8371's remedial scheme conflicts with Congress' intent in
enacting ERISA's exclusive civil enforcement provision in 502(a), 29 U.S.C.
1132(a). 502(a) allows an ERISA-plan participant to recover benefits, to
obtain a declaratory judgment that he is entitled to benefits, and to enjoin an
improper refusal to pay benefits. 29 U.S.C. 1132(a). UNUM contends ERISA
preempts 42 Pa.C.S. 8371 because it is a separate enforcement scheme with a
punitive damages provision that adds to the detailed provisions of ERISA's
remedial mechanism.

10

Citing express ERISA preemption, UNUM also contends 42 Pa.C.S. 8371

falls outside the protective ambit of ERISA's saving clause. ERISA 514(a),
the express preemption clause, broadly provides that "[e]xcept as provided in
subsection (b) of this section, the provisions of this title ... 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). In apparent tension, however, and reflecting
its concern with limiting states' rights to regulate insurance, banking, or
securities, Congress drafted a saving clause, ERISA 514(b)(2)(A), that

provides: "Except as provided in subparagraph (B), nothing in this title 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).2 Barber
responds that 42 Pa.C.S. 8371, the bad faith statute, "regulates insurance" and
accordingly falls within the saving clause's parameters.
Procedural Background
11

In Rosenbaum v. UNUM Life Insurance Co. of America, No. 01-6758, 2003

U.S. Dist. LEXIS 15652, 2003 WL 22078557 (E.D.Pa. Sept. 8, 2003)
("Rosenbaum II"),3 the District Court held 42 Pa.C.S. 8371 satisfied the
saving clause and found conflict preemption did not apply. Id. at *10-25.4 The
order in Rosenbaum II was certified for interlocutory appeal, but the ruling
came after parties had advised the District Court they had settled the matter,
eliminating a case or controversy. But the district judge in Rosenbaum II was
also assigned to this lawsuit. On September 9, 2003, the District Court denied
UNUM's motion to dismiss for the reasons provided in Rosenbaum II. Barber
v. UNUM Life Ins. Co., No. 03-3018, 2003 WL 22078557 (E.D. Pa. filed Sept.
8, 2003). The District Court certified the issue for interlocutory review. Id. We
granted the petition for allowance of appeal.5

II.
A. Conflict Preemption
12

Under the doctrine of conflict preemption, a state law may be preempted "to the
extent that it actually conflicts with federal law," English v. Gen. Elec. Co., 496
U.S. 72, 79, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990), that is, where it "stands as
an obstacle to the accomplishment and execution of the full purposes and
objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85
L.Ed. 581 (1941). UNUM contends conflict preemption applies because 42
Pa.C.S. 8371 is a separate enforcement scheme that enlarges the remedies
otherwise available under the detailed civil enforcement provision of ERISA
502(a).

13

Until the Supreme Court's recent decision in Aetna Health Inc. v. Davila, ___
U.S. ___, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004), the debate over ERISA
conflict preemption centered on two Supreme Court cases-Pilot Life, 481 U.S.
41, 107 S.Ct. 1549, 95 L.Ed.2d 39, and Rush Prudential, 536 U.S. 355, 122
S.Ct. 2151, 153 L.Ed.2d 375. In Pilot Life, an insurance company terminated an
injured employee's disability plan. 481 U.S. at 43-44, 107 S.Ct. 1549. The

employee brought a common law tort and contract action asserting improper
processing of a benefits claim. Id. The Court found the saving clause did not
save the bad faith claim because it did not "regulate insurance." Id. at 50, 107
S.Ct. 1549. But stating it was obliged to consider "the role of the saving clause
in ERISA as a whole," the Court noted an "understanding of the saving clause
must be informed by the legislative intent concerning [ERISA's] civil
enforcement provisions," which, the Court said, were "intended to be
exclusive." Id. at 51-52, 107 S.Ct. 1549. In ruling that punitive damages in a
bad faith cause of action constituted an additional remedy, the Court explained:
14

[The provisions of ERISA] 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.

15

Id. at 54, 107 S.Ct. 1549. The Court stated the "`six carefully integrated civil
enforcement provisions found in 502(a) of the [ERISA] statute as finally
enacted ... provide strong evidence that Congress did not intend to authorize
other remedies that it simply forgot to incorporate expressly.'" Id. (quoting
Mass. Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 87
L.Ed.2d 96 (1985)) (emphasis in original). Accordingly, the Court found the
state claims permitting punitive damages were preempted by ERISA. Id. at 57,
107 S.Ct. 1549.

16

The Supreme Court revisited conflict preemption in Rush Prudential, 536 U.S.
355, 122 S.Ct. 2151, 153 L.Ed.2d 375, narrowly reaffirming the applicability of
conflict preemption in the ERISA context. The Court "recognized a limited
exception from the savings clause for alternative causes of action and
alternative remedies," describing this exception as "Pilot Life' s categorical
preemption." Id. at 380-81, 122 S.Ct. 2151. The Court noted:

17

Although we have yet to encounter a forced choice between the congressional

policies of exclusively federal remedies and the reservation of the business of
insurance to the States, we have anticipated such a conflict, with the state
insurance regulation losing out if it allows plan participants "to obtain remedies
... that Congress rejected in ERISA."

18

Id. at 378, 122 S.Ct. 2151 (quoting Pilot Life, 481 U.S. at 54, 107 S.Ct. 1549)

(citation and internal quotations omitted). The Court explained the civil
remedies provided in ERISA 502(a) are an "`interlocking, interrelated, and
interdependent remedial scheme,'" id. at 376, 122 S.Ct. 2151 (quoting Mass.
Mutual, 473 U.S. at 146, 105 S.Ct. 3085), that" `represent[s] 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.' "Id. at 376,
105 S.Ct. 3085 (quoting Pilot Life, 481 U.S. at 54, 107 S.Ct. 1549). ERISA
502(a)'s civil enforcement provisions are the "sort of overpowering federal
policy" that is so strong it even "overrides a statutory provision designed to
save state law from being preempted." Id. at 375, 107 S.Ct. 1549. 6
19

The parties here have focused on whether the Supreme Court treatment of
conflict preemption in Pilot Life and Rush Prudential is dicta, noting
Rosenbaum II found it to be "dicta" that was "unpersuasive." Rosenbaum II,
2003 WL 22078557, at *7, 2003 U.S. Dist. LEXIS 15652, at *20-21.7
Whatever the outcome of that debate, it is no longer material because in Aetna
Health, ___ U.S. ___, 124 S.Ct. 2488, 159 L.Ed.2d 312,8 the Court confirmed
that state laws that supplement ERISA's civil enforcement scheme conflict with
Congress' intent to make the ERISA remedy exclusive. Id. at 2495.

20

In Aetna Health, the Court held the plaintiffs' claims under the Texas
Healthcare Liability Act, which imposed a duty of ordinary care in the handling
of coverage decisions, were completely preempted by ERISA and therefore
removable to federal court. Id. at 2492-93, 2498. Noting that ERISA's
"integrated enforcement mechanism, ERISA 502(a)," is "essential to
accomplish Congress' purpose of creating a comprehensive statute for the
regulation of employee benefit plans," the Court held "any state-law cause of
action that duplicates, supplements, or supplants the ERISA civil enforcement
remedy conflicts with the clear congressional intent to make the ERISA remedy
exclusive and is therefore pre-empted." Id. at 2495 (citing Pilot Life, 481 U.S.
at 54-56, 107 S.Ct. 1549). The Court explained "Congress' intent to make the
ERISA civil enforcement mechanism exclusive would be undermined if state
causes of action that supplement the ERISA 502(a) remedies were permitted,
even if the elements of the state cause of action did not precisely duplicate the
elements of an ERISA claim." Id. at 2499-2500. In short, Aetna Health
confirms that conflict preemption applies to any "state cause of action that
provides an alternative remedy to those provided by the ERISA civil
enforcement mechanism" because such a cause of action "conflicts with
Congress' clear intent to make the ERISA mechanism exclusive." Id. at 2498 n.
4.

21

Reading Pilot Life, Rush Prudential, and Aetna Health together, a state statute

is preempted by ERISA if it provides "a form of ultimate relief in a judicial

forum that added to the judicial remedies provided by ERISA," Rush
Prudential, 536 U.S. at 379, 122 S.Ct. 2151, or stated another way, if it
"duplicates, supplements, or supplants the ERISA civil enforcement remedy."
Aetna Health, ___ U.S. at ___, 124 S.Ct. at 2495 (citing Pilot Life, 481 U.S. at
54-56, 107 S.Ct. 1549). 42 Pa.C.S. 8371 is such a statute because it is a state
remedy that allows an ERISA-plan participant to recover punitive damages for
bad faith conduct by insurers, supplementing the scope of relief granted by
ERISA. Accordingly, 42 Pa.C.S. 8371 is subject to conflict preemption.
B. Express Preemption and the Saving Clause
22

1. The Saving Clause's Effect on Conflict Preemption

23

Barber contends 42 Pa.C.S. 8371 is a law that "regulates insurance," and

therefore, under ERISA 514(b)(2)(A), his bad faith claim is saved from
preemption, including conflict preemption. He notes Congress could have
qualified 514(b)(2)(A)'s saving clause by limiting its applicability if state law
remedies conflict with or add to ERISA's remedies, but it did not do so.

24

In Aetna Health, ___ U.S. ___, 124 S.Ct. 2488, 159 L.Ed.2d 312, the Supreme
Court found a similar argument "unavailing," holding that the presence of
ERISA's saving clause does not disrupt the normal conflict preemption
analysis:

25

ERISA 514(b)(2)(A) must be interpreted in light of the congressional intent to

create an exclusive federal remedy in ERISA 502(a). Under ordinary
principles of conflict pre-emption, then, even a state law that can arguably be
characterized as `regulating insurance' will be pre-empted if it provides a
separate vehicle to assert a claim for benefits outside of, or in addition to,
ERISA's remedial scheme.

26

Id. at 2500. 9 Citing Pilot Life, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39, the
Court noted Congress' policy choices reflected in ERISA's exclusive remedial
provision would be undermined by state laws allowing alternate remedies, and
concluded that "Pilot Life' s reasoning applies here with full force." Aetna
Health, ___ U.S. at ___, 124 S.Ct. at 2500. For those reasons, even if 42
Pa.C.S. 8371 were found to "regulate insurance" under the saving clause, it
would still be preempted because the punitive damages remedy supplements
ERISA's exclusive remedial scheme.

2. Express Preemption
27

In the alternative, we believe the District Court erred in finding 42 Pa.C.S.

8371 "regulates insurance" under the saving clause. Accordingly, express
preemption under ERISA 514(a) would apply. As stated, in Miller, 538 U.S.
329, 123 S.Ct. 1471, 155 L.Ed.2d 468, the Supreme Court set forth a two-part
test which clarified that a statute "regulates insurance" and satisfies the saving
clause only if it (1) is "specifically directed toward entities engaged in
insurance" and (2) "substantially affect[s] the risk pooling arrangement between
the insurer and the insured." Id. at 341-42, 123 S.Ct. 1471.10

28

For the first prong of the test-whether 42 Pa.C.S. 8371 is "specifically

directed towards entities engaged in insurance," 538 U.S. at 342, 123 S.Ct. at
1479 the inquiry must be answered in the affirmative. 42 Pa.C.S. 8371 is
entitled "actions on insurance policies," and its first sentence limits the
provision's scope to insurers: "In an action arising under an insurance policy, if
the court finds that the insurer has acted in bad faith toward the insured...." Id.
(emphasis added). Moreover, the remedies offered under 42 Pa.C.S. 8371 are
awarded or assessed "against the insurer." Id.

29

UNUM responds that 42 Pa.C.S. 8371 fails this prong because it regulates the
insurer's conduct rather than the underlying insurance by creating extracontractual remedies for certain types of insurer conduct. We believe Miller
forecloses this argument. In Miller, the Supreme Court considered Kentucky's
Any Willing Provider Law which regulated insurers' conduct with regard to
third-party providers. 538 U.S. at 337-38, 123 S.Ct. 1471. The Court explained
ERISA's savings clause "is not concerned ... with how to characterize conduct
undertaken by private actors, but with how to characterize state laws in regard
to what they `regulate.'" Id. The Court provided the following analogy:

30

Suppose a state law required all licensed attorneys to participate in 10 hours of

continuing legal education (CLE) each year. This statute "regulates" the
practice of law-even though sitting through 10 hours of CLE classes does not
constitute the practice of law-because the state has conditioned the right to
practice law on certain requirements, which substantially affect the product
delivered by lawyers to their clients.

31

Id. at 337-38, 123 S.Ct. 1471. The Court concluded the Any Willing Provider
Law similarly "`regulates' insurance by imposing conditions on the right to
engage in the business of insurance." Id. at 338, 123 S.Ct. 1471. This case
presents a similar situation in which Pennsylvania's bad faith statute regulates

insurers' conduct by imposing industry-wide conditions on the insurance

business. Accordingly, the first prong of the Miller test is satisfied.

32

33

Under the second prong, however, 42 Pa.C.S. 8371 does not "substantially
affect[ ] the risk pooling arrangement between the insurer and insured." Miller,
538 U.S. at 342, 123 S.Ct. 1471.11 In Miller, the Court explained the "any
willing provider" statute under review, the "mandated-benefit" law in
Metropolitan Life, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728, the "noticeprejudice" rule in UNUM Life, 526 U.S. 358, 119 S.Ct. 1380, 143 L.Ed.2d 462,
and the "independent review" provision in Rush Prudential, 536 U.S. 355, 122
S.Ct. 2151, 153 L.Ed.2d 375, "alter the scope of permissible bargains between
insurers and insureds" and therefore "substantially affect[] the type of risk
pooling arrangements that insurers may offer." 538 U.S. at 338-39, 123 S.Ct.
1471. In comparison, the bad faith statute here is remedial in nature-it is a
remedy to which the insured may turn when injured by the bad faith of an
insurer. See Kidneigh v. UNUM Life Ins. Co. of Am., 345 F.3d 1182, 1187 (10th
Cir.2003) ("[B]ad faith claims, whether common law or statutory, merely
provide an additional remedy for policyholders."). 42 Pa.C.S. 8371 does not
affect the kinds of bargains insurers and insureds may make. It provides that
whatever the bargain struck, if the insurer acts in bad faith, the insured may
recover punitive damages. Pilot Life, 481 U.S. at 49-51, 107 S.Ct. 1549
(holding "the common law of bad faith does not define the terms of the
relationship between the insurer and the insured; it declares only that, whatever
terms have been agreed upon in the insurance contract, a breach of that contract
may in certain circumstances allow the policyholder to obtain punitive
damages.").12
Moreover, claims for bad faith insurance breaches bear no relation to the risk
pooled-the risk of loss the insurer agrees to bear on behalf of the insured.
Within the insurance industry, "risk" means the risk of occurrence of injury or
loss for which the insurer contractually agrees to compensate the insured. With
risk pooling, "a number of risks are accepted, some of which involve losses,"
and the "losses are spread over all the risks so as to enable the insurer to accept
each risk at a slight fraction of the possible liability upon it." Union Labor Life
Ins. Co. v. Pireno, 458 U.S. 119, 128 n. 7, 102 S.Ct. 3002, 73 L.Ed.2d 647
(1982) (internal quotations omitted); Hollaway v. UNUM Life Ins. Co. of Am.,
89 P.3d 1022, 1029 (Okla.2003) (explaining that risk pooling groups "those
with greater and lesser risks together to better account and minimize the
unpredictable risk for everyone" and "results in spreading the costs of risk of
loss for which an insurer must pay across the span of insureds"). Here, the risk
pooled, in this case the risk of disability, is reflected in the policy itself. The
tort of bad faith breach of an insurance contract is not ordinarily a risk identified

in the insurance policy as a risk of loss the insurer agrees to bear for its insured.
34

Our conclusion is buttressed by Pireno, 458 U.S. 119, 102 S.Ct. 3002, 73
L.Ed.2d 647. 13 In Pireno, a plaintiff brought suit, alleging antitrust violations
by a peer review committee used to assess whether chiropractors' fees were
reasonable. Id. at 122-24, 102 S.Ct. 3002. The Court found the use of the peer
review played no part in the spreading and underwriting of insurance risk:
[Plaintiff's] argument contains the unspoken premise that the transfer of risk
from an insured to his insurer actually takes place not when the contract
between those parties is completed, but rather only when the insured's claim is
settled. This premise is contrary to the fundamental principle of insurance that
the insurance policy defines the scope of risk assumed by the insurer from the
insured.

35

Id. at 131, 102 S.Ct. 3002 (emphasis added). Here, the transfer of risk occurred
when Barber entered into the insurance contract, not when his claim was
settled. The scope of the risk pooled is defined by the policy, not by a claims
settlement statute allowing for bad faith remedies.

36

Moreover, the threat that punitive awards may result in increased costs that
could be passed on to the insured is too attenuated to be deemed to
"substantially affect" the risk pooling arrangement. Accordingly, under the
Miller test, Pennsylvania's bad faith statute does not "regulate insurance" within
the meaning of ERISA's saving clause and is expressly preempted by ERISA.

III.
37

For the foregoing reasons, we will reverse the judgment of the District Court
and remand with instructions to dismiss Barber's bad faith claim.

Notes:
*

The Honorable Arthur L. Alarcon, United States Circuit Judge for the Ninth
Judicial Circuit, sitting by designation

42 Pa.C.S. 8371 provides:

In an action arising under an insurance policy, if the court finds that the insurer
has acted in bad faith toward the insured, the court may take all of the
following actions:

(1) Award interest on the amount of the claim from the date the claim was
made by the insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.
Id.
2

Subparagraph (B) ("the deemer clause") provides:

Neither an employee benefit plan ... nor any trust established under such a plan,
shall be deemed to be an insurance company or other insurer, bank, trust
company, or investment company or to be engaged in the business of insurance
or banking for purposes of any law of any State purporting to regulate insurance
companies, insurance contracts, banks, trust companies, or investment
companies.
Id. 1144(b)(2)(B). As summarized by the Supreme Court:
If a state law "relate[s] to ... employee benefit plan[s]," it is pre-empted.
514(a). The saving clause excepts from the pre-emption clause laws that
"regulat[e] insurance." 514(b)(2)(A). The deemer clause makes clear that a
state law that "purport[s] to regulate insurance" cannot deem an employee
benefit plan to be an insurance company. 514(b)(2)(B).
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 95 L.Ed.2d 39
(1987).

InRosenbaum v. UNUM Life Insurance Co. of America, No. 01-6758, 2002 WL

1769899, 2002 U.S. Dist. LEXIS 14155 (E.D.Pa. July 29, 2002) ("Rosenbaum
I"), the District Court held 42 Pa.C.S. 8371 is not expressly preempted
because it "regulates insurance" under ERISA's saving clause. Id. at *1-9, 2002
WL 1769899. UNUM filed a motion for reconsideration. While that motion
was pending, the Supreme Court decided Kentucky Association of Health
Plans, Inc. v. Miller, 538 U.S. 329, 123 S.Ct. 1471, 155 L.Ed.2d 468 (2003),
which clarified a statute "regulates insurance" and satisfies the saving clause
only if it (1) is "specifically directed toward entities engaged in insurance" and
(2) "substantially affect[s] the risk pooling arrangement between the insurer and
the insured." Id. at 341-42, 123 S.Ct. 1471.

Several other federal district courts in Pennsylvania held ERISA preempts 42

Pa.C.S. 8371See Hunter v. Fed. Express Corp., No. 03-6711, 2004 WL
1588229, 2004 U.S. Dist. LEXIS 13271 (E.D.Pa. July 15, 2004); Rieser v.
Standard Life Ins. Co., No. 03-5040, 2004 WL 1166575, 2004 U.S. Dist.
LEXIS 9378 (E.D.Pa. May 25, 2004); Waters v. Kemper Ins. Cos., No. 031803, 2004 U.S. Dist. LEXIS 7379 (W.D. Pa. April 19, 2004); Tannenbaum v.
UNUM Life Ins. Co. of Am., No. 03-CV-1410, 2004 WL 1084658, 2004 U.S.
Dist. LEXIS 5664 (E.D.Pa. Feb. 27, 2004); Dolce v. Hercules Inc. Ins. Plan,
No. 03-CV-1747, 2003 WL 22992148, 2003 U.S. Dist. LEXIS 23890 (E.D.Pa.
Dec. 15, 2003); Nguyen v. Healthguard of Lancaster, Inc., 282 F.Supp.2d 296
(E.D.Pa.2003) reconsideration denied 03-3106, 2003 U.S. Dist. LEXIS 22043
(E.D.Pa. Oct. 7, 2003); Leuthner v. Blue Cross & Blue Shield of Northeastern
Penn., 270 F.Supp.2d 584 (M.D.Pa.2003); Morales-Ceballos v. First UNUM
Life Ins. Co. of Am., No. 03-CV-925, 2003 WL 23640274, 2003 U.S. Dist.
LEXIS 9801 (E.D.Pa. May 27, 2003); McGuigan v. Reliance Standard Life Ins.
Co., 256 F.Supp.2d 345 (E.D.Pa.2003); Emil v. UNUM Life Ins. Co. of Am.,
No. 02-2019, 2003 WL 256781, 2003 U.S. Dist. LEXIS 1540 (M.D.Pa. Feb. 5,
2003); Snook v. Penn State Geisinger Health Plan, 241 F.Supp.2d 485
(M.D.Pa.2003); Bell v. UNUM Provident Corp., 222 F.Supp.2d 692
(E.D.Pa.2002); Kirkhuff v. Lincoln Tech. Inst., Inc., 221 F.Supp.2d 572
(E.D.Pa.2002); Sprecher v. Aetna U.S. Healthcare, Inc., No. 02-CV-00580,
2002 WL 1917711, 2002 U.S. Dist. LEXIS 15571 (E.D.Pa. Aug. 19, 2002).
One district court agreed with Rosenbaum II, 2003 WL 22078557, 2003 U.S.
Dist. LEXIS 15652, and held ERISA does not preempt 42 Pa.C.S. 8371.
Stone v. Disability Mgmt. Servs., 288 F.Supp.2d 684 (M.D.Pa.2003).

We have subject matter jurisdiction under 28 U.S.C. 1331. We have

jurisdiction to hear an interlocutory appeal under 28 U.S.C. 1292(b)
The issues presented are legal issues over which we exercise plenary review.
Concepcion v. Morton, 306 F.3d 1347, 1352 (3d Cir.2002). Because this is an
appeal of a Fed.R.Civ.P. 12(b)(6) motion, we accept all factual allegations in
the complaint and all reasonable inferences to be drawn therefrom in the light
most favorable to the plaintiffs. Rossman v. Fleet Bank Nat'l Ass'n, 280 F.3d
384, 387 n. 1 (3d Cir.2002). We may dismiss a claim only if it is certain that no
relief could be granted under any set of facts which could be proven. Id.

In addition toPilot Life and Rush Prudential, the Supreme Court has asserted on
other occasions Congress did not intend to authorize remedies other than those
provided under ERISA 502(a), emphasizing the "overpowering" federal
policy in ERISA's exclusive civil enforcement provisions. See Metropolitan

Life Ins. Co. v. Taylor, 481 U.S. 58, 64-65, 107 S.Ct. 1542, 95 L.Ed.2d 55
(1987) ("As we have made clear today in Pilot Life ... 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."); Mass. Mutual, 473 U.S. at 146, 105 S.Ct. 3085
(ERISA 502(a)'s "carefully integrated civil enforcement provisions ... provide
strong evidence that Congress did not intend to authorize other remedies that it
simply forgot to incorporate expressly.").
7

Even if the Supreme Court's discussion of conflict preemption were dicta, we

do not view their dicta lightly:
[W]e should not idly ignore considered statements the Supreme Court makes in
dicta. The Supreme Court uses dicta to help control and influence the many
issues it cannot decide because of its limited docket. "Appellate courts that
dismiss these expressions [in dicta] and strike off on their own increase the
disparity among tribunals (for other judges are likely to follow the Supreme
Court's marching orders) and frustrate the evenhanded administration of justice
by giving litigants an outcome other than the one the Supreme Court would be
likely to reach were the case heard there."
Official Comm. of Unsecured Creditors of Cybergenics Corp. ex rel.
Cybergenics Corp. v. Chinery, 330 F.3d 548, 561 (3d Cir.2003) (quoting
McDonald v. Master Fin., Inc. (In re McDonald), 205 F.3d 606, 612-13 (3d
Cir.2000)).

The District Court decided this case before the decision inAetna Health, ___
U.S. ___, 124 S.Ct. 2488, 159 L.Ed.2d 312. Because Aetna Health was issued
after oral argument, we requested briefing from the parties.

Amicus supporting Barber's position contend that because 42 Pa.C.S. 8371

does not "provide[ ] a separate vehicle to assert a claim forbenefits," Aetna
Health, ___ U.S. at ___, 124 S.Ct. at 2500 (emphasis added), Barber's claim
for punitive damages, as opposed to additional benefits, is not preempted. But
this is too narrow a reading given the Supreme Court's emphasis on the
"congressional intent to create an exclusive federal remedy in ERISA 502(a)."
Id. (emphasis added).

10

Prior toMiller, the seminal case interpreting ERISA's insurance regulation

preemption exception was Metropolitan Life Insurance Co. v. Massachusetts,
471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). In Metropolitan Life, the
Supreme Court applied the McCarran-Ferguson test to determine whether a law

regulates insurance for purposes of the ERISA saving clause. First, the law
must have regulated insurance from a "common sense" view. Id. at 740, 105
S.Ct. 2380. Second, the Court adopted the three factors used in the McCarranFerguson Act to determine whether a regulation falls within the business of
insurance, that is, whether the regulation (1) transferred or spread policy risk;
(2) was an integral part of the policy relationship between the insurer and the
insured; and (3) applied only to entities within the insurance industry. Id. at
743, 105 S.Ct. 2380.
Applying the McCarran-Ferguson factors, the Supreme Court has saved from
preemption: an Illinois law requiring HMOs to provide independent review of
whether services are medically necessary, Rush Prudential, 536 U.S. at 374-75,
122 S.Ct. 2151; a California law requiring an insurer to demonstrate prejudice
in order to deny an untimely claim for benefits, UNUM Life Ins. Co. of Am. v.
Ward, 526 U.S. 358, 367-79, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999); and a
Massachusetts law requiring coverage of certain minimum mental health
services under any health insurance policy issued in that state, Metropolitan
Life, 471 U.S. at 742-47, 105 S.Ct. 2380. In Miller, 538 U.S. 329, 123 S.Ct.
1471, 155 L.Ed.2d 468, the Supreme Court jettisoned Metropolitan Life' s test,
stating it was making "a clean break from the McCarran-Ferguson factors." Id.
at 341, 123 S.Ct. 1471.
11

Barber attempts to cast the saving clause in a broad light by claimingMiller' s

reference to "the risk pooling" arrangement between insurer and insured refers
simply to the "insurance" arrangement between them. But the Miller test is
intended to clarify ERISA's opaque statutory language which saves statutes that
"regulate insurance." 29 U.S.C. 144(b)(2)(A). The Miller test, we believe,
demands more than whether a law substantially affects the insurance
arrangement between the insurer and insured. The Supreme Court's precise
formulation is whether a statute "substantially affects the risk pooling
arrangement between the insurer and insured." Miller, 538 U.S. at 342, 123
S.Ct. 1471 (emphasis added).

12

We recognizePilot Life was decided under the pre-Miller McCarran-Ferguson

standard which asked whether the law at issue "has the effect of transferring or
spreading a policy holder's risk." 481 U.S. at 48, 107 S.Ct. 1549 (internal
quotations omitted). Though the Miller Court made a "clean break" from the
McCarran-Ferguson factors, 538 U.S. at 341, 123 S.Ct. 1471, we believe the
Court's analysis in Pilot Life is nonetheless instructive and still valid on this
point.

13

As withPilot Life, we find the Court's analysis of insurance risk in the

pre-Miller Pireno to still offer guidance.