ERISA Remedies, Welfare Benefits, and Bad Faith: Losing Sight of the Cathedral

too lax and/or if damage awards are too high relative to the actual costs workers, participate[d] in a retirement plan regulated by erisa." id. at 2 (citations omitted). and refining the standard of culpability and reformulating the remedies by statute, 26 u. mich. j.l. difficult to fashion an argument that this current erisa remedy [for second, there is a concern that providing however, probably occurs in the insurance context." id. "in the past, because insurance policies congressional intent.91 questionable claims.59 for several often misunderstood reasons, is not amenable to simplistic 2009] erisa remedies, welfare benefits, and bad faith 405 interest based, nominally, on the court's interpretation of section 502(a)(3) but noting that "[e]very 398 hofstra labor & employment law journal [vol. 26:387 approximately "1.9 million beneficiaries of erisa plans have health care claims denied each year") there is little, if any, difficult to resolve during the debates in both of the chambers." jean p. hearne & hinda ripps culpability chosen is not particularly significant when viewing liability from a consequentialist expanding the remedies available for wrongful coverage decisions will cause welfare plans to abandoned by every state.105 77. see dominick c. capozzola, first-party bad faith: the search for a uniform standard contract breach) was unique to the insurance context.104 wrongful denial of coverage] is inadequate."48 43. it is now clear that the list of remedies set forth in mertens was intended to be illustrative, courts.18 and it seems equally unthinkable that the court would adopt the conception of erisa preemption section 502(a)(1)(b) include not only the plan but also its administrators and trustees." zanglein 42. the court first addressed the meaning of section 502(a)(3) in mertens v. hewitt assoc., 36. langbein, supra note 17, at 1334 (footnotes omitted). 68. "a first-party insurance contract is at its heart a promise to pay a sum or sums of money 91. justice ginsburg forcefully communicated this point during oral argument in sereboff between the financial interests of the benefit decision-maker and the benefit applicant in virtually 22. insurance is simply a form of risk management used to hedge against the risk of a plan losses or disgorge fiduciary gains. erisa � 502(a)(2). in either event, the lawsuit must be would have virtually no effect on the litigation of disputes over the 16, on file with author) (arguing that "the development of federal common law . . . by providing either."101 compensation from a third party who allegedly participated in the plan fiduciaries' breach. id. at administration of plan benefits, it is now being used as a shield for plan fiduciaries and insurers to or the availability of an employee benefits plan or because it qualified for an exception in section 514(b) of erisa of the phrase is regularly urged by commentators.89 resolution of the issue necessarily turns on whether one conceptualizes their contemplation at the time of contract formation."73 claims.49 liability rules will continue to develop by default rather than by design. define its scope.102 produced during the course of litigation, observed that: welfare plan fiduciaries.55 257 ("since all relief available for breach of trust could be obtained from a court of equity, limiting income by employees."5 force and may in the end be convincing"). "[w]e cannot rule out the possibility that a broader unanimously held that erisa does not permit the recovery of monet's paintings of the rouen cathedral, one need not analyze liability rules from a breach of contract makes it possible for the insurer to deny legitimate be said that such is the implied contract of the parties." (quoting spalding v. mason, 161 u.s. 375, "provide adequate notice in writing . . . setting forth the specific reasons punitive damages. see, e.g., promoting responsible managed care act of 1999, s. 374, 106th "coverage" because the patient does, ultimately, receive some treatment. the statute has extraordinary influence on the delivery of wrongful coverage determinations.43 when) to award consequential damages is quite different in cases where the disputed benefit is a after two decades, 37 ariz. l. rev. 1153, 1153 (1995) ("the tort of bad faith for breach of an supreme court, though, gave no reason for its characterization of russell's claim as one seeking 39. epstein & sykes, supra note 26, at 632 (footnote omitted); see also erisa � 502(g)(1) whether a treatment is medically necessary."). see also william m. sage, managed care's crimea: or unique to erisa.77 devise a comprehensive regulatory program to protect millions of american workers who looked to at the same time, however, this judicial solution does not address 48. epstein & sykes, supra note 26, at 641. benefit because her illness is the result of a pre-existing medical language of law and economics, the argument is simply that current promulgated regulations setting forth many procedural requirements for administrative review of john c. stein, jay sushelsky, christopher trower, nina wasow, and kathryn zeiler. and i thank against a welfare plan and its fiduciaries when a litigant has been injured notable commentators have long expressed the concern about business." paul m. secunda, sorry, no remedy: intersectionality and the grand irony of erisa, "congressional findings and declaration of policy" and providing that "[i]t is hereby declared to be state regulation erisa was believed to preempt, there appeared to be a `regulatory gap.'" id. at because . . . [t]he coverage decision-making enterprise is fundamentally resistant to ex ante subsequent courts have concluded, without examining the legislative history, that erisa forecloses and should punitive damages be available in the most egregious cases of traditional contractual remedies permitting recovery of extracontractual damages in the benefits-due 27. see jayne e. zanglein & susan j. stabile, erisa litigation 542 (2d ed. 2005) condition?29 contract law and trust law . . . [and] . . . those bodies of law . . . permitted recovery of both damages, relief is usually limited to the amount of benefit in question, and claims experimental and therefore not reimbursable."). relief" in section 502(a)(3) of erisa,85 insurance company on behalf of its employees and/or their beneficiaries (i.e., spouses, dependents). employer coverage?, 18 health aff. 7, 18 (1999). and, third, there is an inherent conflict available at www.namic.org/insbriefs/080926badfaith.pdf. (i.e., those economic injuries that were foreseeable by the breaching 90. see, e.g., brief of the sec'y of labor as amicus curiae in support of larue for otherwise would have avoided the litigation process entirely. second, it will cause other victims of provisions of erisa authorizes the recovery of consequential damages unquestionably colors his or her perspective regarding the extent to which reputational costs deter 23. erisa refers to such an individual as a "participant" and defines that term to include "any 60. "excessive damage awards will in addition discourage insurers from questioning claims wrongful coverage determinations to continue the litigation of their claims until settlement or it: reinterpreting erisa preemption, 51 ucla l. rev. 457, 460-61 (2003) ("erisa, meant to govern the relationships between employees and third parties . . . . by correcting this single error, as such, justice ginsburg joined what another noted jurist had 51. as a fellow symposium participant has noted, the fifth circuit articulated this position in rules?81 remedies available under section 502(a)(3) to "those categories of relief that were typically available punitive damages by participants or beneficiaries who are injured by the fact that consequential and punitive damages are not available benefits may be provided by such plans,21 relief" in section 502(a)(3) of erisa. clarification or reinterpretation although litigation continues in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." id. at both pension and welfare plans.3 indus. & lab. rel. rev. 77 (1950). even today, there is disagreement regarding the extent to (1994) (arguing that "courts must be willing to develop [federal] common law where state law is over the precise meaning of "equitable relief" in this provision of medill, supra note 17, at 831. erisa defines a "pension plan" to 502(a)(3). 37. section 502(a)(2) permits litigation against a breaching plan fiduciary in order to recover insurance: illness (health insurance), debilitating injuries (disability insurance), and death (life which employee benefits are truly deferred compensation rather than "status benefits." this 8. see brief of the sec'y of labor as amicus curiae in support of qualchoice's petition for although section 502(a) currently has several parts, disparaging supreme court dicta [i]n massachusetts mutual life insurance co. v. russell . . . ."). mepsweb/data_files/publications/st197/stat197.pdf (noting that 79% of all medical expenditures am., health and ret. fund of 1974, 165 f.3d 209, 213 (3d cir. 1998) (permitting pre-judgment section 502(a)(3) authorizes participants and beneficiaries, inter benefits mishandling? as such, it is not surprising that most litigation abraham, distributing risk: insurance, legal theory, and public policy 178 (1986). peril for an agreed period of time. a peril is any risk the likelihood of which can be quantified. in argument goes, because the expected cost of litigation (in light of the expansion of available respond with consequentialist arguments, virtually all proponents accept the consequentialist 12 cases had been covered by erisa, our liability would have been between zero and that was simply not written into erisa, which should legitimately be included within the federal damages . . . and those additional consequential and punitive damages traditionally recoverable in opposed to legislative reform (which might include damages caps or safe reasonable opportunity . . . for a full and fair review by the appropriate damages that were] . . . reasonably foreseeable by, the parties at the time the contract was made." party insurance claims.68 monetary payment (a retirement, or even life insurance, benefit dispute) as opposed to those where culpability"); see also henderson, supra note 71, at 1156-59 (discussing the approach used in common law of erisa, which is contrary to the approach courts otherwise take with respect to the and others.14 than a four-letter word, 19 prob. & prop. 65, 65 (2005) ("according to the administrative as interpreted by the disputes over benefits are squarely addressed by section 508 u.s. 248 (1993). in mertens, the beneficiaries of an erisa plan sought monetary the statute themselves use the word "appropriate" several times. see id.; erisa � 409(a) and the award of fees to the claimant's attorney) plus (iii) the reputational cost of more than an age-old consequentialist battle over liability rules which, 30. see id. at 554 ("courts have frequently addressed the question of whether a particular of extra-contractual damages "may be beneficial in theory"57 many including jean claude andre, roger baron, paul bland, elizabeth rogers brannen, john (2000) ("without exception, the benefits enforcement section has been construed to permit only the as is often the case, obstacles to legislative reform have led many than 200,000 disability benefit claims). at the end of the day, it is undeniable that one's world view this article addresses one of the most hotly contested radha a. pathak, teresa reneker, matthew d. roberts, paul m. secunda, mary ellen signorille, necessary or nonexperimental."). unnecessarily threaten employees' right to an independent review of an hmo's medical which saves from preemption "any law of any state which regulates insurance, banking, or patient.72 the foreseeable costs of medical bills incurred in treating a condition that peter k. stris* 400 hofstra labor & employment law journal [vol. 26:387 extracontractual damages, or about the possible consequences of delay typical disputes involve questions such as the following:26 united states house of representatives (nov. 5, 1999), http://archive.gao.gov/pdf/163015.pdf en banc rehearing at 13, qualchoice, inc. v. rowland, 367 f.3d 638 (6th cir. 2004) (no. 02-3614). fund 7, fig.1 (sept. 17, 2007) available at barrier to widespread misconduct and negligence in the coverage decision-making process. see, interpretation of erisa's preemptive force with a cramped erisa has created incentives that cannot possibly maximize the overall liability rules, and inalienability: one view of the cathedral, 85 harv. l. rev. 1089, 1111-12 event should occur (e.g., sickness, disability, death).24 employer's shield: the perversity of erisa fiduciary law, 2 u. pa. j. lab. & emp. l. 391, 436 of culpability, 52 hastings l.j. 181, 182 (2000) (noting that the various laws in this area are "in a federal common law, they admit that most courts have pointed to section 502(a)(3) of erisa as characterization of section 502(a)(1)(b) in russell is "curious."98 2009] erisa remedies, welfare benefits, and bad faith 393 96. id. at 144. on the very few federal substitutes are provided."12 6. erisa-governed "retirement plans are the single largest source of income [other than only sections 502(a)(1)(b) and (a)(3) are significant in the comparatively recent. see peter m. rehon, the pension expectation as constitutional property, 8 procedure). essential tools for accomplishing the stated purposes of erisa."). to permit any consequential damages as a remedy for improper handling at the same time, however, there are contract construction)." epstein & sykes, supra note 26, at 631-32. "the practical consequence of additional questions must be resolved. will recoverable damages be sickness, accident, disability, death or unemployment."7 settlement in effect nat'l remedy grants claims review for thousands (dec. 21, 2004), available http://www.erisa-claims.com/library/provident%20memo.pdf. medical necessity, therapeutic benefit, and the goals of administrative process in health 74 tul. l. rev. 951 (2000); rebecca s. fellman-caldwell, new york state conference of blue that market pressures coupled with existing legal rules already provide sufficient protections to � 1133(1) (2006). as contemplated by this section of the statute, the department of labor has regularly do in order to permit the recovery of prejudgment interest modest proposals reach a thoughtful compromise, we ensure that an important body of damages." id. at 439. 75. opponents of federal pbr legislation were (and are) well aware of this fact. see, e.g., the sort of relief obtainable under � 502(a)(3) to `equitable relief' in the sense of `whatever relief a and the united note 16, at 4 ("advocates of expanding liability [under erisa] implicitly assume that private of any federal patient protection legislation. damages as a remedy for benefits mishandling, the next consideration is 49. the mitigation of negative externalities has long been recognized as an essential objective the statutory violation (i.e., the benefits mishandling) as more analogous damages be limited in any way?79 (defending employers' decisions to avoid state-level regulation by purchasing stop-loss insurance may be implied under erisa,84 beneficiary to bring an action to enforce his rights under the plan � 21. the term "employee benefit" is commonly used to describe any non-wage compensation clarification by filing amicus briefs with the supreme court and various west life & annuity ins. co. v. knudson, 534 u.s. 204, 220-21 (2002) (interpreting section irrespective of the choice between tort and contract, numerous or "results in a deferral of expanding remedies often make their initial arguments on different terms. but when opponents mitchell l. rev. 525, 527 (2000) (arguing that if minnesota courts are to follow national trends 402 hofstra labor & employment law journal [vol. 26:387 26. the existence and magnitude of such disputes is neither surprising nor temporary. this is who are approaching the debate from a non-consequentialist perspective. to be sure, proponents of retirement income security act (erisa) � 402(7), 29 u.s.c. � 1002(7) (2006). a welfare plan alia, to bring a civil action "to obtain . . . appropriate equitable relief" to 107. "it is fair to say that prejudgment interest appears to be a widespread, acceptable remedy 62. id. at 14. one common example used to illustrate this argument is the assertion that consequential damages under section 502(a)(1)(b) of the statute.86 the meaning of "appropriate equitable the availability of more robust remedies, the cies+and+divisions&l3=division+of+insurance&l4=archive+of+doi+news+%26+updates&l5 reasonably believes that the procedure is not medically necessary. the plan will do so, the phrase extra-contractual damages (and the subsequent adoption by all legislative or judicial resolution.19 65. studdert, supra note 26, at 8. 392 hofstra labor & employment law journal [vol. 26:387 erisa remedies, welfare benefits, and what extent--attorneys are willing to bear the costs of such litigation (e.g., by accepting corcoran v. united health care, inc., 965 f.2d 1321, 1338 (5th cir. 1992)). conditions have been met." sykes, supra note 67, at 408. "the minimum remedy for breach of 105. see muir, supra note 40, at 437-38 ("more recently, traditional contract law principles theory, and economic consequences, nat'l ass'n mutual ins. companies, sept 2008, at 7, brought."36 100. id. at 437. 20. see supra notes 7-8 and accompanying text. 33. see erisa � 502(a) (entitled "civil enforcement"). see also erisa � 2(b) (entitled to the insured (or heirs of the insured) when covered contingencies materialize and certain section 502(a)(3). by far, the most commonly advanced judicial or technology" by welfare plans.61 (citing gresenz, supra note 16, at 8). this statistic only includes healthcare benefit denials. it been misinterpreted by the courts. see, e.g., george lee flint, jr., erisa: extracontractual from an employee benefit plan which covers employees of such employer." employment these welfare plans covered 137 million workers, retirees, and their 256. trail of error in russell, mertens, and great-west, 103 colum. l. rev. 1317, 1321 (2003) civil litigant.35 policy. by threatening insurers who wrongfully deny claims with tort theory . . . ." id. "today, a majority of jurisdictions permit a tort action based solely on breach insureds to file illegitimate claims." id. at 14. see also epstein & sykes, supra note 26, at 642 2009] erisa remedies, welfare benefits, and bad faith 395 legal rules, the proper answer to the question of whether, and in what non-elderly by age and insurance status, 2004 (jan. 2008), http://www.meps.ahrq.gov/ regulated by erisa.20 for the covered benefits out of his own pocket, he can obtain suffering) and extra-contractual economic injuries (i.e., lost wages due to reduce overall welfare.56 relevant part of the statute is section 502(a).34 provis.aspx. this is particularly significant because most healthcare expenditures in america are enforcement remedies were intended to be exclusive."); mass. mut. life ins. co. v. russell, 473 81. see, e.g., epstein & sykes, supra note 26, at 644-48. the case of employer-sponsored insurance benefits, an employer may enter into a contract with an to a plan participant or beneficiary for extracontractual compensatory the debate over what civil remedies should be available under for two reasons, such expansion would be limited. first, "insurers may 408 hofstra labor & employment law journal [vol. 26:387 form of insurance.22 allegations of wrongful coverage decisions is certainly "unwarranted." put simply, it will drive up allowed."40 they may now or hereafter relate to any employee benefit plan . . . "). see also epstein & sykes, 46. as professors epstein and sykes explain, "state law is preempted unless it is part of the or punitive damages caused by improper or untimely processing of is a been a significant, and somewhat misunderstood, obstacle to the passage doctors, and employers) be prohibited from contracting around liability legal stud. 405, 409-10 (1996); phyllis savage, the availability of excess damages for erisa has long captured the attention of commentators17 general rule, "a number of jurisdictions have rejected that assertion or otherwise denied damages for fiduciaries of an erisa-governed welfare plan.65 & stabile, supra note 27, at 536 (citing crocco v. xerox corp., 137 f.3d 105, 107 (2d cir 1998)). bad faith: losing sight of the supreme court reconsiders the existence of consequential damages under the statute, or congress civil remedies in this area can be reformed.66 phrase "appropriate equitable relief." yet it is undeniable that the calculus regarding whether (and nonetheless, the russell court relied on the phrase is promised something of v. fallon cmty. health plan, 953 f. supp. 419, 424 (d. mass. 1997), aff'd, 127 f.3d 196, 200 (1st inappropriate benefit administration."). governed welfare plans. in 2006, for example, non-elderly americans received health insurance framework and engage the debate as such. to be sure, they concede that the availability determination made by an erisa plan is expressly preempted by section consequences of their wrongful denial of health benefits.") (footnote omitted); kathyrn j. kennedy, worsened because of a wrongfully denied or delayed medical excessive remedies will incent plans to settle (rather than investigate of such benefits often leads to non-economic injuries (i.e., pain and 28. see id. at 544 ("many cases involving medical benefit denials concern the issue of between those `ordinary remedies for breach [of contract],' which would include foreseeable some exclusion of coverage for preexisting conditions, the question of whether a particular medical division over which approach to take has common-law court of equity could provide in such a case' would limit the relief not at all."). 1330-31 (11th cir. 2003) (leaving open the question of whether interest of delayed payments is still participate in her employer's welfare plan23 address the perceived regulatory vacuum created by erisa in the ii. the debate over liability rules people) had no insurance; 15% (39.1 million people) from public programs, and 5% (12.5 million cong. � 302 (1999). judicial remedy.47 individual disqualified from receiving a particular medical or disability be "appropriate" will, to many, be perceived as failing to balance the language of erisa, "the term `extracontractual' never appears in the 99. id. in the plan administrators' processing of a disputed claim. thus, there section 502(a)(3) theory is still valid after great-west. see, e.g., flint v. abb, inc. 337 f.3d 1326, that may be potentially illegitimate." tennyson & warfel, supra note 57, at 14. cf. kenneth s. that "[i]f the standards applied in the courts for finding [a violation] are note 17, at 831. other hand, the accompanying liability rules would expand the remedies [t]he advantages of erisa [to a litigation defendant] are enormous: state law is limited to those that are economic or will non-economic and punitive 55. see john h. langbein, trust law as regulatory law: the unum/provident scandal and 502(a)(3)); mertens v. hewitt assocs., 508 u.s. 248, 260-63 (1993) (interpreting section 502(a)(3)); illustrate that the conflict that has raged over this question is nothing to search for a judicial resolution.82 this interpretation of the statute can be traced back to the supreme of one scholar: http://www.americanbenefitscouncil.org/documents/kennedy-mccain_s872_stmt.pdf. considerations. and empirical work to date on this question is, at best, benefit claims.95 because of the nature of for actions under subsection (a)(1)(b) of this section, the district courts of the united states shall 94. 473 u.s. 134, 148 (1985). see also flint, supra note 82, at 621 ("the difficulty with (4th cir. 2006) (no. 05-1756); brief of the sec'y of labor as amicus curiae at 1, coan v. empirical study of insurance coverage disputes, 26 seton hall l. rev. 1055, 1068 (1996) future benefits under the terms of the plan."38 1974 � 2(b), 29 u.s.c. � 1001(b) (2006) (emphasis added). and the civil enforcement provisions of ("equitable or remedial relief as the court may deem appropriate"); erisa � 502(a)(2) ("appropriate and to what extent should key players (i.e., plans, in litigation in any court. see, e.g., susan m. mangiero, erisa fiduciaries beware: risk is more by the wrongful handling of her benefits claim? it has a modest goal: to remedies for the improper handling of benefits claims by erisa- determinations should be altered turns on complex empirical once a decision has been made to permit some consequential 387 98. muir, supra note 40, at 436. 14. a now-infamous memorandum written by a disability insurance executive almost fifteen erisa that is the subject of this symposium. in her 2004 concurrence ("examining the purposes and main features of erisa . . . [and] then turn[ing] to the three supreme 87. see, e.g., larry j. pittman, a plain meaning interpretation of erisa's preemption and evolved in the judicial and administrative oversight of managed care."). breaches the contract . . . . the foreseeability hurdle seems likely to be present value of (i) the amount of money the plan will be required to consequential damages against plan actors who engage in opportunistic or careless behavior will remedy for wrongful denial of coverage, coupled with a cap on recoverable consequential damages, "the successful plaintiff [to obtain] an order directing the plan to provide madelaine behr, daniel leonetti, and molly o'brien for their invaluable research assistance. 106. "employee benefit claims may or may not be similar to traditional insurance actions. the beneficiaries who suffer serious or fatal injuries allegedly caused by the potential to correct such underenforcement . . . .69 proponents of expanding liability in cases of wrongful benefits the late 1990s and early 2000s saw many proposals advanced by erisa preemption jurisprudence "may lead some employers to change to unfunded employee particular medical treatment experimental and, therefore, not covered by litigants will affect the behavior of welfare plans and their fiduciaries. see, e.g., gresenz, supra victims of improper benefits handling.42 as explained above, the traditional measure of contract damages section 502(a)(1)(b) to those available in traditional first-party insurance enforce any provisions of the statute or to redress violations of the the status quo. as an analytical matter, this is precisely what courts the benefits in dispute, plus attorneys' fees or, if the employee has paid years ago is often cited to illustrate the importance of that concern. the memorandum, which was good faith/bad faith inquiry to the realm of contract, but broadly define damages to include [all same time, there is much evidence to suggest that market forces are woefully insufficient. see, e.g., brendan s. maher & peter k. stris, erisa, agency costs, and the future of health care in the instead, the court held that the phrase "equitable relief" was intended by congress to limit the the supreme court could rationalize the law of managed care immediately."). a well known erisa case when it stated that "bad medical judgments will end up being cost-free to preempted by federal law, there are no jury trials, there are no compensatory or punitive include "any plan, fund, or program . . . established or maintained by an costs of [expanded] liability are uncertain but that the prospect of litigation may have [important] the text, legislative history, or purpose of erisa to suggest that see supra note 8 and accompanying text. see also richard a. epstein & alan o. sykes, the permit the recovery of foreseeable non-economic damages that result insurance, life insurance, and severance pay.10 court's 1985 decision in massachusetts mutual life insurance co. v. authorize expensive high-tech diagnostic procedures (e.g., mris) in circumstances where the plan in setting liability rules. see, e.g., guido calabresi & a. douglas melamed, property rules, 102. id. at 437 (explaining that the lack of explicit statutory language led the russell court to used the term before in the erisa context" or "in any other context not materially worse than that of judges and juries in making cost-benefit decisions about the benefit plan or an employee pension benefit plan or a plan which is both an employee welfare 70. to be sure, there are respected commentators who stop far short of aggressively urging the traditional measure of contract damages."103 whether or not such damages were foreseeable).70 welfare plan setting.37 ("erisa"). erisa, the supreme court has continuously interpreted the phrase in a 3. erisa � 3(3) ("the term `employee benefit plan' or `plan' means an employee welfare remedies will incent participants and beneficiaries to file illegitimate or ("although the intent of the preemption clause was to provide uniformity regarding the ("given the diversity of medical opinions on the proper course of treatment for particular patients, it opponents of substantial expansion of liability maintain that there second, a lawsuit to recover benefits pursuant to section 502(a)(1)(b), unlike other civil litigation condition qualifies as a disability entitling a participant to receive benefits under a plan."). no remedy for death allegedly caused by delayed authorization for bone marrow transplant); turner even critics of expansive judicial remedies admit that "[i]t is not but arguing that state regulators can exploit the "savings clause loophole" by directly regulating erisa: defining the scope of federal preemption, 34 harv. j. on legis. 233, 235-36 (1997) damages be available?78 $0.5 million. employers' involvement in health coverage"); gresenz, supra note 16, at 4. cf. tennyson & liability for extracontractual damages, bad faith liability has the handling currently accept a less costly benefit than the one that they as of the end of 2006, these retirement plans held more than $5.5 trillion in assets. bd. of governors it is easy to appreciate the concern articulated by justice ginsburg second, they argue that many victims of wrongful benefits http://www.commonwealthfund.org/content/publications/issue-briefs/2007/sep/whither- 390 hofstra labor & employment law journal [vol. 26:387 patient rights despite erisa: will the supreme court allow states to regulate managed care?, united states, 76 fordham l. rev. 2297 (2008). authorization for such an award. id. as many courts have noted, it is far from clear whether a benefit plans to avoid erisa's insurance saving clause"). 63. there is, of course, some literature devoted to empirical analysis of the likely effects of settled for fair (or close to fair) value. finally, proponents of expanding statute."99 participant."31 16. for example, those who disagree with the viewpoint espoused by justice ginsburg believe consequential damages . . . and punitive damages under certain circumstances . . . ."). provided by an employer to an employee. this conception of employee benefits (i.e., as deferred * visiting assistant professor, whittier law school. j.d., harvard law school; b.a., university of such reinterpretation would undoubtedly be an improvement over relief" under section 502(a)(3) because, "at common law, the courts of equity had exclusive although several different types of employee iii. the complexities of legislative reform "for many years, erisa section 514 was interpreted to displace state regulation of medical care significant amount of litigation regarding treatments that insurers have characterized as denied claims. see 29 c.f.r. � 2560.503-1 (2009). anticipated." tennyson & warfel, supra note 57, at 3. on the other hand, "nine states confine the norman somers & louis schwartz, pension and welfare plans: gratuities or compensation?, 4 liability suggest that courts get some cases wrong (i.e., affirm improper erisa defines a "welfare plan" to include "any plan, fund, or tex. l. rev. 1295, 1309 (1994). 83. see, e.g., russell korobkin, the failed jurisprudence of managed care, and how to fix many proposed reform bills expanded, in some meaningful way, the the plans that rely on [utilization review] companies to contain medical costs" because, under 58. id. disabled?30 the three questions that largely drive the policy debate at issue: should compensation) has long been advanced by some economists. see, e.g., albert de roode, pensions press release, mass. office of consumer affairs & bus. regulation, landmark multi-state benefits. were viewed as contingent contracts to pay the amount specified under the policy, remedies healthcare9 column entitled "opponents of changing remedies"); see also aetna health inc. v. davila, 542 u.s. rehearing and rehearing en banc, larue v. dewolff, boberg & associates, inc., 458 f.3d 359 if a claim for benefits is denied, erisa requires that the plan play in questionable cases. adopted by the supreme court. many will object to such an cases involving the precise scope of erisa section 502(a). see larue v. dewolff, boberg, & curiae supporting farace's petition for panel and en banc rehearing at 1, pereira v. farace, 413 between these proposed bills highlight several important and challenging 69. kenneth s. abraham, the natural history of the insurer's liability for bad faith, 72 resolutions address four primary subjects: the extent to which state law enforcement remedies were drafted . . . argue strongly for the conclusion that erisa's civil "[s]ubsections (1)-(3) . . . constitute the three remedy provisions upon healthcare costs without meaningfully improving care quality. again, it is undeniable that one's 10. for example, "[s]hort- and long-term disability benefits were available [in 2004] to 39 and 89. see, e.g., secunda, supra note 51 (manuscript at 5-6); langbein, supra note 17, at 1321; 2003, "[a]bout fifty million private-sector employees, including a majority of year-round, full-time in first-party insurance, the cost to the policyholder of bringing suit for coverage decisions?80 to a litigant under erisa means that they are not available at all. any it denies or delays coverage if the amount of money immediately saved the clarification or reinterpretation of this provision. are turning contract actions, which are suits over what is covered under a health care plan, into tort recovery of extracontractual damages under the benefits-due lawsuit arises because of some exchange for this premium payment, the insurer assumes the financial risk of a contractually defined a worsened medical condition). but section 502(a)(1)(b) merely allows apply to both pension and welfare plans. for this reason, there is no way to selectively interpret the core holding of its unanimous 2002 decision in aetna health inc. v. davila, 542 u.s. 200 (2004). courts to permit traditional trust law remedies of `make-whole' relief to rectify `any' act or practice absolutely no consequential damages are recoverable by a victim of existing remedies under erisa for wrongful coverage denials are inadequate "has considerable noted, the decision to self-insure--either fully or with the purchase of stop-loss insurance--is often (june 7, 2007), http://www.federalreserve.gov/releases/z1/20070607/z1.pdf. assessing the patients' bill of rights (oct. 29, 2001), available at even negligent disregard of the legitimacy of the policyholder's claim for coverage and whether the 32. erisa � 503(2). as one erisa scholar has previously noted, the supreme court's 61 hastings l.j. (forthcoming dec. 2009) (manuscript at 33, on file with author) (quoting it would be deemed plan will likely incur as a result of the denial or delay (e.g., legal fees, an questions in that debate: what remedies should be available in litigation section 502(a)(1)(b). as explained above, federal courts have true for three reasons: first, any system that insures well over 100 million americans against a would be created, they do not phrase issues of coverage in coverage terms."). manner which does not permit the recovery of extra-contractual or action to "recover benefits due to him under the terms of his plan, to written about erisa preemption, federal common law, and ways in which existing jurisprudence should be changed.87 ("medical plans typically exclude experimental and investigational treatments. there has been a and, even if a state law cause of action somehow a fiduciary to an employee benefit plan may be held personally liable 24. there are three important perils that are commonly covered by employer-sponsored to breach of contract or tort.71 resulting from refusal to authorize psychiatric benefits under the plan); spain v. aetna life ins. co., because of these potential changing erisa's liability rules. see studdert, supra note 26, at 8 (concluding that "the direct employee retirement income security act of 19741 in other words, "consequential damages are not thoughtful compromise, however, we ensure that an important body of 80. see, e.g., am. benefits council, issue brief, kennedy-mccain patients' bill of rights been denied coverage for some treatment of medical importance to the families.8 kauffman, 457 f.3d 250 (2d cir. 2006) (no. 04-5173); brief for the sec'y of labor as amicus employee or former employee . . . who is or may become eligible to receive a benefit of any type damages] are usually not recoverable in contract actions . . . ."74 benefit plan relate to the administration of the plan and thus come within erisa's general 45. this could happen either because the law at issue was somehow deemed not to "relate to" the supreme court's interpretation of section 502(a)(3) is faithful to that concern as follows: arguing two recent erisa cases before the united states supreme court: larue v. dewolff, 97. see flint, supra note 82, at 621 (noting that, as a result of dicta in russell, "many 4. id. � 3(2)(a)(i). erisa, "the cost of compliance with a standard of care (reflected either in the cost of prevention or 11 f.3d 129, 132 (9th cir. 1993) (finding no remedy for death allegedly caused by withdrawn welfare of players in the system.51 available." id. 101. id. at 436. elaboration." david m. studdert et al., expanded managed care liability: what impact on "medical, surgical or hospital care or benefits, or benefits in the event of claims because the traditional rules governing damages award the by 1995, "at least twenty-four other state courts of last resort ha[d] also recognized that an insurer under what circumstances to permit such damages. again, this is hardly 52. see, e.g., mark a. hall et al., judicial protection of managed care consumers: an in this regard, the wrongful conduct. compare epstein & sykes, supra note 26, at 642, with bronsteen, maher, & 396 hofstra labor & employment law journal [vol. 26:387 5. id. � 3(2)(a)(ii). 514(a) of the statute.44 1545 (1996). program . . . established or maintained by an employer" that provides services, inc., 547 u.s. 356 (2006). i am grateful for the generous assistance that i received from consequential damages for the improper handling of a benefits claim.93 authorization for surgery); kuhl v. lincoln nat'l health plan, inc., 999 f.2d 298, 305 (8th cir. centuries viewed noncontributory private pensions plans as mere gratuities."). see generally a. brought on behalf of the plan. section 502(a)(2) can apply in litigation involving the handling of one who contracts to pay money on a certain day knows that, if he fails to fulfill his contract, he available in insurance law or otherwise justifying its choice to speak in terms of extracontractual securities." erisa � 514(b)(2)(a). mass. mut. life ins. co. v. russell, 473 u.s. 134, 140 (1985) (interpreting section 502(a)(2)). intersectionality of erisa preemption and remedial issues. it is influenced by my experiences distributed to the insuring public in the form of higher insurance 2009] erisa remedies, welfare benefits, and bad faith 407 what is an unjust and increasingly tangled erisa regime."13 and, yet again, this is hardly new by failing to pay the insurance benefit is greater than the expected mental anguish on grounds of unforeseeability." id. (citing kewin v. mass. mut. life ins. co., 295 each year, there are millions of recorded disputes regarding the employer" that "provides retirement income"4 also permits civil litigation to redress violations.33 new or unique to erisa; states have long been forced to confront the 79. some proposed legislation would have permitted economic, non-economic, and punitive terms of the insurance policy. at one time courts generally held that no further remedy was mid atl. med. servs., inc., 547 u.s. 356, 361-63 (2006) (interpreting section 502(a)(3)); great- may not be difficult for a plaintiff to find an expert willing to opine that some treatment was every coverage dispute involving welfare insurance benefits. see generally john bronsteen, because: protect participants' rights.") (footnote omitted). with repeat dealing and reputation are operative to a significant degree" and maintaining that "the state law cause of action permitting a litigant to challenge a benefit exaggerated."). of course, the extent to which market forces affect the behavior of welfare plan 67. see, e.g., alan o. sykes, "bad faith" breach of contract by first-party insurers, 25 j. various circumstances including litigation under section 502(a)(1)(b)). punitive damages without limitation. see, e.g., patient's bill of rights act of 1999, h.r. 358, 106th alternatively, it may self-insure by agreeing to pay covered benefits once they are earned (either out recovery of benefits due under a plan.") (footnote and citations omitted). 59. "if damage awards are sufficient to create a `windfall' for the insured, this may encourage 404 hofstra labor & employment law journal [vol. 26:387 omitted). put simply, the government argued that participants and beneficiaries were entitled to supra note 26, at 631 ("all courts seem to agree that disputes over the coverage of an employee medical malpractice claims: a response to pacificare of oklahoma v. burrage, 80 minn. l. rev. drawing in the ring case based on 15th and 16th century english precedent?" transcript of oral assets. 250-51. although "[m]oney damages are, of course, the classic form of legal relief," id. at 255, the wrongful death of unborn child allegedly caused by denial of authorization for hospitalization). although born from concerns about pension security,2 that violates `any' provisions of erisa"). see also langbein, supra note 17, at 1321; medill, supra (1972). as recognized by professor/judge calabresi and professor melamed's reference to claude 61. tennyson & warfel, supra note 57, at 14. in the "over-invest[ment] in claims processing bureaucracy, procedures, were made by those with private health insurance in 2004). the statute also mandates that the plan "afford a but caution insurance benefit not only save the plan money, but also permit advertisement of a high rate of rules would expand the remedies available in some erisa cases except for incumbent rent seekers, there are no commentators who damages as extracontractual damages." id. recoverable as long as they are "foreseeable" by the party who memorandum from jeff mccall to idc mgmt. group & glenn felton (oct. 2, 1995), available at handling maintain that there are compelling reasons to believe that lewis, brendan s. maher, shaun p. martin, paul a. montuori, lindsay nako, scott l. nelson, bronsteen, maher, & stris, supra note 26, at 2311 (focusing on concerns with the former). incentive to pursue legitimate claims to the point of settlement or government in mertens, or some variant thereof, would need to be available after great-west). in my opinion, the near-universal availability of pre-judgment interest argument, sereboff v. mid atl. med. servs., inc. 547 u.s. 356 (2005) (no. 05-260), available at warfel, supra note 57, at 14. 2009] erisa remedies, welfare benefits, and bad faith 401 remedies: chimera or congressional compromise?, 81 iowa l. rev. 1, 3 (1995) ("concentrat[ing] "damages for mental anguish [i.e., non-economic consequential director, education, workforce, and income security issues for the united states general 13. id. (quoting difelice, 346 f.3d at 453 (becker, j., concurring)). see also cicio v. does, a threshold question that must be answered, of course, is whether reimbursement."39 53. this is true because the potential for a greater ultimate recovery will have two likely context of managed healthcare.64 the plan?27 (noting that patients often "find it too expensive or too difficult to pursue their objections through liability insurer's duty to settle is governed by a negligence or a strict liability standard matters little, in aetna health inc., v. davila,11 security of americans can hardly be overstated.6 compare epstein & sykes, supra note 26, at 642 (focusing on concerns with the latter), with cross & shield plans v. travelers insurance co.: the supreme court clarifies erisa preemption, believe that welfare plan fiduciaries (i) usually act in good faith and (ii) exercise judgment that is 72. epstein & sykes, supra note 26, at 632. 47. see, e.g., bast v. prudential ins. co. of am., 150 f.3d 1003, 1010 (9th cir. 1998) (finding would have permitted economic damages for wrongful coverage decisions but not non-economic or significantly, the statutory provision explicitly authorizing a is an relief"); id. � 502(a)(3) ("appropriate equitable relief"). permits recovery for one important category of "consequential" injuries 1. 29 u.s.c. �� 1001-1461 (2006). callery and reversal of the district court at 1, callery v. united states life ins. co., 392 f.3d 401 authorized by erisa, may be filed in either federal or state court. see erisa � 502(e)(1) ("except after many years of study and debate, congress enacted the employee retirement income security act of 1974, a political history 1 (2004). [result in] unwarranted increases in claim costs that are ultimately zanglein and stabile characterize the awarding of prejudgment interest as an implied remedy under inconclusive.63 92. this issue is further complicated by the fact that erisa's civil enforcement provisions 66. "provisions involving judicial remedies and access to courts . . . proved to be the most statute or the terms of the erisa plan at issue.41 hastings const. l.q. 153, 168 (1980) ("[m]ost courts in the late nineteenth and early twentieth ousted" and that if leaving a litigant "without a remedy would contravene the purposes of erisa, it 12. id. at 222 (ginsburg, j., concurring) (quoting difelice v. aetna u.s. healthcare, 346 f.3d cathedral proper rule for awarding extracontractual damages should be another tool to reduce improper plan under state [contract] law . . . consequential damages may be contingency-fee compensation and/or by advancing costs). 396 (1896)). congress 11 (june 18, 2002), available at 2009 hofstra labor & employment law journal symposium, the grand irony of erisa?: 54. as professors epstein and sykes concede, "the calculus may be even more favorable wrongful handling of a benefits claim have been left with no meaningful most welfare benefits take the 78. some proposed pbr legislation would have permitted economic, non-economic, and extracontractual damages and drew no parallels with traditional insurance law. nor did it cite any as interpreted by the argument goes, would result in a greater number of these claims being (arguing that erisa should not be construed to preempt states from enforcing insurance laws is a particular treatment medically necessary?28 apply under some of the bills and in some circumstances. curiously, even where federal action hopkins, robert hoskins, todd jackson, alison lacroix, bill lann lee, paul alan levy, jeffrey the cost of paying judgments) need not be factored in utilization review companies' cost of doing damages mandated for benefit claims actions, 36 ariz. l. rev. 611, 665 (1994) ("congress congress intended to limit the contractual remedies available under principled reason to treat such interest payments as different from many and, second, person designated by a participant, or by the terms of an employee benefit plan, who is or may does an individual satisfy her plan's definition of steers a reasonable course between the competing concerns." id. at 642. denials or delays) and that this is a particularly significant risk under the 25. see, e.g., metro. life ins. co. v. glenn, 128 s. ct. 2343, 2350 (2008) (noting that that erisa permits to be "non-vested" (e.g., retiree healthcare benefits) may be terminated. a regulatory vacuum leaves gaping wounds--can common sense offer a better way to address eoca (describing a landmark agreement in which the largest disability insurer in the u.s. agreed available in many erisa cases if a tort approach is adopted.75 57. sharon tennyson & william j. warfel, first-party insurance bad faith liability: law, 41. erisa � 502(a)(3)(b). that such a delay gives rise to a private right of action for consequential injuries caused by the improper denial or delayed provision of welfare benefits. over time, it has become settled law that none of the civil enforcement because liability for bad faith serves a largely ex ante function."). 2009] erisa remedies, welfare benefits, and bad faith 389 "one good loophole deserves another," 5 yale j. health pol'y l. & ethics 89, 110-12 (2005) of the implied covenant of utmost good faith (i.e., bad faith). . . . [in these states,] the injured party world view unquestionably colors his or her perspective regarding the relative integrity and of a benefits claim. this question is hardly new or unique to erisa.67 justice ruth bader ginsburg described wisdom is that "contractual precision [in defining health insurance benefits] has not occurred between stakeholders with strikingly different interests and ideologies. id. see also jason c. brown, extra-contractual damages stemming from a first-party insurer's of adoption.88 identified 12 claim situations where we settled for $7.8 million in the aggregate. if these first, they claim that many victims of tort but not contract."). 35. see, e.g., pilot life, 481 u.s. at 54 ("the deliberate care with which erisa's civil resolution.53 federal judges to determine liability rules on a case-by-case basis. as lawsuit"). competing systemic concerns.92 the policy of this chapter to protect . . . the interests of participants in employee benefit plans and daniel feinberg, thomas c. goldstein, julia m. graff, deepak gupta, karen handorf, elizabeth 2004."). because the [supreme] court has coupled an encompassing fashion, existing laws regarding liability for wrongful coverage as wages, 3 am. econ. rev. 287, 287 (1913) ("a pension system . . . is really paid by the other types of consequential damages in the welfare benefit context (e.g., participants and beneficiaries. see carole roan gresenz et al., a flood of litigation? 31. employment retirement income security act (erisa) of 1974 � 503(1), 29 u.s.c. 388 hofstra labor & employment law journal [vol. 26:387 welfare benefits but only if the plan is funded and the dispute involves the mismanagement of its incurred by [those] whose claims have been denied, substantial incentive remedies available for the wrongful handling of benefits claims by the 74. id. although some have argued that insurance contracts fall within an exception to the stud. 625 (2001). second, welfare insurance benefits are typically defined in subjective terms. for the mentioning: first, "those that may be held liable in an action seeking recovery of benefits under recovery be permitted for consequential economic injuries which are not quality care act of 1999, h.r. 216, 106th cong. � 302 (1999). yet other proposed legislation consequentialist perspective. but there are few, if any, advocates of expanding erisa remedies 30 percent of workers, respectively, and nearly all participated." u.s. dep't of labor, bureau of improper handling of benefits claims. and those proposals which would the disputed benefit is medical care. stronger remedies, the argument goes, are a term in the erisa context."100 e.g., epstein & sykes, supra note 26, at 642 (asserting that "the usual market constraints associated 64. see generally edward a. zelinsky, against a federal patients' bill of rights, 21 yale l. resolutions address the meaning of the phrase "appropriate equitable 2009] erisa remedies, welfare benefits, and bad faith 403 damages.46 v. dedeaux, 481 u.s. 41, 52 (1987) ("the civil enforcement scheme of � 502(a) is one of the become entitled to a benefit thereunder." id. � 402(8). administrators may receive a deferential standard of review. the economic impact . . . 88. for example, it hardly seems possible that the supreme court will choose to revisit the three potential distortions, in particular, are internalize the negative externalities of wrongfully handling benefits prominent democrats and republicans to enact what is often referred to necessity determination with preemption, 77 st. john's l. rev. 867, 884 (2003) (arguing that distortions may arise."58 initially requested.54 mass. 1997) ("this case, thus, becomes yet another illustration of the glaring need for congress to 2009] erisa remedies, welfare benefits, and bad faith 391 when she asked, "do you really think that congress had in mind the distinction that you are now moreover, the supreme court "never effects: first, it will cause some victims of wrongful coverage determinations to bring lawsuits who regularly identified: first, there is a concern that providing excessive although the court's holding only applied to section 502(a)(2) of rules through anti-indemnification, anti-retaliation, and anti-waiver beneficiaries--joined by the united states as amicus curiae--argued that they sought "equitable http://www.heritage.org/research/healthcare/hl720.cfm ("the house and senate health care bills at http://www.mass.gov/?pageid=ocaterminal&l=6&l0=home&l1=government&l2=our+agen in addition to mandating administrative review, however, erisa variety of contractual contexts to describe damage requests that exceed prior to russell, "no reported court decision had ever used the competence of welfare plan fiduciaries (on the one hand) and judges/juries (on the other hand). coverage." gresenz, supra, at 2 tab.1. i. existing remedies against a stop-loss plan's insurer); l. darnell weeden, tactical self-funded erisa employers enforcement provisions, 41 san diego l. rev. 593, 612-13 (2004); donald t. bogan, protecting to what extent should employers be condition arose before the coverage under the plan is one that is litigated with some frequency."). by ignoring this reality and failing to remedy available to a patient who challenges the denial of coverage by an mco [managed care equitable that could be used by participants or beneficiaries to recover monetary compensation for 502(a)(1)(b) which authorizes a participant or beneficiary to file a civil their beneficiaries . . . by providing for . . . ready access to the federal courts."); pilot life ins. co. strongly advocate for maintenance of the status quo regarding civil 321 f.3d 83, 106 (2d cir. 2003) (calabresi, j., dissenting), rehearing after remand, 385 f.3d 156 frequently were limited to the terms of the policy--generally its face value." id. (citing sykes, significantly affect the liability rules available in such disputes--or find and commentary on this issue is directed at the interpretation of section 76. it is worth noting, however, that at least one scholar has argued that the standard of not exhaustive. see, e.g., sereboff v. mid atl. med. servs., inc., 547 u.s. 356, 356 (2006) the availability of more robust remedies, the argument from the wrongful handling of a benefits claim. this is probably the rev. 164, 166 (1977). costs [that, in turn] will result in higher premiums [and] reductions in employer-sponsored insurance judgment who otherwise would have dismissed their claims prior to resolution. in either case, this and other non-retirement benefits such as disability leave its references of "extracontractual damages" undefined). preemption and federal common law. for years, much has been 2009] erisa remedies, welfare benefits, and bad faith 397 transplant); cannon v. group health serv. of okla., inc., 77 f.3d 1270, 1277 (10th cir. 1996) 103. id. "for example, professor dobbs refers to emotional distress damages and punitive intended that the remedies provided by erisa include . . . those available under then current state 82. to be fair, most commentators who propose judicial resolutions believe that erisa has 73. sykes, supra note 67, at 410. state of confusion" because even those states that do recognize the tort "apply different standards of may recover for all harm or injuries incurred, regardless of whether they could have been as of 2002, current system because erisa has been interpreted by the supreme interpretation of the statute because, as a practical matter, it allows damages but with a safe harbor against punitive damages for coverage denials in which the plan revisits the law to the same end."); andrews-clarke v. travelers ins. co., 984 f. supp. 49, 53 (d. judicial review of benefit denials under erisa, 101 nw. u. l. rev. 1315, 1321 (2007). although the issue is quite important, it is beyond the scope of this article. party (i.e., the insurer). pursuant to the contract, the insured pays a fixed sum (the premium). in named fiduciary of the decision denying the claim."32 such a promise, available in all jurisdictions, is an action to recover the amounts owing under the from having policies covered by erisa could be significant. as an example, [we] would the availability of such newly permitted means to discourage welfare plan fiduciaries from engaging in strategic 9. the majority of private health insurance in the united states is provided through erisa- toward wrongful denial if the plan anticipates that it can settle the cases that are brought quickly of the statute as finally enacted, however, provide strong evidence that congress did not intend to court decisions that have contorted erisa remedy law."). see also colleen e. medill, resolving issues on which consensus must be reached before the law governing statutory provisions or legislative history analogizing employee benefit plan remedies to those ensure that benefit plan participants and beneficiaries are compensated for injuries caused by welfare insurance benefits, however, the denial or delay in the provision state law `regulating insurance.' even then, it will be preempted to the extent that it purports to reform. see, e.g., epstein & sykes, supra note 26, at 641-42 (concluding that the argument that when benefits are wrongfully denied or delayed.107 saving clauses: in support of a state law preemption of section 1132(a) of erisa's civil appropriateness of welfare benefits, then expanding remedies available in cases involving advanced by professor korobkin. see korobkin, supra note 83, at 460-61. 50. of course, it is also predicated on the notion that expanding the remedies available to civil "first-party bad-faith will become a recognized cause of action"). the supreme court justified its rationale in russell as one grounded in companies in the provision and financing of health insurance, the commonwealth of a segregated fund or out of the company's general accounts). if an employer chooses to self- managed to survive preemption under section 514,45 amend erisa . . . [which] has evolved into a shield of immunity that protects health insurers, 44. see erisa � 514(a) ("except as provided in subsection (b) of this section, the provisions limitation on contract damages under erisa that is peculiar. scope of coverage under employer-sponsored insurance arrangements.25 authorize other remedies that it simply forgot to incorporate expressly."). http://www.bls.gov/ncs/ebs/sp/ebsm0002.pdf. see also letter from barbara d. bovbjerg, associate supreme court, this statutory provision has proven to be of little help to 17. see, e.g., john h. langbein, what erisa means by "equitable": the supreme court's 7. erisa � 3(1). pays the employer for costs incurred above an agreed upon level. as commentators have long 18. for example, the united states supreme court has decided several statutory interpretation to be sure, there are many reasons to doubt that an entirely new cause of action against insurers regarding first-party coverages.") (citation omitted). utilization review providers, and other managed care entities from potential liability for the erisa, the majority opinion contained the following dicta: am. biodyne, inc., 48 f.3d 937, 943 (6th cir. 1995) (finding no remedy for suicide allegedly predicting the consequences of changing legal remedies available to erisa distortions, the argument goes, the careless expansion of liability "will preempted by section 502(a) if it permitted consequential or punitive 85. another of my fellow symposium participants has focused on this issue. secunda, supra 45 cath. u.l. rev. 1309 (1996); seema r. shah, loosening erisa's preemptive grip on hmo office of the u.s. courts, new [erisa] cases [numbered] 9,167 . . . in 2000 [and] 11,499 . . . in see also, jay conison, erisa and the language of preemption, 72 wash. u. l.q. 619, 667-68 goes, would result in a greater number of these claims proceeding to preemption clause."). the costly and time-consuming judicial process"). a modest one where [for example, a managed care organization] has is preempted by erisa,83 & pol'y rev. 443 (2003). in the words of professor zelinsky, a fellow symposium participant, might occur because the prospect of a greater ultimate recovery will influence whether--and to 71. see roger c. henderson, the tort of bad faith in first-party insurance transactions subcommittee on employer-employee relations committee on education and the workforce of the states department of labor continues to aggressively pursue escape liability on the grounds that any economic losses were beyond erisa] will result in defensive practices [that, in turn] will result in large increases in health care boberg, & associates, inc., 128 s. ct. 1020 (2008) and sereboff et ux. v. mid-atlantic medical conception of what remedies are appropriate.16 406 hofstra labor & employment law journal [vol. 26:387 courts of appeals.90 394 hofstra labor & employment law journal [vol. 26:387 reform 1, 26 (1992) ("although a number of jurisdictions have recognized a cause of action . . . remedies) now exceeds the cost of, what the plan believes to be, an uncovered procedure. if we equity"). to date, however, the court has failed to accept the characterization of any remedy as 104. "the most common use of the term extracontractual to refer to a limitation on damages, act of 1999, h.r. 719, 106th cong. � 302 (1999). coverage decisions. see, e.g., dahlia k. remler et al., what do managed care plans do to affect of the fed. reserve sys., flow of fund accounts of the united states: flows and outstandings, 113 made by those with private insurance. see, e.g., gary olin, medical expenditures of the russell.94 benefit plan and an employee pension benefit plan."). except for the establishment of a pension system."). its adoption by american courts, however, is beneficiaries, 2, tab.1 (1999), http://www.rand.org/pubs/issue_ papers/2006/ip184.pdf (table 1: proposal (s. 872) leaves employers vulnerable to lawsuits (june 2001), available at contingent loss. typically, a consumer (i.e., the insured) directly enters into a contract with another successful claimant only the amount to which she is entitled under the litigation is an effective deterrent mechanism."). cases, which have much more extended types of recovery . . . . this is done by letting state law on the scope of relief available in erisa fiduciary and section 510 claims after mertens."). (noting that, according to 1996-97 data, approximately 36% and 26% of all employees in the private fiduciaries is an empirical question. there is certainly evidence that market forces deter wrongful n.w.2d 50 (mich. 1980)). administrator behavior."); muir, supra note 40, at 461 ("[p]ermitting claims for foreseeable iv. the complexities of judicial resolution for years, states have grappled with the question in the process of as a patients' bill of rights ("pbr")--federal legislation designed to assocs., inc. 128 s. ct. 1020, 1026 (2008) (interpreting section 502(a)(2) of erisa); sereboff v. in 1973 in gruenberg v. aetna insurance co. in doing so, the supreme court of california created wrongful refusal to honor first party insurance claims--an emerging trend, 45 fordham l. employer-based-health-insurance--the-current-and-future-role-of-u-s--companies-in-the- provide any `remedy' for the denial of benefits (as distinguished from, say, a rule of insurance timely followed the recommendation of an external review panel. see, e.g., managed care reform 15. this expectation was specifically expressed by congress when it described erisa as first party insurance claims. and, as their experience illustrates, the standard of culpability selected.76 as with any question about the economic efficiency of john s. hoff, remarks at heritage lecture #720, the heritage found.: the right prescription? establishing rules of liability for the improper handling of various first bronsteen, debra davis, william a. delgado, maura dundon, shay dvoretzky, james feldman, perspective. abraham, supra note 69, at 1310 ("whether first-party bad faith includes reckless or cases.106 is actually motivated by the belief of most courts that the loss of the time-value of money is a in order for consequential damages to be available under section but, as 34. erisa � 502(a). really is nothing at all in the statutory text to support the conclusion wrongful coverage decisions currently do not have the financial for this reason, many welfare plan participants and employee, not perhaps in money, but in the foregoing of an increase in wages which he might obtain which virtually all claims by erisa participants and beneficiaries are (2d cir. 2004) ("[t]he injury that the courts have done to erisa will not be healed until the http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/ib98017a.pdf. the same time, however, reasonable minds often differ in their insurance). an enormous portion of insurance against such perils in the united states today is effects on coverage decision making, information exchange, risk contracting, and the extent of (10th cir. 2004) (no. 03-4097). the pain of erisa preemption?, 26 hofstra lab. & emp. l.j. (forthcoming 2009) (manuscript at 442, 456 (3d cir. 2003) (becker, j., concurring)). thus, the supreme court's use of the federal courts of an outmoded interpretation of the term) has led to a supra note 67, at 408). as explained above, the argument in favor of people) from some other source. see sara r. collins, chapin white & jennifer l. kriss, organization] under a plan covered by erisa." id. at 632. note 51 (manuscript at 47) (arguing that "section 502(a)(3) should be interpreted by future supreme 11. 542 u.s. 200 (2004). 2009] erisa remedies, welfare benefits, and bad faith 399 http://www.oyez.org/cases/2000-2009/2005/2005_05_260/argument/. 93. see supra note 42 and accompanying text. appropriate causes of action where the legislature intended for erisa to preempt state law is not the extent to which common law remedies example, most health insurance benefits are defined in terms of "medical necessity." conventional governed welfare plans (i.e., no consequential damages regardless of for the improper handling of a benefits claim.97 govern relationships between employers and employees, should never have been interpreted to only appropriate in light of historical development, but it is called for by the legislative history."). "providing for appropriate remedies." employment retirement income security act (erisa) of 19. throughout this article, i use the term "liability rules" to encompass the rules governing supreme court, it sets forth the exclusive remedies that are available to a in the commonly used disagreement animates the debate over whether, and under what circumstances, an employee-benefit subject to liability for arguably making or exercising control over social security] for aged americans." wooten, supra note 2, at 1-2 (citations omitted). as of rev. 827, 831 (2006) ("develop[ing] a statutory and policy-based theory"); dana m. muir, erisa u.s. 134, 146 (1985) ("the . . . carefully integrated civil enforcement provisions found in � 502(a) remedial provisions of erisa." zanglein & stabile, supra note 27, at 254. although professors foreseeable consequence of contract breach. see, e.g., fotta v. trs. of the united mine workers of whither employer-based health insurance? the current and future role of u.s. the judicial paradox of "equitable" relief under erisa section 502(a)(3), 39 j. marshall l. physician-recommended services are ultimately denied by managed care organizations). at the bad-faith breach: will minnesota adopt the tort or contract theory of recovery?, 26 wm. of this subchapter and subchapter iii of this chapter shall supersede any and all state laws insofar as extent to which remedies would be expanded would likely depend upon according to the russell court: difficult undertaking. by ignoring this reality and failing to reach a 502(a)(3), the interpretation of the statute advanced by the federal construction of the . . . relief[ ] allowable under [erisa], a "regulatory issue in establishing liability rules for the improper handling of various judicial standard of review in erisa benefit claim cases, 50 am. u. l. rev. 1083, 1091 (2001) chaikind, patient protection and managed care: legislation in the 107th congress, issue brief for 200, 222-24 (2004) (ginsburg, j. concurring). they also believe that "[i]ncreased exposure [under the supreme court could re-interpret section 502(a)(1)(b) to foreseeable? should recovery be permitted for non-economic injuries? as such, meaningful legislative reform is necessarily a complex and cir. 1997) (finding no remedy for death allegedly resulting from the denial of a bone marrow permitting consequential damages is a straightforward one. in the words and, in appropriate cases, dispute) illegitimate or questionable claims.60 443 (citations omitted). compensatory or punitive relief.96 corcoran v. united healthcare, inc., 965 f.2d 1321, 1339 (5th cir. 1992) (finding no remedy for (recognizing the remedy of equitable lien by contractual agreement as "typically available in 2. in the words of a fellow symposium participant, "erisa was congress's attempt to ultimately pay the claimant plus (ii) any additional expenditures that the a self-serving or careless welfare plan is better off financially whenever 56. as a preliminary matter, they suggest that reputational costs already present a substantial assault on managed care: vicarious liability, erisa preemption, and class actions, 30 j. legal have exclusive jurisdiction . . . ."). of course, only a small fraction of benefit denials actually result erisa governs for such denial, written in a manner calculated to be understood by the may be liable to an insured or policy beneficiary for damages beyond the contract benefits under a broadly speaking, proposed judicial various states); roger c. henderson, the tort of bad faith in first-party insurance transactions: premiums."62 84. one of my fellow symposium participants has focused on this issue. andrew l. oringer, would follow that, upon preemption, the court should recognize a federal remedy."). when a statutory violation has been committed, we expect liability rules will continue to develop by default rather than by design. seek compensatory damages under the statute. a deeply divided court rejected the argument. id. at note 26, at 641. in this regard, it is worth nothing that settlements for less than 100% of the earned 86. see, e.g., flint, supra note 82, at 666 ("the impact on employee benefit plans of using the insurance, 53 duke l.j. 597, 599 (2003) ("explor[ing] the concept of medical necessity as it has 38. erisa � 502(a)(1)(b). two technical points about section 502(a)(1)(b) are worth the rationales for doing so have not been entirely consistent."). insurer's obligation in the area of first-party insurance was first recognized by a court of last resort may also promise benefits to the "beneficiary" of a participant. erisa defines a "beneficiary" as "a resolution of such questions requires substantial compromise if a contract approach is adopted, then the accompanying liability labor statistics, national compensation survey: employee benefits in private influenced by erisa. see, e.g., russell korobkin, the battle over self-insured health plans, or [section] 502(a)(1)(b) . . . says nothing about the recovery of its importance in protecting the retirement 95. russell, 472 u.s. at 136. liability rules do not provide sufficient incentives for welfare plans to in other words, an employee who chooses to accounting office, to the honorable robert e. andrews, ranking minority member of the care? results from a survey of physicians, 34 inquiry 196, 200 (1997) (finding that few this was significant because the phrase "is used in a the differences what civil remedies are available to an aggrieved litigant. are compelling reasons to believe that such expansion will actually limit their liability under these plans. such a result is inconsistent with erisa's overall objective to party at the time the contract was formed). the contrary rule (i.e., that the question presented for decision [was] whether, under . . . (erisa), court to require judicial deference to the administrative decisions of private pension plans for financial support in their retirement years." james a. wooten, the 1993) (finding no remedy for death allegedly resulting from delayed authorization for surgery); notion that erisa-covered plans can deny benefits willy-nilly without significant penalty is plainly while that those injured by the violation will have an appropriate remedy.15 value (e.g., medical care, a monetary payment) if and when a contingent industry in the united states, march 2004 1 (nov. 2004) available at (i) to pay a $145 million settlement, (ii) to pay a $15 million penalty, and (iii) to reexamine more at have been applied in the insurance context. the line drawn in contract-based causes of action is pennsylvania; principal, stris & maher llp. this article was presented as part of the march 13, as explained above, employer-sponsored welfare plans are stris, supra note 26, at 2312 n.58. cong. � 302 (1999); patient's bill of rights act of 1999, s. 6, 106th cong. � 302 (1999); access to from the following sources: 62% (162.7 million people) from an employer; 18% (46.5 million broad range of perils will necessarily result in many disagreements regarding the scope of coverage. judgment.52 new implied causes of action under erisa--have little, if any, chance harbors), awarding consequential damages whenever they are deemed to f.3d 330 (2d cir. 2005) (no. 03-5035); brief of the sec'y of labor as amicus curiae in support of stop-loss insurance companies); see also troy paredes, stop-loss insurance, state regulation, and the argument is predicated on the uncontroversial notion that jurisdiction over virtually all actions by beneficiaries for breach of trust." id. at 256 (citations (finding no remedy for death allegedly caused by delayed authorization for treatment); tolton v. with minimal expenditures necessary to compensate plaintiffs' attorneys." epstein & sykes, supra insure, it may nonetheless purchase what is commonly referred to as "stop-loss insurance" which although they differed in specifics, provided via employer-sponsored plans. since erisa itself supplies no regulation to replace the "extracontractual damages" and, perhaps more importantly, failed to the wrongful denial.50 explained above, that exception for insurance contracts has now been described as "the rising judicial chorus urging that congress . . . revisit 40. epstein & sykes, supra note 26, at 632; see also dana m. muir, fiduciary status as an (authorizing "the court in its discretion [to] allow a reasonable attorney's fee and costs of action" in fundamental limits on the ability to achieve meaningful reform through finally, there is a concern that providing excessive remedies will result must pay the established rate of interest as damages for his nonperformance. hence it may correctly vacuum" exists: "[v]irtually all state law remedies are preempted but =2004+doi+press+releases&sid=eoca&b=terminalcontent&f=doi_media_media_press59&csid= most sensible interpretation of section 502(a)(1)(b). there is nothing in this convoluted structure is that a civil enforcement action under erisa is presently the sole legal does not include denials of claims for disability benefits, life insurance benefits, and other welfare sector had short- and long-term disability insurance, respectively). enforce his rights under the terms of the plan, or to clarify his rights to 29. see zanglein & stabile, supra note 27, at 545 ("because many medical plans contain currently provided by employer-sponsored welfare plans. see supra notes 9 and 10.