ERISA Claimants and UnumProvident Bad Faith Denials

The Employee Retirement Income Securities Act (“ERISA”) is a 1974 federal statutory scheme which was designed to protect against the fiduciary looting of company or union pension plans. Under ERISA’s “preemption clause”, all state laws that relate to an employee benefit plan are preempted except those state laws regulating insurance under the “savings clause,”.

Because most people obtain disability coverage through their employee benefit plan, determining whether a case is can be brought against disability insurers like, Unum, has been difficult because of this ERISA preemption. However, this appears to be changing, bringing hope to thousands of workers who are being denied coverage that they are entitled to.

In a decision that could help many victims of UnumProvident bad faith denials, a federal judge has recently ruled that ERISA does not pre-empt a claim under Pennsylvania's bad-faith statute. The ruling by Senior U.S. District Judge Clarence C. Newcomer in Rosenbaum v. UNUM Life Insurance Co. is the first of its kind and a major victory for plaintiffs because it means workers can now seek punitive damages when suing the insurer that provides their benefits.

In a pair of recent decisions from the high court Unum Life Insurance Co. of America v. Ward in 1999 and Rush Prudential HMO Inc. v. Moran in 2002 -- Newcomer found that the justices significantly changed the test for assessing whether a state law qualifies for ERISA's "saving clause" which exempts from pre-emption "any law of any state which regulates insurance."