Here’s another in our continuing series of ERISA hits: Dishman v. UNUM Life Ins. Co., 269 F.3d 974 (9th Cir. 2001). Dishman
involves the difficult, complex area of ERISA’s preemption of state law claims. ERISA preemption of state law is like a nuclear weapon on the legal landscape: if a state law runs afoul of ERISA preemption, it's like it never existed at all. The reason I file Dishman
in the “hit” category is because it uses common sense to provide a bit of remedial protection to consumers dealing with overreaching insurers.
John Dishman was the executive director of a law firm when debilitating migraines caused him to have to stop working. He filed a disability claim with the firm’s insurer. However, Dishman had a large monthly benefit and UNUM was concerned about the cost of Dishman’s claim over his lifetime. Let’s just say UNUM dedicated significant resources to making sure Dishman had a meritorious claim.
Frankie Puthoff, a member of UNUM’s Complex Claim Unit, retained several private investigators to monitor his activities and investigate his background. Hiring surveillance on disability claims is not at all uncommon for insurers. But in this case Dishman asserted that the investigators went a little beyond the usual tactics. Dishman alleged the gumshoes gained confidential information about him by falsely claiming to be bank loan officers, impersonated him on the telephone to gather information, falsely claimed that he had volunteered to coach a basketball team, and repeatedly called his home phone and hung up when he answered, among other transgressions. Thereafter, without having any physician examine Dishman or even review his records, UNUM suspended Dishman’s monthly benefit.
Dishman sued UNUM in federal court to have the monthly benefit reinstated. In addition, he included a non-ERISA, state law claim for invasion of privacy based on the bad acts of the detectives. UNUM immediately moved to dismiss the invasion of privacy claim and the district court granted the motion. Dishman appealed to the U.S. Court of Appeals for the Ninth Circuit.
The decision, included in the library, is an excellent primer on ERISA preemption. The line between state law claims that ERISA does and does not preempt is often difficult to define. But the approach the Ninth Circuit takes is sound and recognizes how the real world works.
Not all state law claims that may, strictly speaking, “relate to” an ERISA plan can be preempted. Congress certainly did not intend to prevent states from passing and enforcing all laws that even tangentially affect ERISA plans. Dishman was not attempting to get plan benefits when he brought his invasion of privacy claim. That cause of action did not depend on the benefit claim in any meaningful way. The court analogized: “[w]hat if one of UNUM’s investigators had accidently rear-ended Dishman’s car while surveiling him? Would the fact that the surveillance was intended to shed light on his claim shield UNUM and the investigator from liability? . . . To ask the question is to answer it.”
The Ninth Circuit reversed the trial court’s dismissal of the invasion of privacy claim. In so doing it made sure that a least some state law remedies are kept in place to police insurer’s from completely abusing their insureds.
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