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KIRKHUFF v. LINCOLN TECHNICAL INSTITUTE INC.

September 6, 2002

DIANE KIRKHUFF, ET AL.
V.
LINCOLN TECHNICAL INSTITUTE INC., ET AL. ROSS P. BARTIMUS V. LINCOLN TECHNICAL INSTITUTE, INC., ET AL. ROBERT C. RADLE V. LINCOLN TECHNICAL INSTITUTE, INC., ET AL.



The opinion of the court was delivered by: Bartle, District Judge.

MEMORANDUM

These are actions alleging violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. Before the court are motions to amend each complaint to add a claim for punitive damages under Pennsylvania's bad faith statute, 42 Pa.Cons.Stat.Ann. § 8371.

Plaintiffs are employees of defendant Lincoln Technical Institute, Inc. They are participants in an employee welfare benefit plan providing insurance benefits through a group life insurance policy issued by defendant The United States Life Insurance Company in the City of New York. Plaintiffs contend that certain benefits have been cancelled or deleted in violation of ERISA.

Plaintiffs' motions to amend were triggered by a recent decision by our colleague Judge Clarence C. Newcomer in Rosenbaum v. Unum Life Ins. Co. of Am., Civil Action No. 01-6758 (E.D.Pa.), allowing a bad faith claim to proceed in an ERISA action. Shortly thereafter, our colleague Judge Ronald L. Buckwalter reached the opposite result in Sprecher v. Aetna U.S. Healthcare, Inc., Civil Action No. 02-580 (E.D.Pa.). He concluded that ERISA preempted such a cause of action.

Rule 15 of the Federal Rules of Civil Procedure provides that "leave [to amend] shall be freely given when justice so requires." However, leave should be denied when the amendment would be futile, that is, when the amendment does not state a claim for relief. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).

The Pennsylvania bad faith statute 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.

42 Pa.Cons.Stat.Ann. § 8371.

ERISA, which expansively regulates employee benefit plans, contains a broad preemption provision:

Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or ...

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