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SNOOK v. PENN STATE GEISINGER HEALTH PLAN

January 31, 2003

MICHAEL SNOOK AND CASSANDRA SNOOK, H/W, INDIVIDUALLY AND AS PARENTS AND NATURAL GUARDIANS OF AUSTIN SNOOK, A MINOR, PLAINTIFFS
v.
PENN STATE GEISINGER HEALTH PLAN, DEFENDANT.



The opinion of the court was delivered by: James F. McCLURE, Jr., United States District Judge

MEMORANDUM AND ORDER

BACKGROUND

The sole issue before us is whether a claim under Pennsylvania's bad-faith statute, 42 Pa.C.S.A. § 8371, is preempted by ERISA.

Plaintiffs Michael and Cassandra Snook (the Snooks) filed a three-count amended complaint against the Penn State Geisinger Health Plan (Geisinger), their ERISA-controlled employee benefit plan. The complaint focuses on a dispute over Geisinger's failure to provide coverage for their son Austin's brain surgery. Count I of the complaint alleges a cause of action under ERISA's civil enforcement provision, § 502(a), 29 U.S.C. § 1132(a). Count II is an ERISA claim for breach of fiduciary duty. See 29 U.S.C. § 1104(a)(1)(B). Count III sets forth a state-law claim under § 8371 for bad-faith denial of insurance benefits.

Geisinger has filed a motion under Federal Rule of Civil Procedure 12(b)(6) to dismiss Count III. Relying on Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987), it argues that ERISA preempts § 8371 claims. The Snooks counter by arguing that the recent case of UNUM Life Ins. Co. of America v. Ward, 526 U.S. 358 (1999), renders Pilot Life inapplicable and commands that ERISA's "saving clause" excepts § 8371 from preemption. We disagree with the Snooks' contentions, and we find that Pilot Life controls the disposition of the motion.

Specifically, we find that (1) § 8371 does not come within the purview of the saving clause; and (2) Congress's intention that ERISA's civil enforcement provisions provide for exclusive remedies leads to the conclusion that § 8371, which offers remedies in addition to those provided by ERISA, is preempted. For either of these reasons, the Snooks' bad-faith claim is preempted, and Count III will be dismissed.

DISCUSSION:

I. 12(b)(6) STANDARD

A motion to dismiss under Rule 12(b)(6) admits the well-pleaded allegations of the complaint but denies their legal sufficiency. Hospital Building Co. v. Trustees of the Rex Hospital, 425 U.S. 738, 740 (1976). In reviewing a motion to dismiss under 12(b)(6), the court must accept as true all factual allegations of the complaint and draw all reasonable inferences in the light most favorable to the plaintiff. Board of Trustees of Bricklayers and Allied Craftsmen Local 6 of New Jersey v. Wettlin Assoc., Inc., 237 F.3d 270, 272 (3d Cir. 2001) (citation omitted). But "[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." General Motors Corp. v. New A.C. Chevrolet, 263 F.3d 296, 333 (3d Cir. 2001) (citation and internal quotation marks omitted).

"A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proven consistent with the allegations." Ramadan v. Chase Manhattan Corp., 229 F.3d 194, 195-96 (3d Cir. 2000) (citing Alexander v. Whitman, 114 F.3d 1392, 1398 (3d Cir. 1997)). "The issue [under Rule 12(b)(6)] is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000) (citations and internal quotation marks omitted).

II. ANALYSIS

According to Count III of the complaint, Geisinger, the Snooks' employee benefit plan, acted in bad faith in denying coverage for Austin's brain surgery. Pennsylvania's bad-faith statute, 42 Pa.C.S. § 8371, controls this claim. It provides:

Actions on insurance policies

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.

ERISA, which regulates employee benefit plans, contains an expansive 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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