Employer Group Benefits: Can the employer make another state’s law apply?
When you buy insurance through an employer’s group plan, a federal law called ERISA applies. ERISA is the acronym for the Employee Retirement Income Security Act, a federal law passed in 1974 to encourage employers to provide insurance and pension, and to protect those benefits for workers. ERISA came about in part because companies were expanding across state borders. As companies grew, they wanted to be able to offer a single benefit plan without having to worry about the laws of 50 states changing everyone’s rights. Over time, companies started inserting language in their benefit plans selecting the law of one state or another to govern their plans. These “choice of law” provisions have been challenged at times, but courts have typically allowed them.
On August 16, 2016, the Eleventh Circuit Court of Appeals based in Atlanta (covering Alabama, Florida, and Georgia) considered the issue of whether an ERISA plan can select one state’s law to govern benefit claims. The court followed its precedent, and again concluded that it was entirely permissible for an employer to adopt an ERISA plan which one state’s law even when employees live in another state.
In Alexandra H. v. Oxford Health Insurance Inc., the beneficiary lived in one state, but the plan’s terms stated that the law of another state – New York – applied. Instead of considering the law of the beneficiary’s state, the court affirmed its previous decisions and applied New York law. The court explained,
In the Eleventh Circuit, we have also enforced choice-of-law provisions in ERISA contracts and used state law to interpret terms in the ERISA contract when the state law was not unreasonable or fundamentally unfair. Buce v. Allianz Life Ins. Co., 247 F.3d 1133, 1149 (11th Cir. 2001); Capone v. Aetna Life Ins. Co., 592 F.3d 1189, 1196–97 (11th Cir. 2010). In Buce, we grappled with whether to apply federal common law or state law to interpret the meaning of “accident” in an ERISA plan. Walter Buce died in a single-vehicle crash and was later shown to have been driving under the influence of alcohol. Buce, 247 F.3d at 1136. Buce had a Personal Accident Insurance Plan, which provided that the plan was to be interpreted under the laws of the State of Georgia. Id. His wife brought suit to claim the benefit under the plan for her husband’s death after the insurance company denied the claim. Id. at 1136–37. The insurance company reasoned that Buce’s death was not an accident because the policy required the injury to be caused by accidental means, which required some sudden, unexpected, and unforeseen act that led to the injury. Id. at 1137. This definition of “accident,” referred to as “accidental means,” was consistent with Georgia law. Id. at 1144. Because Buce had been intoxicated at the time of the accident, the insurance company determined that his death was not an accident within the meaning of the policy. Id. at 1137.
We explained that when deciding whether to honor a choice of law provision in an ERISA plan, “[t]he pertinent question is whether the principles of liability agreed upon by the parties are inconsistent with the language of ERISA or the policies that inform that statute and animate the common law of the statute.” Id. at 1148. We held that Georgia’s interpretation of accident, while subject to formidable criticism, was not contrary to ERISA. Id. at 1148–49. “Where a choice of law is made by an ERISA contract, it should be followed, if not unreasonable or fundamentally unfair.” Id. at 1149. Finding no signs of unreasonableness or unfairness, we upheld the choice of law provision.
We again honored a choice of law contract contained in an ERISA welfare benefit plan in Capone v. Aetna Life Ins. Co., 592 F.3d 1189 (11th Cir. 2010), holding that a choice of law provision should be followed as long as it is consistent with ERISA and not unreasonable or fundamentally unfair.
TAKEAWAY: As a general rule, most courts will allow an ERISA plan to be drafted with any terms that the employer wants unless they are outlandish. Read your plan and see what law the plan says it will use in your claim. If you live in one state, but your employer’s benefit plan says that the law of another state applies, you should assume a court will allow that. You may need to consult an ERISA attorney to find out your rights.
If you need assistance with an ERISA claim, call our experienced ERISA attorneys at (866) 282-5260 to schedule a free consultation.