The Employee Retirement Security Act of 1974 (ERISA) is a federal law enacted to protect health and disability insurance plans as well as retirement and pension plans and other benefits provided by employers from mismanagement or fraud. That means that in most cases, it overrides or “preempts” state and local laws if they conflict.
This preemption doesn’t always work in an employee’s favor. For example, ERISA can preempt state bad faith insurance laws that are in place to help protect people from wrongful denials of insurance claims. States have traditionally been the ones to regulate insurers, so some of the most stringent laws governing this industry are often found at the state level.
Where state laws are often advantageous
State laws often provide legal remedies and the ability to see awards in cases involving insurance companies that ERISA preempts. These include:
- Extracontractual or punitive damages
- The ability to have a jury trial rather than a bench trial
- Awards of legal fees, costs and prejudgment interest (with some exceptions)
This doesn’t mean that you don’t have remedies under ERISA if it preempts state laws. Further, there are exemptions to these preemptions. However, anything involving an employer-sponsored plan can be complex and confusing.
Don’t let a plan administrator or insurance company representative tell you that your bad faith or another claim against an insurance company falls under “ERISA preemption.” It’s always wise to seek experienced legal guidance whether you end up dealing with the matter in state court or under ERISA. This is your best opportunity to seek the justice and compensation you deserve.