U.S. Fifth Circuit Explains Savings Clause Affirming Dismissal of Suit for Life Insurance Benefits Originally Filed in State Court

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Swenson filed suit in Louisiana State Court seeking benefits from a life insurance policy after her husband passed away. The insurance company refused to pay based on its belief that Swenson’s husband was not a covered employee at the time of his death. Swenson cited Louisiana statutes imposing certain requirements on group life policies concerning the rights of a discharged employee to convert the employer-provided policy into an individual life insurance policy. The insurer removed the matter to Federal Court arguing complete preemption. After the case was removed, Swenson added a claim under ERISA for equitable relief.

The district court: (i) agreed that ERISA completely preempted the State Law claims; (ii) dismissed the claim for benefits for failure to exhaust administrative remedies, without prejudice, allowing the plaintiff to commence the administrative process; and (iii) dismissed, with prejudice, under Varity, the claim for equitable relief.

Affirming, the Fifth Circuit noted that “the savings clause does not allow state law claims seeking recovery of ERISA benefits to escape preemption…. It only saves certain state laws from conflict preemption, which is a federal defense that can be asserted when a federal law conflicts with a state law….  That is not to say that, when challenging the lawfulness of the denial of ERISA benefits, a beneficiary cannot argue that the administrator failed to comply with applicable laws including any state laws that retain force because of the savings clause. But that must be done in the context of ERISA’s civil enforcement provision, a claim that was not ripe when Swenson filed this suit because she had not engaged in the administrative review process. Because Swenson’s claim for benefits must be brought under federal law, the district court correctly dismissed her state law claims seeking the same relief.”

Swenson v. United of Omaha, No.17-30374, 2017 WL 5988351 (5th Cir. Dec. 4, 2017).

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