Research revealed no relevant case law addressing Oregon’s specific regulation. However, several circuits, including the Ninth, Seventh, and Sixth Circuit Courts of Appeals, have held that similar state bans on discretionary language in ERISA plans are not preempted. See Standard Ins. Co. v. Morrison, 584 F.3d 837, 846-47 (9th Cir. 2009)…
Adams v. United of Omaha Life Insurance Co.
(D. S.C. 2021)

This disability case highlights the operation of ERISA’s “savings clause” which saves from preemption state laws “which regulate[] insurance.” Id. § 1144(b)(2)(A)…” After denial of benefits and his resort to the plan’s appeal procedures, the plaintiff filed suit under 29 U.S.C. § 1132(a)(1)(B).

At the outset, the parties disputed the proper standard of review. While the plan reserved discretionary authority to the plan administrator, the plaintiff contended such clauses are nullified by a state regulation that prohibited inclusion of such language.

“[The plaintiff] argues that despite the language in the Policy a de novo standard applies because the Policy is governed by Oregon law and an Oregon insurance regulation, Or. Admin. R. 836-010-0026, has banned discretionary clauses…”

The district court agreed, stating that:

“After review of Oregon’s regulation and the relevant case law, the court agrees with the analysis of this issue in Morrison and finds that Oregon’s insurance regulation prohibiting discretionary language in ERISA plans is saved from preemption under 29 U.S.C. § 1144(a) by the savings clause in section 1144(b). See Morrison, 584 F.3d 837, 842-45. Turning to the instant action, the Policy was revised on January 1, 2019. (J.S. Exs. (AR 1, 1101), ECF Nos. 19, 19-2.) Therefore, Oregon’s regulation is applicable to the Policy, and United’s denial of benefits will be reviewed de novo.”

Note: The reasoning underpinning the holdings that ERISA preemption is inapplicable is summarized in Standard Ins. Co. v. Morrison, 584 F.3d 837, 846-47 (9th Cir. 2009) as follows: “Because the practice merely forces ERISA suits to proceed with their default standard of review, it cannot be said to ‘duplicate,’ ‘supplement,’ or ‘supplant’ the ERISA remedy. Since it adds nothing the ERISA scheme does not already contemplate, the practice is distinguishable from cases in which a state attempts to meld a new remedy to the ERISA framework.” (internal citations omitted)); see also Fontaine v. Metro. Life Ins. Co., 800 F.3d 883, 889 (7th Cir. 2015); Am. Counsel of Life Insurers v. Ross, 558 F.3d 600, 609 (6th Cir. 2009).

Operation of the “Savings Clause” – ERISA’s preemption scheme is convoluted. The steps to the outcome involve the following deductive steps:

#1. With certain exceptions, ERISA preempts state laws that “relate to any employee benefit plan.” 29 U.S.C. § 1144(a).

#2 Relevant here, the “savings clause” saves from preemption state laws “which regulate[] insurance.” Id. § 1144(b)(2)(A). It is undisputed that Oregon’s regulation “relate[s] to any employee benefit plan.” 29 U.S.C. § 1144(a). Therefore, it is preempted unless preserved by the savings clause. Id. § 1144(b)(2)(A); see also Morrison, 584 F.3d 837, 841-42.

#3 For a state law to be deemed a law “which regulate[s] insurance” it must satisfy two requirements. Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329, 341-42 (2003). “First, the state law must be specifically directed toward entities engaged in insurance. . . . Second, . . . the state law must substantially affect the risk pooling arrangement between the insurer and the insured.” Id. at 342 (citations omitted). The court found these conditions satisfied so the state law was “saved” from ERISA preemption.