Summary
The Supreme Court of Alabama declined to answer a certified question concerning whether Alabama's tort of bad-faith refusal to pay benefits regulates insurance under ERISA's savings clause. The court concluded that the question required interpretation of federal statutory language, which had already been addressed by the Eleventh Circuit, and therefore would not be determinative in the underlying federal case. Justice Johnstone concurred in part and expressed no opinion regarding a footnote addressing prior Alabama decisions.
Topics
Practice areas
Questions Presented
- Whether the Alabama tort of bad faith, as codified in Ala. Code § 27-12-24 and as previously existing, is limited solely to insurers.
- Whether the Alabama tort of bad faith constitutes a law regulating the insurance industry under Alabama law and therefore falls within ERISA's insurance savings clause.
- Whether the Alabama Supreme Court should answer a certified question when answering it would require interpreting federal statutory language and would not be determinative of the underlying federal cause.
Holdings
- A certified question must be determinative of the underlying cause; the court therefore should not answer a question that would amount to an abstract or non-dispositive advisory opinion.
- The Alabama Supreme Court declined to interpret the federal statutory phrase "regulates insurance" because authoritative interpretation of federal statutory language is ultimately supplied by the federal courts, and the Eleventh Circuit had already addressed the issue.
Key quotations
“Because either option would be an exercise in futility, it is clear that our acceptance of this question was erroneous, and we decline to answer it.” (236)
“QUESTION DECLINED.” (236)
Factual background
Palmore was employed by Reliance Electrical Company for approximately sixteen years and allegedly developed debilitating conditions from on-the-job exposure to harmful substances. He obtained benefits under a long-term disability plan funded through a disability insurance policy issued by First Unum. Palmore alleged that First Unum wrongfully terminated his benefits in December 2000 and sought punitive damages based on bad faith.
Procedural history
Palmore sued First Unum after the insurer allegedly terminated long-term disability benefits under an ERISA welfare benefit plan and sought punitive damages for bad-faith failure to pay. The federal district court certified the question to the Alabama Supreme Court after the Eleventh Circuit reversed the district court's prior conclusion regarding ERISA preemption in Gilbert v. Alta Health & Life Insurance Co. The Alabama Supreme Court concluded that the question depended on interpretation of ERISA's federal savings clause and that its answer would not be determinative of the federal litigation, and therefore declined to answer.