Standard Insurance Co. v. Morrison
Like Ross, the Ninth Circuit issued a similar ruling in Standard Insurance Co. v. Morrison. Montana requires its commissioner of insurance to disapprove any [insurance] form…if the form…contains…any inconsistent, ambiguous, or misleading clauses or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract…
John Morrison, who is commissioner of insurance by virtue of being state auditor, announced that this statute requires him to disapprove any insurance contract containing a so-called discretionary clause, and he consistently disapproved such policy forms. No specific Montana law forbids discretionary clauses.
Standard Insurance Co. applied to Morrison for approval of its proposed disability insurance forms, which contained discretionary clauses. Morrison denied the request. Standard sued Morrison in the District of Montana, arguing that the subject is preempted by ERISA. The district court granted summary judgment in favor of Morrison.
On appeal, a three judge panel of the Ninth Circuit affirmed. The Ninth Circuit held that Morrison’s practice of disapproving discriminatory clauses is specifically directed toward entities engaged in insurance and substantially affects the risk pooling arrangement between insured and insurer, more so than other laws that have been upheld by the U.S. Supreme Court; thus, the practice is saved from ERISA preemption. In addition, the Ninth Circuit held the practice does not conflict with ERISA’s exclusive remedial scheme for insureds who have been denied benefits and does not fall within the current scope of the exception to the savings clause.
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