The attempt by California voters to reform the insurance industry by passing Proposition 103 was well publicized. Less well known, however, is that three recent judicial decisions, two by the California Supreme Court and one by the United States Supreme Court, severely limit bad faith actions against insurance companies. These decisions bar individuals receiving insurance through employee benefits plans from bringing bad faith actions against insurers, ruling that such actions are preempted by ERISA. This Note begins by discussing the evolution of, and policies underlying, bad faith actions against insurers in California. The Note next examines the United States Supreme Court's decision in Pilot Life Insurance Co. v. Dedeaux, which ruled that common-law bad faith claims against insurance companies are preempted under ERISA. The Note argues that this case was wrongly decided and that it should be given a narrow interpretation. The Note then analyzes two California cases that deny Californians a statutory-based action for bad faith and thus deny ERISA plan participants any remedy against insurers other than those provided by ERISA. Finally, this Note urges that these decisions should be overturned so that Californians are protected against insurer misconduct.
No Faith in Bad Faith,
41 Hastings L.J. 201
Available at: https://repository.uchastings.edu/hastings_law_journal/vol41/iss1/7