In an ERISA action, defendants Macy’s Inc. Long Term Disability Plan and Prudential Insurance Company of America moved to dismiss plaintiff Kymberlee Gilson’s state law claim on the ground it was preempted by ERISA.

The plaintiff claimed she was entitled to prejudgment interest pursuant to California Insurance Code Section 10111.2, which provides that “[w]hen the insurer has received all information needed to determine liability for a claim and the insurer determines that liability exists and fails to make payment of benefits to the insured within 30 calendar days after the insurer has received that information, any delayed payment shall bear interest, beginning the 31st calendar day, at the rate of 10 percent per year.”

In opposing the defendants’ motion to dismiss, the plaintiff asserted that Section 10111.2 was saved from preemption by ERISA’s “savings clause,” which states that “[e]xcept as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.” 29 U.S.C. 1144(b)(2)(A).

In Gilson v. Macy’s Inc. Long Term Disability Plan, et al., the U.S. District Court for the Northern District of California found that prejudgment interest does not fall within ERISA’s savings clause because it is not “ ‘specifically directed toward the [insurance industry].’ ” Pilot Life v. Dedeaux, 481 U.S. 41, 50 (1987). 

In holding that ERISA preempted Section 10111.2, the court recognized that other judges in the Northern District of California have uniformly denied state law claims based on Section 10111.2 on the ground that “allowing a plaintiff to proceed with a state law claim under [S]ection 10111.2 would effectively impose a mandatory prejudgment interest rate of ten percent on successful ERISA claims, improperly expanding the scope of ERISA damages and supplementing the ERISA enforcement remedy.” Prado v. Allied Domecq Spirits and Wine Group Disability Income Policy, 800 F. Supp. 2d 1077, 1100 (N.D. Cal. July 22, 2011).

Accordingly, the plaintiff’s state law claim for prejudgment interest was dismissed with prejudice.

Click here for the opinion in Gilson v. Macy’s Inc. Long Term Disability Plan, 2014 U.S. Dist. LEXIS 2762 (N.D. Cal. January 9, 2014)