In a landmark decision involving insurance law, a Federal judge ruled Tuesday that the Employee Retirement Income Security Act (ERISA) does not pre-empt bad-faith insurance claims in Pennsylvania. ERISA is a Federal law that restricts lawsuits against employer-supplied medical insurance programs. Under ERISA, the harmed patient must sue in Federal court and can seek no more than the cost of the service that was denied. Such curtailment of damages has emboldened insurers and other managed care companies, leading to frequent denials of medical procedure requests, as the cost of a procedure is typically only a "drop in the bucket" when compared to damages awarded in other types of lawsuits (pain & suffering, lost wages, etc.).

Under Tuesday's ruling, however, plaintiffs can now seek punitive damages, attorney fees, and an amount of interest when suing insurers under Pennsylvania's bad-faith statute. The decision, ruled by Senior U.S. District Judge Clarence C. Newcomer, could have major implications regarding the future of ERISA claims, particularly if other judges agree with Newcomer's decision. Newcomer pointed to two recent Supreme Court decisions in his ruling, Rush Prudential HMO Inc. v. Moran (2002) and Unum Life Insurance Co. of America v. Ward (1999), both of which considerably changed the test, known as the Common-sense/McCarran-Ferguson test, for determining if a state statute falls under ERISA's "saving clause," which states that preemption is exempted if a "state law regulates insurance." Newcomer ruled that because the Supreme Court decided that state statutes did not have to meet every requirement of the McCarran test, the bad-faith statute met the guidelines and qualified for ERISA's "saving clause."