August 22, 2019

Colorado Court of Appeals: Both State and Federal Courts Have Concurrent Jurisdiction to Adjudicate and Enforce ERISA Claims

The Colorado Court of Appeals issued its opinion in Strunk v. Goldberg on May 26, 2011.

Insurance—Bad Faith—Disability—Preemption—ERISA—Claim Preclusion—Jurisdiction—Ripeness.

In this insurance bad-faith insurance case, plaintiff Sherry M. Timm appealed the order of the trial court dismissing her complaint against defendant Prudential Insurance Company of America (Prudential). The order was affirmed in part and reversed in part, and the case was remanded for further proceedings.

Prudential denied Timm’s claim for disability benefits. After exhausting her administrative remedies, Timm filed a civil action in federal court. The federal court entered a declaratory judgment vacating Prudential’s decision and declaring Timm disabled. The federal court remanded the case to Prudential for a determination of benefits due under the plan. Timm later filed this action because Prudential failed to determine Timm’s entitlement of benefits. Prudential moved to dismiss this action pursuant to C.R.C.P. 12(b)(5), contending that Timm’s complaint failed to state a claim for which relief can be granted. The trial court agreed and dismissed the complaint. This appeal followed.

Timm contended that the trial court erred by determining that her claim for bad faith under CRS § 10-3-1116(1) is preempted by ERISA. Because § 10-3-1116(1) allows a double recovery of benefits, it supplements and conflicts with ERISA’s remedies and therefore is preempted. Accordingly, because ERISA preempts § 10-3-1116(1), the trial court did not err in dismissing Timm’s statutory bad-faith claim.

Timm also contended that the trial court erred by dismissing her ERISA claim for benefits under principles of claim preclusion. Claims that would or could have been based on Prudential’s conduct in the administrative process up to the date the federal court issued its declaratory judgment are precluded. However, Timm’s ERISA claim is not based on conduct occurring before the federal court’s declaratory judgment. Further, ERISA provides for concurrent jurisdiction of both state and federal courts to adjudicate and enforce ERISA claims. Accordingly, to the extent the trial court held that Timm may bring her ERISA claim only in federal court, it erred.

Timm further argued that the trial court erred by dismissing her claim for lack of ripeness. The complaint states that Timm “reasonably sought the payment of benefits” from Prudential after the federal court’s decision and that Prudential refused to decide the matter for more than twenty-one months. Because of the delay by Prudential, Timm asserts it would have been clearly useless for her either to have waited longer for a decision in the first instance from Prudential, or to have appealed through administrative channels to the appeals board of Prudential. Accordingly, Timm’s claim was ripe for judicial review and the trial court erred by dismissing Timm’s claim on that basis.

This summary is published here courtesy of The Colorado Lawyer. Other summaries by the Colorado Court of Appeals on May 26, 2011, can be found here.

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