Ninth Circuit to Decide: Can ERISA Plans Avoid California Insurance Code Section 10110.6 with Choice-of-Law Provisions?

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The Ninth Circuit is considering the enforceability of a choice of law provision in an ERISA plan in William White v. Guardian Life Insurance Company, et al., Case No. 24-2681, appeal pending from the United States District Court for the Southern District of California.

Background

William White, a California resident, was denied accidental death and dismemberment (“AD&D”) benefits under his employer’s benefits plan, managed by Guardian Life Insurance Company and governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). This plan contained two critical clauses: a choice-of-law provision designating Florida law, and a discretionary clause granting the plan administrator broad authority to interpret plan terms.

California Insurance Code Section 10110.6 prohibits discretionary clauses in insurance policies; Florida has no such discretionary ban. At the district court level, the central issue was whether the plan’s choice-of-law provision was enforceable. The district court acknowledged that ERISA lawsuits are treated as federal questions, and therefore, federal choice-of-law rules apply and referenced the Ninth Circuit's decision in Wang Laboratories, Inc. v. Kagan, 990 F.2d 1126, 1128–29 (9th Cir. 1993), which established that an ERISA contract’s choice-of-law provision should be followed unless it is unreasonable or fundamentally unfair. The district court factored in elements such as the location of the employer’s headquarters and where most of its employees resided, both of which were in Florida. The district court also considered that California Insurance Code § 10110.6 was not yet in effect when the policy was issued in 2009, thus eliminating the possibility that the defendant chose Florida law to avoid this statute. Ultimately, the district court found that the plan’s choice of Florida law applied and that the discretionary clause was valid. 

The Appeal and Competing Arguments

The appeal, filed in April 2024, has drawn attention, with an amicus curiae brief filed by United Policyholders, a non-profit consumer advocacy organization, in support of the Plaintiff-Appellant, and a joint amicus curiae brief filed by the American Council of Life Insurers and the Florida Insurance Council (“Insurer-Side Amici”) in support for the Defendant-Appellee.

• United Policyholders, represented by Glenn Kantor of Kantor & Kantor, LLP, argue that enforcing the Florida choice-of-law provision would undermine California’s strong public policy against discretionary clauses, as espoused in Section 10110.6, and violate ERISA’s savings clause. United Policyholders contends that California has a fundamental right to protect its residents from inherently unfair discretionary clauses.
• Insurer-Side Amici, represented by Mark Schmidtke and Kristina Holmstrom of Ogletree & Deakins, LLP, counter that allowing states to override plan terms would disrupt ERISA's goal of national uniformity and affordability. They defend discretionary clauses as tools that promote plan uniformity and efficiency and argue that upholding the choice-of-law provision will protect employers' ability to administer plans consistently.

Why This Matters

The Ninth Circuit's decision in White v. Guardian will determine whether choice-of-law provisions in California can circumvent the strictures of California Insurance Code Section §10110.6.