360
Syllabus
the enforcement of contracts. While the notice-prejudice rule is an application of the maxim that law abhors a forfeiture, it is an application of a special order, a rule mandatory for insurance contracts, not a principle a court may pliably employ when the circumstances so warrant. Tellingly, UNUM has identified no California authority outside the insurance-specific notice-prejudice context indicating that, as a matter of law, failure to abide by a contractual time condition does not work a forfeiture absent prejudice. Outside the notice-prejudice context, the burden of justifying a departure from a contract's written terms generally rests with the party seeking the departure. Moreover, California and other States have adopted the notice-prejudice rule to address policy concerns specific to the insurance industry. Pp. 368-373.
(c) The notice-prejudice rule regulates the "business of insurance" within the meaning of the McCarran-Ferguson Act. Preliminarily, the Court rejects UNUM's assertion that a state regulation must satisfy all three McCarran-Ferguson factors in order to "regulate insurance." Those factors are considerations to be weighed, Pilot Life, 481 U. S., at 49, and none is necessarily determinative in itself, Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 129. The Metropolitan Life Court called the factors "relevant," 471 U. S., at 743, and looked to them as checking points, not separate essential elements that must each be satisfied. The Court need not determine whether the rule at issue satisfies the first, "risk-spreading," McCarran-Ferguson factor, because the remaining factors, verifying the common-sense view, are securely satisfied. Meeting the second factor, the notice-prejudice rule serves as an integral part of the insurance relationship because it changes the bargain between insurer and insured; it effectively creates a mandatory contract term that requires the insurer to prove prejudice before enforcing a timeliness-of-claim provision. The third factor—whether the rule is limited to insurance entities—is also well met, since it is aimed at the insurance industry and does not merely have an impact upon it. See FMC Corp. v. Holliday, 498 U. S. 52, 61. Pp. 373-375.
2. The Court rejects UNUM's assertion that the notice-prejudice rule conflicts in three ways with substantive provisions of ERISA. First, UNUM's contention that the rule, by altering the notice provisions of the insurance contract, conflicts with ERISA's requirement that plan fiduciaries act "in accordance with the documents and instruments governing the plan," § 1104(a)(1)(D), overlooks controlling precedent and makes scant sense. This Court has repeatedly held that state laws mandating insurance contract terms are saved from preemption under § 1144(b)(2)(A). See, e. g., Metropolitan Life, 471 U. S., at 758. Under UNUM's interpretation, however, States would be powerless to alter
Page: Index Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: October 4, 2007