Opinion ID: 27046
Heading Depth: 1
Heading Rank: 5

Heading: penalties and attorney’s fees pursuant to

Text: LA. REV. STAT. § 22:657 We now turn to the question whether the district court erred in awarding Thurmon penalties and attorney’s fees pursuant to La. Rev. Stat. § 22:657. That statute provides that an insurer must pay claims made under a health and accident insurance policy within 30 days of their receipt. If the insurer fails to comply without “just and reasonable grounds,” it will be subject to a penalty of double the amount of benefits due plus attorney’s fees. “The statutory scheme is apparent; insurers are discouraged from lightly 8 denying coverage.” Boudreaux v. Fireman’s Fund Ins. Co., 654 F.2d 447, 451 (5th Cir. Unit A Aug. 1981). In this case, Provident asserts that its delay in paying Thurmon’s claims was reasonable under the circumstances, offering three explanations for its delay. First, it submits that its denial of the initial claims was justified based on its belief that the cardiovascular endorsement barred coverage. Second, Provident attributes its further delay to Thurmon’s failure to provide information regarding his Medicare eligibility until July 1999. Finally, Provident blames its failure to pay the claims for nearly three months — from July 1999, at which time it admittedly had all the information it allegedly needed, until October 1999 — on staffing problems caused by Year 2000 preparations. The district court found that none of Provident’s proffered explanations justified its delay in paying Thurmon’s claims, and we discern no clear error in this finding. Given the inconsistencies and apparent conflicts on the initial claim forms, the district court had a reasonable basis to conclude that Provident had a duty to investigate Thurmon’s claims further before denying them and that its failure to do so was unreasonable: “The indication that the patient’s illness might be related in part to an excluded condition does not automatically exclude coverage for the entire illness and hospitalization.” Broussard v. National Am. Life Ins. Co., 302 So. 2d 627, 630 (La. Ct. App. 1974). Provident’s second reason for its delay — that Thurmon did not provide his Medicare 9 eligibility information until July — is moot in light of our determination that both the Medicare provision and the Medicare endorsement are invalid, for “[a]n insurer must take the risk of misinterpreting its policy provisions. If it errs in interpreting its own insurance contract, such error will not be considered as a reasonable ground for delaying the payment of benefits, and it will not relieve the insurer of the payment of penalties and attorney’s fees.” Carney v. American Fire & Indem. Co., 371 So. 2d 815, 819 (La. 1979); Sanders v. Home Indem. Ins. Co., 594 So. 2d 1345, 1350 (La. Ct. App. 1992). Finally, the district court did not err in rejecting Provident’s explanation that its efforts to achieve Year 2000 compliance was a reasonable basis for its delay. That Provident chose to shirk its responsibilities under § 22:657 by diverting its work force from processing claims to prepare for the Year 2000 transition, a foreseeable circumstance that could have been handled without diverting claims personnel, does not justify its delay.