Court Opinion

ID: 35473
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:28:45+00
Date Added: 2024-06-11T17:13:28.211692
License: Public Domain

United States Court of Appeals
                                                                   Fifth Circuit
                                                                F I L E D
                 IN THE UNITED STATES COURT OF APPEALS            June 4, 2004
                         FOR THE FIFTH CIRCUIT
                          ____________________              Charles R. Fulbruge III
                                                                    Clerk
                             No. 03-30235
                         ____________________

                       Nabil A. Moufarrej, M.D.,

                Plaintiff - Appellee - Cross-Appellant,

                                versus

                      UNUM Provident Corporation,

                Defendant - Appellant - Cross-Appellee.

_________________________________________________________________

     Appeals from the United States District Court for the
                  Western District of Louisiana
                   Civil Action No. 01-CV-0297
________________________________________________________________

Before DAVIS, BARKSDALE and PRADO, Circuit Judges.

PER CURIAM:*

     Nabil A. Moufarrej, M.D. received a judgment awarding him

total disability benefit payments from UNUM Provident Corporation

(“Provident”).    Provident appealed that decision.   We REVERSE the

decision of the district court and RENDER judgment in favor of

Provident.     Because we find in favor of Provident we do not reach

Dr. Moufarrej’s cross appeal.

Factual Background

     *
       Pursuant to 5TH CIR. R. 47.5, this court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.

                                  -1-
     Dr. Moufarrej is a board-certified neurologist specializing

in sleep medicine.    Prior to 1996, he practiced at a hospital and

maintained a private sleep clinic at which he saw patients

referred to him by the hospital.    In 1988, Dr. Moufarrej

purchased a disability insurance policy (the “policy”) from

Provident.1   The policy provided for different monthly payments

if Dr. Moufarrej became “totally disabled” or “residually

disabled.”    To claim total disability under the policy the

insured would have to be unable to perform the “substantial and

material duties” of his occupation and be receiving appropriate

medical care.    Occupation was defined in the policy as “the

occupation (or occupations, if more than one) in which the

insured is regularly engaged at the time he becomes disabled.”

The following policy provisions are also pertinent to this

dispute:

     Notice of Claim
     Written notice of claim must be given within twenty days
     after a covered loss starts or as soon as reasonably
     possible.

     Proof of Loss
     If the policy provides for a periodic payment for a
     continuing loss, you must give us proof of loss within
     90 days after the end of each period for which we are
     liable. . . . written proof must be given within 90
     days after each [new] loss. If it was not reasonably
     possible for you to give written proof in the time
     required, we will not reduce or deny the claim for this
     reason if the proof is filed as soon as reasonably
     possible. In any event, the proof required must be

     1
       Dr. Moufarrej paid all required policy premiums from 1988
through the time of trial.

                                 -2-
     furnished no later than one year after the 90 days
     unless you are legally unable to do so.

     Legal Actions
     You may not start a legal action to recover on this
     policy within 60 days after you give us required proof
     of loss. You may not start such action after three
     years from the time proof of loss is required.

     On September 27, 1993, Dr. Moufarrej injured his back. He

underwent corrective surgery, but his pain grew worse over the

next year.

      Dr. Moufarrej’s hospital work involved prolonged standing

and walking, moving patients and bending over patients.

According to his examining doctor, the physical demands of the

hospital work exacerbated Dr. Moufarrej’s condition.   Dr.

Moufarrej soon began declining patient referrals from other

doctors.   Prior to 1996, Dr. Moufarrej had worked 60 to 65 hours

per week, with 30 to 45 of those hours spent at his hospital

practice and the remainder at his clinic office.

     By January 1, 1996, Dr. Moufarrej had completely stopped his

hospital practice due to his back injury.   Since that time he has

spent five days a week at his clinic, but only sees patients for

a total of nine hours per week.    Dr. Moufarrej testified he did

not file for disability benefits in 1996 because he believed that

as long as he was working as a physician he could not receive

disability benefits.

                                  -3-
     In the fall of 1999, Dr. Moufarrej’s insurance agent

suggested he apply for disability benefits.    On October 5, 1999,

Dr. Moufarrej notified Provident that he intended to submit a

claim for disability benefits.    He filed his claim in November

1999.    On May 24, 2000, Provident sent Dr. Moufarrej a letter

denying his claim.

Proceedings

     On February 15, 2001, Dr. Moufarrej sued Provident on the

policy, seeking recovery of total disability benefits beginning

April 1, 19962 and attorney’s fees.    After a bench trial, the

district court awarded Dr. Moufarrej the total disability

benefits he sought as of April 1, 1996.    Provident then moved to

amend and modify the judgment, or alternatively, for a new trial,

claiming an affirmative defense of prescription.    On February 24,

2003, the district court found that Provident had waived the

affirmative defense of prescription.    Two days later, the court

vacated its February 24, 2003 order and found that Provident had

not waived its prescription defense.    However, the district court

declined to amend its previous order or to conduct a new trial.

The court explained that it had found no manifest error of fact

or law, no newly discovered evidence, and no intervening change

in the controlling law to justify an amendment or a new trial.

     2
         April 1, 1996 was 90 days after January 1, 1996.

                                 -4-
Notice and Proof of Loss Requirement

     Provident contends that the district court erred by not

applying the notice provision set forth in LA. REV. STAT. §

22:213.   Section 22:213 sets out certain minimum terms for all

Louisiana health and disability insurance policies.    The

applicability of § 22:213 to this case is a legal question,

subject to de novo review.    See United States v. Grayson County

State Bank, 656 F.2d 1070, 1075 (5th Cir. 1981).

     Section 22:213 requires all health and disability insurance

policies in Louisiana to include either certain specified

provisions or “provisions which in the opinion of the

commissioner of insurance are not less favorable to the

policyholder.”    Therefore, the provisions in § 22:213 only

replace policy provisions when the policy provisions are less

favorable to the insured.    Those policy provisions which are more

favorable to the insured than § 22:213's provisions are untouched

by the statute.

     In this case, the policy provisions exactly mirror the

provisions of § 22:213.    Under both, notice of claim was required

within 20 days of loss, unless “it was not reasonably possible to

give such notice within the time required.”    Both the policy and

§ 22:213 also specify that in the case of a continuing disability

loss, written proof of loss must be filed within 90 days of the

loss unless “it was not reasonably possible to give proof within

                                 -5-
such time,” in which case the proof must be given “as soon as

reasonably possible.”     Accepting Dr. Moufarrej’s argument that it

was not reasonably possible for him to give notice or submit

proof of loss within the specified time periods, under the terms

of the either § 22:231 or the policy he would then be obliged to

file his claim as soon as reasonably possible.

     However, the policy’s time limit on legal actions (3 years

from when proof of loss was required) is more favorable to the

insured than § 22:213's provision (1 year from when proof of loss

was required).   Therefore, the policy provision on legal actions

applies.   Because Dr. Moufarrej undisputedly filed his action

within three years of giving Provident notice, his legal action

was timely if his proof of loss was timely.

     Thus, the district court correctly concluded that the

critical issue is whether Dr. Moufarrej submitted his proof of

loss as soon as reasonably possible.

Interpreting “As Soon as Reasonably Possible”

     Standard of Review

     Provident argues that the meaning of “as soon as reasonably

possible” in this case is a matter of contract interpretation

subject to de novo review.     In contrast, Dr. Moufarrej contends

that interpreting “as soon as reasonably possible” only calls for

the factual determination of what was reasonable in his

circumstance and therefore is a matter to be reviewed for clear

                                  -6-
error.     While the elements of fact and law are somewhat

intertwined in this issue, Provident presents the stronger

argument.    Part of the logic behind applying a clearly erroneous

standard to review determinations of fact is that the district

court is in a better position than the reviewing court to

interpret trial evidence.     S.E.C. v. Fox, 855 F.2d 247, 250-251

(5th Cir. 1988).     Here, this court is in the same position as was

the district court in reviewing the relevant facts to determine

when Dr. Moufarrej could have been reasonably expected to present

proof of loss.3    Consequently, this court will apply a de novo

standard to review the district court’s interpretation of “as

soon as reasonably possible.”

       Determining the Reasonableness of Dr. Moufarrej’s Proof of

Loss

       Dr. Moufarrej argued, and the district court agreed, that

Dr. Moufarrej’s late proof of loss was acceptable because a party

is not obliged to act when he is unable to do so.     This reasoning

comes from the doctrine of contra non valentum, which stops the

running of prescription in certain exceptional circumstances when

       3
       The Supreme Court has held that “our reliance upon the
findings of fact does not preclude us from making an independent
determination as to the legal conclusions which would be drawn
from them.” United States v. Miss. Valley Generating Co., 360
U.S. 520, 526 (1961). Similarly, within this circuit, Texas
state courts have held that when relevant facts are undisputed,
the definition of a reasonable time for giving notice is a
question of law. See Fed. Ins. Co v. CompUSA, 319 F.3d 746, 752
(5th Cir. 2003) (summarizing Texas state law).

                                  -7-
it is in the interests of justice to do so.            Webb v. Blue Cross

Blue Shield of La., 711 So. 2d 788, 790 (La. App. 1 Cir. 1990).

The exception, which Dr. Moufarrej argues should apply to his

situation, is to be granted when: “the cause of action is not

known or reasonably knowable by the plaintiff, even though his

ignorance is not induced by the defendant.”            Terrebonne Parish

Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870, 884 n.37 (5th Cir.

2002).    Contra non valentum is ordinarily applied to analyze

prescription questions under statutes of limitations; however,

the proof of loss provision in the policy is analagous to a

statute of limitation and can be analyzed similarly.

     Dr. Moufarrej’s only explanation for failing to give

Provident timely proof of loss was that he was unaware he had a

claim.    However, Dr. Moufarrej knew that his injury was impacting

his ability to perform his job and, with minimal investigation,

he could have learned that he had a claim.         Therefore, this court

cannot find that Dr. Moufarrej’s cause of action was not

reasonably knowable to him.

     Furthermore, a fundamental tenet of insurance law is that

the policyholder has the responsibility to research the

provisions of his policy and make himself aware of any potential

claims.    13 LEE R. RUSS & THOMAS F. SEGALLA, COUCH   ON   INSURANCE § 190:36

                                    -8-
(3d ed. 2003).4   Dr. Moufarrej failed to do the bare minimum to

investigate his claim and therefore this court finds that his

delay in presenting proof of loss was not reasonable.

     The Notice-Prejudice Rule

     The district court found that whether or not Dr. Moufarrej’s

proof of loss was timely, Provident was obligated to consider his

claim because Provident had not shown it was prejudiced by his

late proof of loss.   In so finding, the court relied on the

Louisiana notice-prejudice rule, which provides that “where the

requirement of timely notice is not an express condition

precedent, the insurer must demonstrate that it was sufficiently

prejudiced by the insured’s late notice.”    Peavey Co. v. M/V

ANPA, 971 F.2d 1168, 1173 (5th Cir. 1992).

     This judicially-created rule conflicts with the requirements

of § 22:213, which do not require any showing of prejudice.

Notably, the cases Dr. Moufarrej cites in support of this rule

     4

            “Upon learning that an event which is arguably an
      occurrence of loss within the policy has taken place,
      an insured is obligated to investigate and determine
      whether that occurrence is one covered by the
      insured’s policy, and such duty is an active not a
      passive one, with the insured chargeable with all of
      the information actually possessed and which would
      have been acquired by the exercise of reasonable
      diligence.” LEE R. RUSS & THOMAS F. SEGALLA, COUCH ON
      INSURANCE § 190:36 (3d ed. 2003).

                                 -9-
interpret non-health or disability insurance policies.5 Section

22:213 directly addresses health and disability policies and is

narrowly tailored to these policies.     See Sargent v. La. Health

Serv. & Indem. Co., 550 So. 2d 843 (La. App. 2 Cir. 1989)(holding

that general ten-year prescription period from the Louisiana

Civil Code did not apply because it conflicted with the more

specific provisions of § 22:213).     In addition, Louisiana courts

have applied notice provisions in health and disability policies

without any reference to the notice-prejudice rule.     See id.;

Hall v. Provident Life & Accident Ins. Co., 250 So. 2d 435 (La.

App. 3 Cir. 1971); Touro Infirmary v. Henderson, 666 So. 2d 686

(La. App. 4 Cir. 1995).   We too conclude that the judicially-

created notice-prejudice rule does not apply to health and

disability policies, such as the one at issue.

Conclusion

     We find that Dr. Moufarrej’s claim is barred because it was

not timely filed.

     REVERSED and RENDERED.

     5

 Dr. Moufarrej cites the following cases in which the notice-
prejudice rule was applied: MGIC Indem. Corp. v. Cent. Bank of
Monroe, 838 F.2d 1382 (5th Cir. 1992) and Joslyn Mfg. Co. v.
Liberty Mutual Co., 30 F.3d 630 (5th Cir. 1994). MGIC Indem.
Corp. dealt with liability insurance, and Joslyn Mfg. Co.
addressed a comprehensive general liability policy.

                               -10-