Court Opinion

ID: 13162
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:24:28+00
Date Added: 2024-06-11T12:35:00.177429
License: Public Domain

REVISED
                        UNITED STATES COURT OF APPEALS
                             FOR THE FIFTH CIRCUIT

                            _____________________

                                 No. 96-31151
                            _____________________

                  BEVERLY SUSIE WYNN and LAWRENCE WYNN,

                                                    Plaintiffs-Appellants,

                                    versus

              WASHINGTON NATIONAL INSURANCE COMPANY,

                                                      Defendant-Appellee.

_________________________________________________________________

           Appeal from the United States District Court
               for the Western District of Louisiana
_________________________________________________________________
                         September 9, 1997

Before WISDOM, DUHÉ, and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

     At   issue    is    LA. REV. STAT. ANN. §   22:215.12,    which,   for

hospital, health, or medical expense insurance policies issued
after 1992, prohibits denial or limitation of “benefits for a

covered individual for losses due to a pre-existing condition [that

were] incurred more than twelve months following the effective date

of the individual’s coverage”.        Beverly and Lawrence Wynn appeal a

summary judgment granted Washington National Insurance Company on

the Wynns’ claim that they were entitled to health insurance

benefits for her back surgery. Washington National denied coverage

on the basis of an exclusion in the Wynns’ policy.          We AFFIRM.
                                 I.

     In early February 1993, the Wynns signed an application for

group major medical expenses coverage under a policy of insurance

issued by Washington National to the Washington National Major

Medical Trust.    With respect to Beverly Wynn, the Wynns answered

“yes” to the following “Health Question” on the application:

                Within the past 5 years, has any person
           to be covered: (a) consulted, been examined or
           treated   by  any   physician,   chiropractor,
           psychologist,    or    other    health    care
           practitioner?

           ....

                (1) Was the exam, consultation or
           treatment prompted by complaints or symptoms?

Later in the application, the Wynns explained that Beverly Wynn had

pulled a muscle in her back in September 1992.

     Washington National determined that it could not underwrite

the coverage as the Wynns requested, but could offer modified

coverage for Beverly Wynn with a rider for disorders of the spine.

Coverage was conditioned on the Wynns’ signing the following

“Exception Endorsement”:

                No benefits will be paid under this
           certificate of insurance, or under any rider
           or amendment thereto, for disability, loss or
           expense resulting from or caused by any injury
           to or disease or disorder of the spine or
           spinal region, fractures and cancer excepted,
           suffered by Beverly S. Wynn.

The Wynns signed the endorsement and received their insurance

certificate in March 1993.

     The   policy   also   contained    the   following   pre-existing

conditions limitation:

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                 The Policy does not cover charges
            incurred by a Covered Person during the first
            24 months after his or her coverage became
            effective, if those charges are incurred
            because of a pre-existing condition that was
            not disclosed in the application for his or
            her coverage. The Policy does not cover any
            charges due to a condition that is excluded by
            name or specific description even after that
            24-month period.

(Emphasis added.)

     Approximately two years after the certificate was issued,

Beverly Wynn had treatment, including surgery, on a cervical disc,

resulting    in    medical     charges     of    almost    $35,000.      Washington

National denied coverage pursuant to the exclusion endorsement.

     The Wynns filed this action against Washington National in

late 1995, claiming that they were entitled to benefits because the

condition requiring Beverly Wynn’s surgery was not a pre-existing

condition.    In the alternative, they claimed that, if the surgery

was the result of such a condition, the earlier-referenced LA. REV.

STAT. ANN. § 22:215.12 (West 1995 & Supp. 1997) prohibits Washington

National from denying coverage for losses, due to a pre-existing

condition,    which     are    incurred    more     than   12   months   after   the

effective date of coverage (March 1993).                   The Wynns also sought

statutory penalties under LA. REV. STAT. ANN. § 22:657 (West 1995)

for the denial of their claim for benefits without just and

reasonable grounds.

     Washington National removed the case on diversity grounds, and

cross-motions for summary judgment were filed.                  The district court

granted     Washington        National’s        motion,    concluding    that    the

endorsement       and   the    pre-existing        conditions     limitation     are

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separate, unrelated provisions.    Consequently, the endorsement was

not governed by (and did not run afoul of) § 22:215.12 and instead

constituted an independent basis on which to exclude coverage.

                                  II.

     We review a summary judgment de novo, applying the same

standard as the district court.         See, e.g., Bodenheimer v. PPG

Indus., Inc., 5 F.3d 955, 956 (5th Cir. 1993).         Such judgment is

appropriate where there is no material fact issue and the movant is

entitled to judgment as a matter of law.        Id.; see FED. R. CIV. P.

56(c).    In   making   this   determination,    we   are    to    draw   all

justifiable inferences in favor of the nonmovant.           Id.   Of course,

because the district court had subject matter jurisdiction based on

diversity of citizenship, Louisiana’s substantive law applies. See

Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).

                                   A.

     Section 22:215.12 states in part:

               Any hospital, health, or medical expense
          insurance policy ... which is delivered or
          issued for delivery in [Louisiana] on or after
          January 1, 1993, shall not deny, exclude, or
          limit benefits for a covered individual for
          losses due to a preexisting condition incurred
          more   than   twelve  months   following   the
          effective    date    of    the    individual’s
          coverage....

According to the Wynns, this section prohibits Washington National

from denying coverage for Beverly Wynn’s surgery, which took place

more than a year after issuance of the policy.

     The Wynns concede “that the endorsement was added to the

policy in order to write policies for the Wynns”; but, they

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maintain, nevertheless, that there is a material fact issue as to

whether the endorsement is simply a method of excluding coverage

for a pre-existing condition.        They point, inter alia, to the

affidavit of Washington National’s chief underwriter, which states,

“The exclusion for Ms. Wynn was placed on the Certificate because

of a back disorder.”

     Along this line, the Wynns assert that, if Washington National

is able to write exclusion endorsements in this manner, it can then

rely on such endorsements to exclude coverage for those pre-

existing conditions that are disclosed on insurance applications

(such as Beverly Wynn’s prior back injury), and rely on the pre-

existing conditions limitation in the policy to deny coverage for

those conditions not disclosed on the policy, thereby circumventing

the purpose behind § 22:215.12.

     Washington National responds that it, as an insurance company,

is free to limit its liability in any manner, absent a statute or

public policy to the contrary.       It maintains that the exception

endorsement does not violate § 22:215.12 because coverage was not

denied the Wynns on the basis of the pre-existing conditions

limitation in the policy.    According to Washington National,       the

section   affects   only   such   limitations   and   does   not   affect

endorsements such as the one at issue.      Also, it asserts that no

record evidence supports the Wynns’ suggestion that it will write

similar endorsements every time an individual discloses a pre-

existing condition on an application.

                                  - 5 -
     The section was enacted in 1992; there is little case law

interpreting it. The only reported case that discusses the section

is not on point.   See Rabalais v. Louisiana Health Serv. and Indem.

Co., 671 So. 2d 7 (La. Ct. App. 1996).

     An exception endorsement is qualitatively different from a

pre-existing conditions limitation.         As noted, an insurer in

Louisiana is free to limit its liability “just as individuals may”.

Sargent v. Louisiana Health Serv. & Indem. Co., 550 So. 2d 843, 845

(La. Ct. App. 1989); see Perault v. Time Ins. Co., 633 So. 2d 263,

267 (La. Ct. App. 1993).     Clear and unambiguous insurance contract

provisions to that end are given effect.         Id.

     The exception endorsement clearly and unambiguously limited

Washington National’s liability for losses sustained by Beverly

Wynn occurring from disorders of the spine.        As the district court

noted, nothing in the exception endorsement suggests that it is an

extension   of   the   policy’s   pre-existing   conditions    limitation.

Rather, it is a separate and independent limitation on liability

that the Wynns signed of their own accord as a condition to

receiving insurance.     Indeed, Washington National would have been

entitled to refuse to insure the Wynns if they had not signed the

exception endorsement.      See Sargent, 550 So. 2d at 845.

     The pre-existing conditions limitation operates separately and

independently from the exception endorsement because it applies to

conditions for which an endorsement has not been written and/or

which were not disclosed on the application.           That the limitation

can operate independently of the endorsement is borne out by the

                                   - 6 -
fact that, in their summary judgment papers, the Wynns contended

that Beverly Wynn’s back surgery was not due to a pre-existing

condition. They submitted an affidavit from a neurosurgeon to that

effect.       Thus, the endorsement does not operate to deny coverage

for    pre-existing      conditions;    rather,       as   written,   it   excludes

coverage for “any injury to or disease, or disorder of the spine or

spinal region, fractures and cancer excepted”, regardless of the

source or when incurred.

       In addition, as Washington National correctly observes, the

Wynns have not produced any summary judgment evidence to support

their claim that, in order to avoid the reach of § 22:215.12,

Washington      National    consistently       uses   similar     endorsements     to

exclude    coverage      for   pre-existing      conditions       revealed    on   an

application. Consequently, there is no genuine issue of fact as to

whether the endorsement is an “extension” of the pre-existing

conditions limitation.         On this record, it is not.

                                        B.

       Because we affirm the summary judgment on these grounds, we

need    not    address     whether   the     Wynns     assigned    their     claims.

Likewise, their claim for statutory penalties under § 22:657 is

moot.

                                       III.

       The judgment of the district court is

                                                                   AFFIRMED.

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