Moufarrej v. Unum Provident Corp. , 100 F. App'x 284 ( 2004 )

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that this opinion should not be published and is not precedent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-