Wynn v. Washington Nat Ins

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.
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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
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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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