McNeil v. Time Ins. Co.

• Decision Date: 24 February 2000
• Docket Number: No. 98-10585,98-10585
• Citation: 205 F.3d 179
• Parties: (5th Cir. 2000) MICHAEL JAY McNEIL, ET AL., Plaintiffs, JIMMY WALLACE McNEIL, as Independent Executor and Representative of the Estate of Michael Jay McNeil, Plaintiff-Appellant, v. TIME INSURANCE COMPANY, Defendant-Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 179

205 F.3d 179 (5th Cir. 2000)

MICHAEL JAY McNEIL, ET AL., Plaintiffs JIMMY WALLACE McNEIL, as Independent Executor and Representative of the Estate of Michael Jay McNeil, Plaintiff-Appellant, v. TIME INSURANCE COMPANY, Defendant-Appellee.

No. 98-10585

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

February 24, 2000

REVISED MARCH 1, 2000

[Copyrighted Material Omitted] Appeal from the United States District Court for the Northern District of Texas

Before REYNALDO G. GARZA, JOLLY, and DeMOSS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this case, we are presented difficult questions of statutory interpretation that determine whether the defendant insurance company is liable for more than $400,000 in hospital bills, which the insured, now deceased, incurred as a result of his losing battle with AIDS. In addition to state statutory questions, we must decide whether the Americans with Disabilities Act's ("ADA") anti-discrimination provisions regulate the terms and content of an insurance policy. We ultimately decide that the ADA does not regulate the terms or content of goods and services, of which this insurance policy is one. We therefore affirm the district court's grant of summary judgment dismissing the complaint.

I

In the spring of 1994, Dr. Michael McNeil, a Texas optometrist, did not know that he would be dead within the year because of AIDS. He thus routinely sought to cover himself and his employee in his optometry practice under a general health insurance plan.

Dr. McNeil's optometry practice was a two-person partnership with Dr. Roy F. Dickey. The partnership had one employee, its secretary, Jana Jay. The partnership was a member of the Texas Optometric Association, which operated as a trust, allowing its members to purchase group insurance. In April, Dr. McNeil received information about a new life and health insurance policy offered by Time Insurance Company through the association. The brochure described the policy's benefits and costs. The policy contained no limitation on pre-existing conditions and provided lifetime maximum benefits of $2 million. There were limitations on coverage for several specific health problems. One of these was for Acquired Immune Deficiency Syndrome ("AIDS"). The policy limited coverage for AIDS and AIDS Related Complex ("ARC") to $10,000 during the first two years of the policy but provided maximum benefits after that.

Dr. McNeil decided that the partnership should purchase this plan. He filled out the employer application, signing a document indicating that he had "authority to bind the employer," and then he and Ms. Jay mailed employee enrollment forms to Time. His form listed him as an "employee." Dr. Dickey was covered by Medicare and did not enroll. The partnership paid the first premium to Time for Dr. McNeil and Ms. Jay from its operating account, though Dr. McNeil later reimbursed the partnership for his portion. The plan became effective on May 1, 1994.

After the plan became effective, Dr. McNeil paid his own premiums, while the partnership paid for Ms. Jay's. During the plan's operation, the partnership's administrative duties consisted of receiving premium notices and paying Ms. Jay's premiums.

In September 1994, Dr. McNeil was diagnosed with AIDS. He was admitted to the hospital and treated for pneumonia. Time paid the first $10,000 of his costs but nothing more. Dr. McNeil subsequently incurred over $400,000 in medical expenses. He died on March 1, 1995.

Before his death, Dr. McNeil brought suit in Texas state court. After Dr. McNeil's death, his father and the executor of his estate took over the suit. Time later removed the case to federal court based on ERISA preemption and diversity. Mr. McNeil then amended the complaint several times. The last version, the Third Amended Complaint, asserted several common law causes of action: breach of contract, breach of the duty of good faith and fair dealing, negligent misrepresentation, common law discrimination, waiver, estoppel, and ratification. This amended complaint also charged that Time had violated a host of state and federal statutes, including the Texas Deceptive Trade Practices Act ("DTPA"), the Texas Insurance Code, the Texas Commission on Human Rights Act ("TCHRA"), the Americans with Disabilities Act ("ADA"), and ERISA.

Mr. McNeil did not have much success in federal district court. First, the court dismissed the claims that were based on alleged violation of Texas insurance law. Second, the court held that Time's provision of insurance did not constitute a "public accommodation" under the ADA, and that Title III of that Act only applied to physical use of the services of a place of public accommodation. Since Mr. McNeil could point to nothing that prevented his son from making physical use of Time's services, the court dismissed the ADA claim. Third, the court held that ERISA preempted the remaining state law claims. Mr. McNeil now appeals each of these three determinations.

II

A

We first address the district court's dismissal of Mr. McNeil's claim under Article 21.21-3 of the Texas Insurance Code: ¹ We also note that because the district court dismissed this particular cause of action, it did not rule on whether ERISA preempted this claim. Our subsequent discussion of ERISA preemption, therefore, does not involve Article 21.21-3.

Art. 21.21-3. Discrimination Against Handicapped Prohibited

An insurer who delivers or issues for delivery or renews any insurance in this state may not refuse to insure, refuse to continue to insure, limit the amount, extent, or kind of coverage available to an individual, or charge an individual a different rate for the same coverage solely because of handicap or partial handicap, except where the refusal, limitation, or rate differential is based on sound actuarial principles or is related to actual or reasonably anticipated experience.

(Emphasis added). The district court first concluded that AIDS was not a "handicap" for purposes of this statute. The court acknowledged that although the statute did not define "handicap," the Texas Commission on Human Rights Act ("TCHRA") did, ² and the two statutes were similar enough to warrant reliance on the TCHRA's definition. The district court then cited our holding in Hilton v. Southwestern Bell Telephone Co., 936 F.2d 823, 828 (5th Cir. 1991), for the proposition that AIDS was not a handicap under the TCHRA and thus not a handicap under Article 21.21-3. The court went on to explain that Time's actions did not constitute "discrimination" under Article 21.21-3 because Time inserted the AIDS limitation in all its policies regardless of whether the insured had AIDS. For these reasons, the district court dismissed this portion of Mr. McNeil's complaint for failure to state a claim.

Our analysis of this Texas law begins with statutory construction, a process we approach as a Texas court would. General Electric Capital Corp. v. Southeastern Health Care, Inc., 950 F.2d 944, 950 (5th Cir. 1991). In Texas, the cardinal rule of statutory construction is to ascertain the "legislature's intent," and to give effect to that intent. Union Bankers Ins. Co. v. Shelton, 889 S.W.2d 278, 280 (Tex. 1994). The duty of the court is to construe a statute as written and ascertain the legislature's intent from the language of the act. Morrison v. Chan, 699 S.W.2d 205, 208 (Tex. 1985).

In condensed form and for purposes of the case before us, we read this statute as follows: An insurer who issues a policy may not limit the amount or extent of coverage to an individual solely because of handicap. ³ This reading leaves us with these questions. First, is AIDS a handicap for purposes of this statute, and, second, if AIDS is a handicap, did Time, the insurer, limit the amount or extent of the policy's coverage to the individual, Dr. McNeil, because of handicap?

We touch on the first question only briefly because the lack of clarity in Texas law makes us reluctant to say whether AIDS constitutes a handicap under the law of that state. The statute itself does not define the term "handicap," and there are no Texas administrative regulations we comfortably can rely on. We do note that the district court's analysis is not irrefutable. If we are to read and consider various statutes of a common purpose together, Calvert v. Fort Worth National Bank, 356 S.W.2d 918, 921 (Tex. 1962); Cadle Co. v. Butler, 951 S.W.2d 901, 907 (Tex. App. 1997), we cannot stop, as the district court did, with the TCHRA. Administrative regulations interpreting Articles 21.20 and 21.21 do suggest that AIDS is a handicap and must also be considered. ⁴ For the sake of this appeal only, however, we will assume that AIDS is a handicap for purposes of Article 21.21-3.

Even so, Time did not violate Article 21.21-3, either at the time that it issued the policy or when it refused to pay more than $10,000 in health care costs.

We begin with the issuance of the policy to Dr. McNeil. It is true that the policy limited its coverage for AIDS to $10,000 during the first two years of the policy. The statute, however, focuses on the conduct of the insurer. The phrase "because of handicap" indicates that the insurer must know that the applicant is handicapped and that the insurer limits coverage to that individual for that reason. ⁵ Dr. McNeil was not handicapped when Time issued this policy to him, or, at the least, Time did not know that he was. Thus, the limitation by the insurer could not have been "because of handicap."

But even if Time had known this when it sold Dr. McNeil the policy, we do not believe it would change our result. The statute specifies that the insurer may not limit the amount or extent of coverage available "to an individual." In short, the statute prevents an insurer from discriminating against an individual applicant because of handicap. Time offered this general policy without distinguishing between individual applicants based...