Guidry v. American Public Life Ins. Co.

Decision Date21 December 2007
Docket NumberNo. 07-30085.,07-30085.
Citation512 F.3d 177
PartiesDarcy GUIDRY; Sally Guidry, Plaintiffs-Appellants, v. AMERICAN PUBLIC LIFE INSURANCE CO., Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Thomas Allen Filo, Cox, Cox, Filo & Camel, Claude Pierson Devall, Lake Charles, LA, Stephen B. Murray (argued), Stephen B. Murray, Jr., Murray Law Firm, New Orleans, LA, for Plaintiffs-Appellants.

W. Wayne Drinkwater (argued), Bradley, Arant, Rose & White, Jackson, MS, John E. Goodman, Bradley, Arant, Rose & White, Birmingham, AL, Maria I. O'Bryne Stephenson, Catherine I. Chavarri, Kathleen Diane Lambert, Stephenson, Matthews, Chavarri & Lambert, New Orleans, LA, John M. Bolton, III, Sasser, Bolton, Stidham & Sefton, PC, Montgomery, AL, for Defendant-Appellee.

Markham R. Leventhal, Mitchell D. Sprengelmeyer, Jorden Burt, Miami, FL, for Amicus Curiae.

Appeal from the United States District Court for the Western District of Louisiana.

Before BENAVIDES, CLEMENT and PRADO, Circuit Judges.

BENAVIDES, Circuit Judge:

Appellants Darcy and Sally Guidry seek a reversal of the district court's dismissal of their claims against Appellee American Public Life Insurance Company ("APL") pursuant to APL's Motion for Judgment on the Pleadings. For the following reasons, we reverse and remand.

I. BACKGROUND

On March 31, 1993, Darcy Guidry applied for an APLIC-3 Cancer and Specified Disease Policy (the "Policy"), which APL issued to him thereafter.1 This Policy is a cash benefit policy that provides supplemental coverage to assist in offsetting costs arising out of the treatment of diagnosed cancer and other specified diseases. The Policy contractually obligates APL to pay a set percentage (ranging between 100% and 110%) of the "actual charges" incurred for various treatments.2 The term "actual charges" is not defined in the Policy.

Until August 2001, APL paid "actual charges" benefits based on the "billed amount"—i.e., the amount originally printed on the medical bill. In August 2001, unbeknownst to its insureds, APL changed its payment practices and paid insureds based on one of two methods: (1) paying "actual charges" benefits based on the "actual expenses" incurred by the insured— that is, the reduced amount of the medical bill after any contractual or statutory reductions ("the discounted bill"); or (2) paying the contractually established percentage (e.g. 110%) of 75% of the "billed amount."3

According to APL, it changed its payment practices "[i]n response to the reality of negotiated discounts by medical providers to the insurers and other responsible third parties." Over the course of many years, a substantial gap developed between the "billed amount" and the actual prices that providers have agreed in advance to accept as payment in full for their medical services, resulting in few patients paying anything close to the "billed amount." According to America's Health Insurance Plans, Inc.'s amicus brief, this phenomenon is due to a combination of two factors: (1) the dramatic increase in the "billed amount" of hospitals and other healthcare providers, and (2) the fact that many insurance carriers have contracts with hospitals which allow their insured to pay a price that is significantly below the billed amount. Consequently, APL realized that it was "overpaying" claims by paying benefits based on the "billed amount," which no longer reflected the expenses incurred by their insureds, and changed its payment practices as described above.

Beginning in 2002, the Guidrys submitted claims to APL for Cancer Treatment Benefits under the Policy. APL's payments to the Guidrys were based on APL's post-August 2001 payment practices. On November 7, 2005, the Guidrys filed a class action petition against APL, asserting a claim for breach of contract and seeking injunctive relief and damages. The Guidrys asserted that APL failed to pay the contractually established percentage of the "actual charges" incurred for medical treatment. APL filed its answer on January 18, 2006. On March 24, 2006, APL filed its Motion for Judgment on the Pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, contending that it performed its contractual duty under the Policy because "actual charges" unambiguously means the amount of the "discounted bill." The district court agreed with APL and granted its motion on June 29, 2006. On July 10, 2006, the Guidrys filed a Motion to Reconsider, which was denied on January 3, 2007. The Guidrys now appeal.

II. STANDARD OF REVIEW

We review a Rule 12(c) motion for judgment on the pleadings de novo. In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007), petition for cert. filed, (U.S. Nov. 26, 2007) (No. 07-713). The standard for deciding a Rule 12(c) motion is the same as a Rule 12(b)(6) motion to dismiss. Id. The court "accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Id. (internal quotations omitted). The plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)."4 Id. at 1965 (citation and footnote omitted).

III. DISCUSSION

Appellants allege that the district court erred in dismissing their claims because the language "actual charges" means the "billed amount" or, at the very least, is ambiguous. APL contends, and the district court agreed, that "actual charges" unambiguously means the amount that the insured ultimately owes (i.e., the discounted bill).

As this is a diversity action regarding the interpretation of insurance policies issued in Louisiana, Louisiana's substantive law controls. Am. Int'l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 260 (5th Cir.2003). Under Louisiana law, an insurance policy "is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil Code." Cadwallader v. Allstate Ins. Co., 848 So.2d 577, 580 (La. 2003). According to the Louisiana Civil Code, "[i]nterpretation of a contract is the determination of the common intent of the parties," LA. CIV.CODE ANN. art. 2045, and an insurance contract "shall be construed according to the entirety of its terms and conditions." LA.REV.STAT. ANN. § 22:654.

Whether contract language is clear or ambiguous is a question of law. Cadwallader, 848 So.2d at 580. The words of a contract "are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning." Id. (citing LA. CIV.CODE ANN. art. 2047). When a contract's language is "clear and explicit and lead[s] to no absurd consequences, no further interpretation may be made in search of the parties' intent." LA. CIV. CODE ANN. art. 2046. If the wording of the policy is unambiguous, then the contract "must be enforced as written." Cadwallader, 848 So.2d at 580. A contract is ambiguous, however, "when it is uncertain as to the parties' intentions and susceptible to more than one reasonable meaning under the circumstances and after applying established rules of construction." Lloyds of London v. Transcon. Gas Pipe Line Corp., 101 F.3d 425, 429 (5th Cir.1996).

When a contract is ambiguous, "the agreement shall be construed according to the intent of the parties." Kuswa & Assocs., Inc. v. Thibaut Constr. Co., 463 So.2d 1264, 1266 (La.1985). "Intent is an issue of fact which is to be inferred from all of the surrounding circumstances." Id. (emphasis added); see also Liberty Mut. Ins. Co. v. Pine Bluff Sand & Gravel Co., 89 F.3d 243, 246 (5th Cir.1996) ("[A]mbiguity in the terms of a contract gives rise to a fact question concerning the intent of the parties.") Consequently, when a contract is ambiguous, the trier of fact must resolve the factual issue of intent, and judgment on the pleadings or summary judgment is improper. See Investors Syndicate of Am., Inc. v. City of Indian Rocks Beach, 434 F.2d 871, 877-78 (5th Cir.1970) (finding that dismissal on the pleadings was error when the contract at issue was ambiguous); Gertler v. City of New Orleans, 881 So.2d 792, 796 (La.Ct.App.2004) ("If the language of [a contract] is ambiguous or susceptible to multiple interpretations, the intent of the parties must be determined and summary judgment is inappropriate.")5

We find that the language "actual charges" as used in the Policy is ambiguous. On the one hand, "actual charges" could reasonably mean the amount the patient was originally billed for medical services. This is the amount that the patient was "actually charged," even if the medical services provider intended to accept less from the patient's insurance carrier. On the other hand, "actual charges" could reasonably mean the amount for which the insured is actually liable based on the discounted bill. Under this interpretation, the amount originally billed for medical services is the amount "charged," and the amount of the discounted bill is the amount "actually charged."6

Appellants' interpretation is buttressed by its argument that when APL intended to limit the insured's recovery to the expenses the insured was ultimately liable for, they did so clearly in the Policy. For example, under the heading "Blood, Plasma and Platelets Benefit," the Policy states: "We will pay 110% of the actual charges for blood, plasma and platelets, the administration, procurement, transfusion, cross-matching, typing and processing of blood/plasma/platelets, from date of diagnosis, which was paid by You, not to exceed $5,000 per twelve (12) month period." (emphasis added). Furthermore, according to the Policy's "Schedule for Definitive Cancer Treatment Benefits," the payment calculation for some benefits...

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