Chabner v. Omaha Life Ins. Co.

• Decision Date: 08 February 2000
• Docket Number: No. 98-17060,98-17060
• Citation: 225 F.3d 1042
• Parties: (9th Cir. 2000) HOWARD L. CHABNER, Plaintiff-Appellee, v. UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant-Appellant
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1042

225 F.3d 1042 (9th Cir. 2000)

HOWARD L. CHABNER, Plaintiff-Appellee, v. UNITED OF OMAHA LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 98-17060

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted February 8, 2000--San Francisco, California

Filed September 11, 2000

[Copyrighted Material Omitted]

COUNSEL: Horace W. Green and Joel H. Kaplan, Seyfarth, Shaw, Fair weather & Geraldson, San Francisco, California for the appellant.

Sid Wolinsky, Disability Rights Advocates, Oakland, California for the appellee.

William Lockyer, Attorney General, Sacramento, California for amicus State of California and Stephanie Kanwit, Epstein, Becker & Greene, Washington, D.C. for amicus Health Insurance Association of America.

Appeal from the United States District Court for the Northern District of California Marilyn H. Patel, Chief Judge, Presiding D.C. No. CV-95-00447-MHP

Before: Procter Hug, Jr., Chief Judge, Dorothy W. Nelson and M. Margaret McKeown, Circuit Judges.

OPINION

HUG, Chief Judge:

Plaintiff / Appellee Howard Chabner brought suit against Defendant / Appellant United of Omaha Insurance Company ("United") for alleged violations of the Americans with Disabilities Act ("ADA") and of various California state laws. Chabner, who is disabled, claims that United unfairly discriminated against him by offering him a life insurance policy that substantially overcharged him for any increased mortality risk associated with his disability. The district court held that Chabner had a valid claim under both state law and the ADA, and finding no genuine issue of material fact, the district court granted summary judgment for Chabner. See Chabner v. United of Omaha Life Ins. Co., 994 F. Supp. 1185 (N.D. Cal. 1998). The court directed United to issue Chabner a new policy that conformed to its order granting summary judgment. United appeals both the summary judgment and the order requiring modification of the policy.

Upon careful review of the record we have found that no genuine issue of material fact exists, and that summary judgment for Chabner was appropriate. We do not, however, base our decision on the ADA. We instead rest our decision on California law, which provides Chabner with the remedy he seeks for the misconduct he has alleged. We therefore affirm, although not for all of the reasons relied upon by the district court.

FACTS

Howard Chabner suffers from a progressive condition called facioscapulohumeral muscular dystrophy (FSH MD), a rare form of muscular dystrophy. The condition has confined Chabner to a wheelchair since 1991 and has caused "marked wasting" of his extremities. Chabner takes medication to help control the condition, and his doctor administers annual electrocardiograms to detect any cardiomyopathy that may arise.

On May 3, 1993, Chabner, who was 35 years old at the time, applied to United for whole life insurance.¹ United forwarded Chabner's application to an underwriter who had experience in underwriting insurance policies for applicants with muscular dystrophy, but not with FSH MD. United possessed no internally developed actuarial data for people with FSH MD, and so its underwriter turned to external sources to estimate Chabner's mortality risk. The underwriter, who was not a doctor, arranged to have Chabner examined by a paramedic, reviewed Chabner's medical records, and consulted two underwriting source materials: the Cologne Life Reinsurance Company's "Life Underwriting Manual" ("Cologne manual"); and "Medical Selection of Life Risks" by R.D.C. Brackenridge and W. John Elder ("Brackenridge manual"). After reviewing these materials, the underwriter authorized a policy with a "Table 6" rating, which corresponded to a mortality rate of 150 percent above standard.²

United offered Chabner a $100,000 whole life policy at a cost of $1,076 per year. Of the $1,076 annual premium, $305.44 was applied to the cost of insurance, and the remainder was invested in the policy's cash accumulation and surrender values. By contrast, even though the annual premium for a standard whole life policy (without an increased mortality rating) would have been the same $1,076, only $155.44 of that annual premium would have been applied to the cost of insurance, which would result in an additional $150 being invested in the policy's cash accumulation and surrender values each year.

Chabner accepted the policy, but inquired about the reason for his nonstandard premium. United's Vice President and Senior Medical Director of Underwriting sent Chabner a letter attempting to explain the nonstandard rating. In the letter, United acknowledged that FSH MD "has only a small effect on mortality" and stated that it reduced life expectancy by four years for a non-smoking man of his age. Unsatisfied, Chabner wrote United on two more occasions to inquire why his premium was 96.5% greater than standard if his condition had only a small effect on mortality. United did not respond, and Chabner filed this action.

Chabner filed his original complaint in California Superior Court on January 3, 1995, alleging violations of California's Insurance Code, its Business and Professions Code, its Unruh Civil Rights Act, and common law fraud. After United removed the case to federal court based on diversity jurisdiction, Chabner amended his complaint to add a claim under the ADA.³ Chabner sought class certification and moved for summary judgment on all but his fraud claim. The district court denied class certification, but granted Chabner's motion for summary judgment. See Chabner, 994 F. Supp. 1185. The district court held that the ADA applies to insurance underwriting, see id. at 1190-93, that California law provides Chabner with a private cause of action for the alleged violation of the state insurance code, see id. at 1189, and that United's actions in this case violated the ADA, the California Insurance Code and the Business and Professions Code, and the Unruh Civil Rights Act, see id. at 1193-96. In subsequent orders the court denied United's motions for reconsideration and ultimately ordered United to issue Chabner a new policy that conformed to the court's order granting summary judgment. The court dismissed Chabner's remaining fraud claim, pursuant to Chabner's request, and entered final judgment on September 28, 1998. United timely filed its notice of appeal on October 23, 1998. We have jurisdiction pursuant to 28 U.S.C. S 1291.

DISCUSSION

I. The ADA

The district court's interpretation of the ADA is a question of law that we review de novo. See Bay Area Addiction Research and Treatment, Inc. v. City of Antioch, 179 F.3d 725, 730 (9th Cir. 1999).

Chabner alleges that the nonstandard premium that United charged him for his insurance policy violated the ADA. Recently, however, we held that although Title III of the ADA requires an insurance office to be physically accessible to the disabled, it does not address the terms of the policies the insurance companies sells. See Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104, 1115 (9th Cir. 2000). We therefore hold that United did not violate the ADA by offering Chabner a nonstandard policy.

Title III of the ADA provides: "No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation." 42 U.S.C. S 12182(a). The ADA also includes a "safe harbor" provision, which says that "[the ADA] shall not be construed to prohibit or restrict . . . an insurer . . . from underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law . . . ." 42 U.S.C.S 12201(c).

Weyer, which was handed down after the district court's order was issued, concerned the question of whether an insurance company that administers an employer-provided disability plan was a "place of public accommodation" under Title III of the Americans with Disabilities Act. We found that the term "place of public accommodation" required a connection between the good or service complained of and an actual physical place. As we explained:

[c]ertainly, an insurance office is a place where the public generally has access. But this case is not about such matters as ramps and elevators so that disabled people can get to the office. The dispute in this case, over terms of a contract that the insurer markets through an employer, is not what Congress addressed in the public accommodations provisions.

Weyer, 198 F.3d at 1114. In adopting this approach, we followed the Third and Sixth Circuits, each of which agreed that an insurance company that administered an employerprovided disability plan was not a "place of public accommodation" under the ADA because the employees received their benefits through employment, and not through a public accommodation. See Parker v. Metropolitan Life Ins. Co., 121 F.3d 1006, 1010-12 (6th Cir. 1997) (en banc); Ford v. Schering-Plough Corp., 145 F.3d 601, 612-13 (3d Cir. 1998). Taking these cases at face value, we are led to conclude that a similar distinction between "access" and "content" applies to this case. Here, we reiterate our observation, set forth in Weyer, that "an insurance office must be physically accessible to the disabled but need not provide insurance that treats the disabled equally with the non-disabled." Weyer, 198 F.3d at 1115. Therefore, we do not uphold the district court's decision based upon the ADA.

II. California Law

We review de novo the district court's ruling that California law provides Chabner with a private right of action for violation of its Insurance Code. See Mastro v. Witt , 39 F.3d 238, 241 (9th Cir. 1994) (en banc). We also review de novo the district court's grant of summary judgment. See Balint v. Carson City, 180 F.3d 1047, 1050 (9th Cir. 19...