Ramsey v. Colonial Life Ins. Co. of America
| Decision Date | 27 January 1994 |
| Docket Number | No. 92-7531,92-7531 |
| Citation | 12 F.3d 472 |
| Parties | William A. RAMSEY, Jr., et al., Plaintiffs, William A. Ramsey, Jr., Plaintiff-Appellant Cross-Appellee, v. The COLONIAL LIFE INSURANCE COMPANY OF AMERICA, d/b/a Chubb Life America, Defendant-Appellee Cross-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
James W. Nobles, Jr., Jackson, MS, Pat M. Barrett, Jr., Lexington, MS, for plaintiff-appellant cross-appellee.
Robert C. Boyd, Jackson, MS, for defendant-appellee cross-appellant.
Appeal from the United States District Court for the Southern District of Mississippi.
Before GOLDBERG, HIGGINBOTHAM and DAVIS, Circuit Judges.
This case comes to us as a claim for benefits by William Ramsey Jr. ("Ramsey"), under a medical insurance policy terminated by The Colonial Life Insurance Company of America ("Colonial Life"). When Ramsey became paralyzed from the neck down, he was covered as a dependent on a policy issued to his wife's employer, the Moulden Supply Company ("Moulden"). After two and one half years of paying Ramsey's medical bills, Colonial Life refused to continue covering Ramsey under the policy.
Ramsey filed suit and the court below took jurisdiction under the pre-emptive sweep of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001, et seq.; see Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 57, 107 S.Ct. 1549, 1558, 95 L.Ed.2d 39 (1987) (). The district court granted summary judgment in favor of Ramsey and ordered Colonial Life to continue covering Ramsey's medical expenses. 1992 WL * 474 565286. The court also determined that Ramsey was not entitled to attorney's fees as provided in ERISA under 11 U.S.C. Sec. 1132(g)(1) and entered judgment accordingly.
Ramsey moved for reconsideration of the judgment to the extent that it denied attorney's fees. After his motion to reconsider was denied by the district court, Ramsey noticed an appeal to this court. Colonial Life subsequently cross-appealed the lower court's judgment as to Colonial Life's continued liability under the policy.
Addressing first the issue of Colonial Life's liability, Colonial Life asserts that Ramsey was covered under an expense policy which pays benefits only while premiums are being paid by the policyholder. According to Colonial Life, once the premiums stop, the coverage terminates. The company distinguishes Ramsey's expense policy from an accident policy, in which a beneficiary is insured for the duration of any injury suffered while the policy is in force. This form of insurance covers medical expenses incurred after the policy is canceled as long as the injury was suffered while the policyholder was paying the premiums.
Colonial Life contends that the unfortunate but indisputable result of Ramsey's limited form of coverage was that when his wife's employer canceled the policy, Ramsey's benefits were terminated. According to Colonial Life, these shortcomings were intrinsic to Moulden's policy. Colonial Life thus argues that, although seemingly inappropriate, the termination of benefits was in compliance with the substance of Ramsey's insurance coverage.
We decline to follow the interpretation of the insurance contract urged by Colonial Life, however, for the simple reason that a facial reading of the contract reveals that Ramsey's benefits extend beyond termination of the policy. The unfortunate result of the plain meaning of the contract is that the insurance company will bear the continuing burden of compensating Ramsey for medical expenses without the benefit of continued premium payments. However, the insurance policy was formulated by Colonial Life itself and therefore Colonial Life cannot contest being bound to its own contract. We find the district court's result is correct and we affirm.
The relevant facts in this case are not in dispute. The insurance policy in question was acquired by Moulden Supply Company, Inc. in August of 1986 from defendant Colonial Life. Dianne Ramsey, an employee of Moulden, chose to cover herself and all her dependents, including her husband, Ramsey, under Moulden's group policy.
On January 31st, 1987, Ramsey fell off a ladder and fractured his spine while working in his yard. The resulting quadriplegia permanently and totally disabled him to the point where he will require medical treatment and care for the remainder of his life.
After incurring the additional expenses which resulted from covering Ramsey's condition, Colonial Life dramatically escalated Moulden's premiums. 1 On August 1, 1989, as a consequence of the severity of the premium increase, Moulden Supply canceled the policy.
The insurance policy was an expense policy, as described above, which discontinued the insured's rights to receive reimbursement for medical expenses at the time the policyholders terminated the policy. 2 Due to the imminent loss of coverage, Ramsey and his wife sought to secure a conversion policy from Colonial Life that would afford the same benefit level as had been provided under the Moulden group policy. Colonial Life issued a conversion policy to the Ramseys with a strict $20,000 maximum lifetime limit on benefits, significantly lower than the $2,000,000 limit that the old Moulden group policy provided. Ramsey, despite the reduction in coverage, paid the required premiums on the conversion policy.
At the end of July, 1990, Colonial Life began refusing to pay any further medical expenses incurred by Ramsey. On August 9, 1990, Ramsey and his wife filed a lawsuit against Colonial Life in the state Circuit Court of Hinds County, Mississippi, alleging state law claims of bad faith refusal to pay benefits and gross negligence with intent to deceive in inducing plaintiffs to convert to a policy with substantially lower limits.
Colonial Life subsequently removed the action to the United States District Court for the Southern District of Mississippi. Judge William H. Barbour Jr. recharacterized the pleadings as a claim for benefits under the provisions of ERISA, 29 U.S.C. Sec. 1132(a)(1)(B) providing a federal cause of action to obtain entitlements due under employee benefits plans. See Degan v. Ford Motor Co., 869 F.2d 889 (5th Cir.1989).
Under the reconstituted pleadings, Judge Barbour dismissed Ramsey's wife and various state law causes of action. The district court framed the remaining issues as follows: (1) whether Ramsey was entitled to benefits under the original Moulden group policy, (2) whether he had any rights under the conversion policy, and (3) whether he could recover attorney's fees. During the pendency of the federal litigation, Colonial Life tendered payment for medical expenses incurred by Ramsey during the first twelve months following the group policy cancellation.
As to the first issue, the district court ruled that under ERISA, the issues presented should be answered by referencing the body of federal common law. See In re Heci Exploration Co., Inc., 862 F.2d 513, 521 (5th Cir.1988). Under federal common law, the court ruled that Ramsey was entitled to continuing coverage based upon the court's interpretation of the Extension of Medical Benefits section of the policy. The court began its analysis by noting that the Termination of Insurance section of the policy states that "some medical benefits may be continued" after termination of the policy. The opinion then refers to the section of the policy entitled "Extension of Medical Benefits" which reads:
If you or a dependent are totally disabled when premium payments stop, medical benefits will be continued, until the earlier of:
a. 12 months from the day you become disabled;
b. the date total and continuous disability ends;
c. you or the dependent are insured for similar medical benefits under another group plan. The plan must pay benefits for the injury or sickness that caused the total disability.
Judge Barbour reasoned that this section is internally inconsistent because on the one hand it mandates extension of coverage, "medical benefits will be continued," but, on the other hand, subsection a. denies Ramsey the extension of benefits because he was disabled more than twelve months prior to termination of the policy. The court determined that the clause mandating extension expressed the authentic intent of the policy and Judge Barbour thus nullified subsection a. as it applied to Ramsey. The court held that Ramsey was entitled to an extension of benefits until his disability came to an end, or until he obtained other insurance.
The judge also ruled that any premiums paid under the conversion policy were unnecessary and should be refunded. As to attorney's fees, Judge Barbour held that because there was no showing of a bad faith denial of benefits by Colonial Life, there should be no award of attorney's fees. 3 See Pitts v. American Security Life Insurance Co., 931 F.2d 351, 358 (5th Cir.1991) (). Judge Barbour also referenced various other considerations which militated for the denial of attorney's fees.
The district court entered its final judgment on June 9, 1992 including a denial of attorney's fees. Ramsey moved for reconsideration of the attorney's fee ruling on June 23. The district court denied this motion on July 17, and Ramsey proceeded to file his notice of appeal on August 11. Colonial Life then cross-appealed on the issue of the district court's extension of Ramsey's insurance coverage.
Before advancing to our discussion of the merits of this appeal, we must first address the question of whether the notice of appeal was timely filed.
We must determine whether Ramsey's appeal was properly filed within the thirty day limit as required by Federal Rule of Appellate Procedure (FRAP) 4(a)(1). 4 We address the issue of timeliness as an initial matter...
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