Thomas v. Metropolitan Life Ins. Co.

• Decision Date: 28 November 1994
• Docket Number: 94-1287,Nos. 94-1286,s. 94-1286
• Citation: 40 F.3d 505
• Parties: 18 Employee Benefits Cas. 2560 Barbara THOMAS, as Committee for Frances L. Werner, Plaintiff-Appellee, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellant. Barbara THOMAS, as Committee for Frances L. Werner, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 505

40 F.3d 505

18 Employee Benefits Cas. 2560

Barbara THOMAS, as Committee for Frances L. Werner, Plaintiff-Appellee, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellant.

Barbara THOMAS, as Committee for Frances L. Werner, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.

Nos. 94-1286, 94-1287.

United States Court of Appeals First Circuit.

Argued Sept. 12, 1994.

Decided Nov. 28, 1994.

Joseph Trovato, with whom David J. Larkin, Jr. and Sandra Parker, New York City, were on brief, for defendant-appellant.

Lawrence J. Casey, with whom Scott E. Bettencourt and Crowe, Crowe & Vernaglia, P.C., Boston, MA, were on brief, for plaintiff-appellee.

Before TORRUELLA, Chief Judge, CAMPBELL, Senior Circuit Judge, and STAHL, Circuit Judge.

TORRUELLA, Chief Judge.

This case involves a dispute arising under an insurance policy, part of the Empire Plan, issued by defendant-appellant Metropolitan Life Insurance Company ("Met Life") to plaintiff-appellee Frances Werner. ¹ Because we agree with the district court that the policy terms mandate coverage here, and that Met Life acted in good faith and committed no unfair or deceptive practices, we affirm.

I. BACKGROUND

McLean Hospital ("McLean") is a psychiatric hospital located in Belmont, Massachusetts. Its forty-six building campus consists numerous patient care buildings, as well as buildings for the hospital's operations, such as offices, laundry, storage, and garages. McLean primarily provides, on an inpatient basis, diagnostic and therapeutic facilities for the diagnosis, treatment and care of mentally ill persons by licensed physicians. McLean also provides continuous, 24-hour-a-day nursing services to its patients under the supervision of a registered graduate nurse.

Through its various facilities and programs, McLean offers its patients a spectrum of care and treatment that aims to foster less dependence on institutional support. These programs range from the psychotic disorders program, in which patients are constantly supervised and have little responsibility, to the community residential and treatment programs, which provide patients with a structured environment, a somewhat independent living arrangement, and the same 24-hour-a-day professional and ancillary hospital services that are available in the more restrictive treatment units. The Hope Cottage and the Mill Street Lodge are two such residential treatment programs available at McLean.

All of the programs at McLean, including the residential treatment programs, are staffed by McLean employees, and all services provided through these programs are billed through McLean's central accounting department.

In September 1985, Frances Werner, a diagnosed paranoid schizophrenic, was admitted to McLean and initially placed in the psychotic disorders unit. In March 1986, her condition had improved, and she was transferred to the community residential and treatment program at McLean. While in the community residential and treatment program, Werner was assigned a bed in the Hope Cottage building until March 1989, and in the Mill Street Lodge building from March 1989 until February 1992. ² Werner was assessed a room and board charge during her stay at McLean, including the period she spent in the Hope Cottage and Mill Street Lodge buildings.

Werner is an enrollee under a group health insurance policy known as the Empire Plan (the "Plan"), which provides health insurance benefits to New York State Government employees and their dependents. Under the Plan, Werner is eligible to receive benefits for covered medical services that are provided to her. The Plan provides that Blue Cross pay for covered services for the first 120 days of care, and that Met Life pay for such services after the initial 120 days.

Blue Cross paid its liability for the first 120 days that Werner was in McLean. After the initial 120 days, Met Life paid for the services received by Werner while she was in the psychotic disorders program (September 5, 1985 to March 6, 1986, and September 14 to October 10, 1989). Met Life denied Werner's claims for services received while she was in McLean's community residential and treatment program, however, contending that neither the Hope Cottage nor the Mill Street Lodge are within the scope of the Plan.

The Plan specifically provides that Met Life will pay for certain covered medical expenses, including "[s]ervices of private proprietary hospitals for the treatment of mental and nervous conditions and alcoholism" (emphasis added). The Plan further defines "hospital" as "only an institution which meets fully every one" of three tests. The Plan sets forth these tests as follows:

1. It is primarily engaged in providing on an inpatient basis diagnostic and therapeutic facilities for surgical or medical diagnosis, treatment and care of injured and sick persons by or under the supervision of a staff of physicians who are duly licensed to practice; and

2. It continuously provides 24-hours-a-day nursing service by or under the supervision of registered graduate nurses; and

3. It is not a skilled nursing facility and it is not, other than incidentally, a place of rest, a place for the aged, a place for drug addicts, a place for alcoholics or a nursing home.

The phrase "on an inpatient basis" is defined under the Plan to mean that the institution assesses a room and board charge.

Met Life received a letter dated October 18, 1990 from one of Werner's physicians at McLean, Dr. Peter Choras. In his letter, written on McLean Hospital letterhead, Dr. Choras explained the urgency of Werner's medical situation, and entreated Met Life to provide coverage for Werner's treatment at the Mill Street Lodge, which he called a "half-way house." In response, Met Life reiterated that no benefits were available, because residential facilities or programs, including "halfway houses," were not covered by the Plan. Met Life further explained that it "must adhere to the plan provisions as stipulated by the contract holder."

After receiving requests on Werner's behalf from another physician and an attorney to reconsider its denial of coverage, Met Life apparently looked for the Mill Street Lodge in the American Hospital Association accreditation manual. Although McLean Hospital was listed, the Mill Street Lodge was not. Met Life responded to these appeals on March 5, 1991, requesting additional information about the Mill Street Lodge to aid its reconsideration. According to Met Life, it never received any information that changed its determination that the Mill Street Lodge was not a covered facility.

Werner brought suit against Met Life in August 1991, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, unfair and deceptive practices in violation of Mass.Gen.L. ch. 93A and 176D, and infliction of emotional distress. ³

Werner moved for declaratory relief, for summary judgment on her breach of contract claim, and requested a jury trial on her other claims. Met Life cross-moved for summary judgment on all Werner's claims, contending that Mill Street Lodge and the Hope Cottage were not hospitals under the Plan, and that it had not engaged in any unfair or deceptive practices.

After a hearing on the motions, the district court granted judgment in Werner's favor on her request for declaratory relief and her claim of breach of contract, and in Met Life's favor on the remaining claims. Both Met Life and Werner appealed.

II. ANALYSIS

A. Standard of Review

Because the district court granted summary judgment in Werner's favor regarding the breach of contract claim, we review that decision de novo. Serrano-Perez v. FMC Corp., 985 F.2d 625, 626 (1st Cir.1993); Pagano v. Frank, 983 F.2d 343, 347 (1st Cir.1993). We must determine whether the record, viewed in the light most favorable to Met Life and drawing all reasonable inferences in Met Life's favor, presents any genuine issues of material fact, and whether Werner is entitled to judgment as a matter of law. Summary judgment may not be granted if the evidence is such that a reasonable jury could return a verdict for Met Life. Serrano-Perez, 985 F.2d at 626. Mere allegations, or conjecture unsupported in the record, are insufficient to raise a genuine issue of material fact. Wynne v. Tufts Univ. Sch. of Med., 976 F.2d 791, 794 (1st Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 1845, 123 L.Ed.2d 470 (1993).

Regarding Werner's other claims, conversely, because the district court granted summary judgment in favor of Met Life, we review this decision de novo, and are required to view the record in the light most favorable to Werner, the non-moving party. Serrano-Perez, 985 F.2d at 626.

B. Werner's Claims for Breach of Contract

Werner claims that the Mill Street Lodge and Hope Cottage fully meet each of the Plan's tests, and therefore all services rendered are fully covered expenses. Met Life, on the other hand, claims that the facilities fail to meet the first two of the three tests set forth in the Plan's definition of "hospital," arguing that they are not "inpatient" facilities and do not provide 24-hour nursing service. ⁴

We first address a preliminary matter. While the rights and obligations of parties under insurance contracts are determined by the language contained in the policy, New York law ⁵ requires that the court determine, in the first instance, whether language in a contract is ambiguous and susceptible to two or more reasonable interpretations. Newin Corp. v. Hartford Accident and Indem. Co., 62 N.Y.2d 916, 479 N.Y.S.2d 3, 5, 467 N.E.2d 887, 889 (1984); Hartford Accident and Indem. Co. v. Wesolowski, 33 N.Y.2d 169, 350 N.Y.S.2d 895, 305 N.E.2d 907 (1973). We agree with the parties that there are no ambiguities in the relevant language of the Plan. The issue at the heart of this case is whether the residential treatment facilities at McLean meet the Plan's three-part definition of "hospi...