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Cougle v. Berkshire Life Insurance Company of America

United States District Court, E.D. Louisiana

December 13, 2019

ALLAN COUGLE
v.
BERKSHIRE LIFE INSURANCE COMPANY OF AMERICA AND AMERITAS LIFE INSURANCE

         SECTION “R” (3)

          ORDER AND REASONS

          SARAH S. VANCE UNITED STATES DISTRICT JUDGE

         Before the Court are defendants' motions to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).[1] Because plaintiff cannot state a claim under his various causes of action, the Court grants the defendants' motions.

         I. BACKGROUND

         This action arises from the denial of insurance benefits. Christopher Cougle suffers from delusional disorder with paranoid and grandiose features, a severe psychiatric illness which interferes with his judgment and perception of reality.[2] Cougle was insured under three individual insurance disability policies, two issued by the Berkshire Life Insurance Company of America and one issued by Ameritas Life Insurance Company.[3] In December 2016, Cougle made a claim for long-term disability with both Berkshire and Ameritas.[4] Both insurance companies accepted Cougle's claim, and began making payments under the insurance policies.[5]

         After twenty-four months, in January 2019, both defendants discontinued payments.[6] When Cougle demanded continued payment, both companies responded that their respective insurance policies covered only twenty-four months for Cougle's psychiatric illness.[7] Ameritas asserts that such twenty-four month limitations for psychiatric illnesses are commonly used throughout the country in individual insurance disability policies.[8]

         Allen Cougle, the appointed curator of Christopher Cougle, brought this suit in state court against Berkshire and Ameritas, arguing that the insurance companies breached the terms of their policies and violated a number of Louisiana laws.[9] On April 10, 2019, the insurance companies removed the suit to federal court.[10] Both insurance companies then moved to dismiss Cougle's complaint for failure to state a claim upon which relief may be granted.[11]

         II. LEGAL STANDARD

         When considering a motion to dismiss for failure to state a claim under Rule 12(b)(6), the Court must accept all well-pleaded facts as true and view the facts in the light most favorable to the plaintiff. See Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). The Court must resolve doubts as to the sufficiency of the claim in plaintiff's favor. Vulcan Materials Co. v. City of Tehuacana, 238 F.3d 382, 387 (5th Cir. 2001). But to survive a Rule 12(b)(6) motion, a party must plead “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The claim must be dismissed if there are insufficient factual allegations to raise the right to relief above the speculative level, Twombly, 550 U.S. at 555, or if it is apparent from the face of the complaint that there is an insuperable bar to relief, Jones v. Bock, 549 U.S. 199, 215 (2007). The Court is not bound to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 679.

         On a Rule 12(b)(6) motion, the Court must limit its review to the contents of the pleadings, including attachments thereto. Brand Coupon Network, L.L.C. v. Catalina Mktg. Corp., 748 F.3d 631, 635 (5th Cir. 2014). The Court may also consider documents attached to a motion to dismiss or an opposition to that motion when the documents are referred to in the pleadings and are central to a plaintiff's claims. Id.

         III. DISCUSSION

         Plaintiff's claims largely hinge on his allegations that the policies violate certain provisions of the Louisiana Insurance Code and therefore should be reformed to conform with those provisions. Plaintiff also asserts claims under the Louisiana Human Rights Act and the Louisiana Unfair Trade Practices Act, as well as a breach of contract claim, in which he appears to assert that after reformation, the insurance companies would be in breach. Finally, plaintiff asserts a declaratory judgment claim, which is contingent on the viability of his other claims. The Court addresses each claim in turn.

         As an initial matter, plaintiff argues that because this case was removed from a Louisiana state court, Louisiana's pleading standards-rather than federal pleading standards-should be used to analyze his claims. But when a case is removed to federal court, the law is clear that federal pleading requirements, rather than state pleading requirements, apply. See Genella v. Renaissance Media, 115 Fed. App'x 650, 652-53 (5th Cir. 2004) (“While this case originated in state court and was later removed to federal court . . . pleadings must nevertheless conform to federal pleading requirements.”); see also Fed. R. Civ. P. 81(c) (“These [Federal Rules of Civil Procedure] apply to a civil action after it is removed from a state court.”).

         The cases plaintiff cites to are inapposite, as they relate to the application of the standard only in the fraudulent joinder context. And in the Fifth Circuit, courts apply federal pleading standards even when addressing fraudulent joinder in a case that has been removed. See Int'l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d 193, 207-08 (5th Cir. 2016) (holding that a federal court must apply the federal pleading standard to state fraudulent joinder claims). Therefore, the Court will apply the federal pleading standard in analyzing the sufficiency of plaintiff's claims.

         A. Reformation

         Plaintiff asks that the Court reform the insurance policies to remedy alleged violations of Louisiana law. Louisiana law explicitly allows a court to reform a policy which violates the Louisiana Insurance Code. The Louisiana Insurance Code states that “[a]ny insurance policy . . . issued and otherwise valid, which contains any condition or provision not in compliance with the requirements of this Code, shall not be rendered invalid, but shall be construed and applied in accordance with such conditions and provisions as would have applied had such policy . . . been in full compliance with this Code.” La. R.S. 22:880. The Louisiana Supreme Court has also approved reformations of insurance polices to make them comply with the Insurance Code. See Rudloff v. La. Health Servs. & Indem. Co., 385 So.2d 767, 770 (La. 1979) (reforming a policy to comply with the Louisiana Insurance Code). And the policies at issue here state that to the extent they violate a state law, the policies are amended so as to be in conformity with the minimum requirements of the law.[12] Here, plaintiff requests reformation based on a variety of statutes, which are addressed in turn below.

         1. La. R.S. 22:1043

         Plaintiff alleges that defendants' policies violate La. R.S. 22:1043, which states: “Any hospital, health, or medical expense insurance policy . . . shall include benefits payable for the treatment of severe mental illness under the same circumstances and conditions or greater as benefits are paid under those policies . . . for all other diagnoses, illnesses, or accidents.” La. R.S. 22:1043(A)(1)(a). This statute is inapplicable here, as the policies at issue are excluded from this prohibition.

         La. R.S. 22:1043 excludes individual health insurance policies or contracts like the ones at issue here. The statute states: “The provisions of this Section shall not apply to health insurance individual policies or contracts; limited benefit health insurance policies or contracts; and short term health insurance policies or contracts.” La. R.S. 22:1043(A)(3)(b). The Berkshire and Ameritas policies are limited benefit health insurance and individual health policies, and are therefore excluded from the statute's prohibition on providing different benefits for mental illness.

         Plaintiff argues that the relevant policies are health insurance and are not “limited benefit health insurance policies.” But this argument is without merit. Plaintiff first seems to argue that limited benefit health insurance policies cannot include disability insurance, and therefore any disability insurance must be health insurance. But the statutory definition of limited benefit health insurance policy specifically includes disability insurance. See La. R.S. 22:47(2)(c) (defining limited benefit insurance as a “[h]ealth and accident insurance policy designed, advertised, and marketed to supplement major medical insurance that includes . . . disability income.”).

         Plaintiff simply ignores that La. R.S. 22:1043 also specifically excludes “health insurance individual policies or contracts” and is designed to apply only to group plans. See La. R.S. 22:1043(A)(3)(b) (“The provisions of this Section shall not apply to health insurance individual policies or contracts. . . .”) (emphasis added); see also Id. 22:1043(A)(3)(a) (“The provisions of this section shall apply only to group, blanket, and association policies.”). Plaintiff does not contest that the relevant policies were individual policies. And because the policies at issue are explicitly excluded under the statute, Cougle has no claim for reformation under La. R.S. 22:1043.

         2. La. R.S. 22:990

         Cougle also alleges that defendants violate La. R.S. 22:990. That statute sets the boundaries for what an insurance policy may define as “total disability.” As relevant here, it states:

A general definition of total disability in such a policy shall not be more restrictive than one requiring the individual to be totally disabled from engaging in any employment or occupation for which he is, or becomes, qualified by reason of education, training, or experience and which provides him with substantially the same earning capacity as his former earning capacity prior to the start of the disability.

La. R.S. 22:990(C). The Berkshire policies' definition of “Total Disability” reads:

Total Disability means that, because of sickness or injury, you are not able to perform the material and substantial duties of your occupation. Your occupation means the regular occupation (or occupations, if more than one) in which you are engaged at the time you become disabled. You will be totally disabled even if you are at work in some other capacity so long as you are not able to work in your occupation.[13]

         And the Ameritas policy reads: “Total Disability . . . means that, solely due to sickness or injury, you are not able to perform the material and substantial duties of your occupation.”[14]

         Cougle's argument does not seem to be that these general definitions of “total disability” in the policies are illegally limiting as they are written. Rather, Cougle argues that the presence of a separate clause in the policies, which limits benefits for mental or substance abuse disorders to twenty-four months, acts as a limit on the definition of “total disability, ” and thus is impermissible under La. R.S. 22:990.

         Cougle's argument fails. La. R.S. 22:990 is designed to apply to the general definitions of “Total Disability” in a policy. And plaintiff does not argue that those general definitions are insufficently broad. La. R.S. 22:990 does not speak to other limitations on the application of the definition of “Total Disability.” Significantly, as discussed above, another portion of the Louisiana Insurance Code speaks specifically to limitations for mental and substance abuse disorders. See La. R.S. 1043. And that statute specifically excludes individual disability policies from its prohibition on limitations on mental health disorder benefits. See Id. 1043(A)(3)(b). When two statutes on a similar subject matter conflict “the statute specifically directed to the matter at issue must prevail as an exception to the statute more general in character.” Oubre v. La. Citizens Fair Plan, 79 So.3d 987, 997 (La. 2011). Here, La. R.S. 1043 directly addresses the distinct treatment of mental health disorders, while La. R.S. 22:990, if it does so at all, does so only generally and indirectly. Because it is more specific, La. R.S. 1043, and its exception regarding limitations on mental health benefits, must apply.

         Moreover, the exclusion in La. R.S. 1043(A)(3)(b) would be meaningless if La. R.S. 22:990 forbade individual or limited benefit insurance policies from providing less beneficial treatment of mental health disorders than other conditions. And it is “a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.” TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (internal quotation marks omitted) (citing Duncan v. Walker, 533 U.S. 167, 174 (2001)); see also Oubre, 79 So.3d at 987 (“[C]ourts are bound, if possible, to give effect to all parts of a statute and to construe no sentence, clause, or word as meaningless and surplusage if a construction giving force to and preserving all words can legitimately be found.”). To read La. R.S. 22:990 as broadly as Cougle requests would render La. R.S. 22:34(A)(3)(b) meaningless, and therefore violate this “cardinal principle of statutory construction.” TRW Inc., 534 U.S. at 31. This would be improper under Louisiana law.

         The case plaintiff cites to argue that the twenty-four-month limitation necessarily violates La. R.S. 22:990, Scott v. Unum Life Insurance Company of America, 80 So.3d 740 (La.App. 2 Cir. 2011), does not require the opposite result. In that case, the Louisiana Court of Appeals for the Second Circuit affirmed the trial court's decision that the policy at issue violated La. R.S. 22:990 because the insurance company had construed the policies to deny that the plaintiff was totally disabled on the grounds that he could still perform work in certain alternative occupations, when these alternative occupations paid less than plaintiff's former ...


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