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Tingle v. Pacific Mutual Insurance Co.

decided: July 23, 1993.

JAMES M. TINGLE, SR. AND YVETTE CECILE TINGLE, PLAINTIFFS-APPELLEES, AND LAFAYETTE GENERAL MEDICAL CENTER, INTERVENOR-PLAINTIFF-APPELLEE, CROSS-APPELLANT,
v.
PACIFIC MUTUAL INSURANCE CO., DEFENDANT-APPELLANT, CROSS-APPELLEE.



Appeals from the United States District Court for the Western District of Louisiana. D.C. DOCKET NUMBER 89-CV-912. JUDGE Richard J. Putnam

Before Wisdom and Duhe, Circuit Judges, and Doherty*fn1, District Judge.

Author: Wisdom

WISDOM, Circuit Judge:

In this case, the plaintiffs/appellees, James M. Tingle, Sr. and his wife, Yvette Cecile Tingle, sued to recover medical expenses under a health insurance policy provided through Tingle's employer. When Tingle's wife suffered injuries to her back, Tingle filed a claim for her medical expenses with his insurance company, Pacific Mutual Insurance Company ("Pacific"), the defendant/appellant. Pacific responded by notifying Tingle that his policy had been retroactively cancelled based on its discovery that he had misrepresented his wife's medical history on his insurance application. Tingle filed suit in state court to recover under his insurance policy. Pacific removed the case to the Western District of Louisiana where the case was tried to the court. At trial, the district court applied Louisiana law and concluded that Tingle was entitled to recover under the policy. We hold that the Employee Retirement Income Security Act ("ERISA")*fn2 preempts state law in this case. Therefore, we reverse and remand with instructions to the district court to apply federal law instead of Louisiana law.

I.

In September 1987, Tingle was employed by Coastal Tubular Services ("Coastal"). Coastal maintained a group health care policy for its employees and their families. When Coastal failed to pay its insurance premiums, causing its policy to lapse, Pacific supplied the replacement policy. Coastal informed its employees that there would be no lapse in their coverage.

On September 3, 1987, Coastal summoned all of its employees from their jobs to meet with Coastal's insurance agent.*fn3 The agent gave each of the employees a Pacific enrollment form to complete and waited about fifteen minutes to collect the forms. The form required the employees to answer questions regarding their medical histories and their covered family members' medical histories. Pacific agreed to provide health insurance to Tingle and his wife based on this application.

In April 1988, Mrs. Tingle injured her back while attempting to pull on her girdle. When she saw her doctor three days later, he admitted her to Lakewood Hospital. Because the hospital was unable to treat her, it transferred her to Lafayette General Medical Center ("Lafayette General"). There she was found to have a herniated disc, not brought on by her previous back condition. She was operated on to correct this condition. Mrs. Tingle was hospitalized again on two separate occasions because of complications arising from the surgery. Pacific pre-approved each separate treatment. The total cost of Mrs. Tingle's treatments amounted to $71,300. Tingle filed a claim for these costs with Pacific.

When Pacific received Tingle's claim for these expenses, it investigated Mrs. Tingle's medical history and discovered several discrepancies between her medical history and the information Tingle had provided on his enrollment form. Pacific denied Tingle's claim and retroactively cancelled his policy based this discovery. Tingle filed suit in state court to recover under his policy. Pacific removed the case to the Western District of Louisiana under 29 U.S.C. § 1132(e) and (f) (ERISA) and 28 U.S.C. § 1331. The Tingles executed an assignment of health care benefits in favor of Lafayette General, which intervened at trial.

The district court found that Tingle had misrepresented his wife's medical history on his enrollment form. Mrs. Tingle was a borderline diabetic and had continuing back problems. Yet, when asked whether or not Tingle or his wife suffered from any form of diabetes or back or spine disorder, Tingle answered in the negative to both of these questions. In addition, he failed to mention that his wife suffered from obesity. At trial, Tingle testified that he thought his wife was taking medication to avoid becoming a diabetic; thus, he did not believe she was diabetic. Further, he stated that he thought her previous back problems had been merely the result of pulled muscles; hence, he did not believe that they constituted a "disorder". Tingle also testified that he overheard Coastal's insurance agent telling another Coastal employee to report only major surgeries and illnesses. Based on this testimony, the district court found that Tingle did not have the actual intent to deceive Pacific when he made the misrepresentations.

The district court held that ERISA did not preempt the applicable state law. Consequently, interpreting La.R.S. 22:619 to require an actual intent to deceive in order to bar recovery, the district court concluded that Pacific was liable on the policy in spite of Tingle's misrepresentations. The district court entered judgment in favor of the Tingles and Lafayette General for the $71,300 in medical expenses and for reasonable costs but not attorneys' fees.

Pacific appeals the court's award allowing recovery under the policy and Lafayette cross appeals the court's decision to deny attorneys' fees.

II.

Pacific argues that ERISA preempts the otherwise applicable Louisiana law in this case. We agree. As a general rule, ERISA preempts any state law that relates to an employee benefit plan.*fn4 However, ERISA's "insurance saving clause" expressly exempts state laws that regulate insurance from preemption.*fn5 The district court held that La.R.S. 22:619 is ...


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