UNITED STATES COURT OF APPEALS
for the Fifth Circuit
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No. 97-30685
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MARK BURTON,
Plaintiff-Appellee,
VERSUS
PAN-AMERICAN LIFE INSURANCE COMPANY,
Defendant-Appellant.
______________________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
(95-CV-345)
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June 10, 1998
Before DAVIS, EMILIO M. GARZA, and BENAVIDES, Circuit Judges.
PER CURIAM:*
In this ERISA case, Pan American Life Insurance Co. ("Pan
American") challenges the district court’s conclusion that Pan
American’s health insurance policy was in effect during the period
at issue and that Pan American was responsible for medical expenses
incurred by appellees. We disagree with the district court that
the policy was in effect and reverse and render judgment for Pan
American.
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
I.
Mark Burton and his wife were participants in a welfare plan
established and maintained by Burton’s employer, C&S Window
Company, Inc. (“C&S”). C&S contracted with Pan-American to provide
certain health care benefits to the beneficiaries of the plan.
Pursuant to an Application and Subscription Agreement, C&S was
obligated to remit premiums for all persons covered by the plan on
or before the first day of each month. The plan, however, provided
for a 31-day grace period for the payment of premiums.
On or about September 23, 1994, Mrs. Burton was admitted to a
hospital for a hysterectomy. Prior to the performance of the
operation, the hospital was advised by Pan American’s third-party
claims administrator that benefits were payable only if her premium
were current. Mrs. Burton incurred medical expenses in the amount
of $13,675.00. Of that amount, the plan would have paid $12,360.71
if coverage had been in effect. C&S, however, failed to remit
premiums due on September 1, 1994. On October 4, 1994, C&S was
notified that its September premiums had not been received and that
the grace period for the receipt of same had expired, resulting in
termination of coverage effective September 1, 1994. Pan American
thereafter denied payment of the medical expenses incurred by Mrs.
Burton.
Burton filed suit against Pan American seeking payment under
the plan. The case was submitted to the district court upon a
stipulated record. The district court issued a Memorandum Ruling
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awarding Burton $12,360.71 in damages, $12,360.71 in statutory
penalties, plus attorneys’ fees.
II.
A.
The district court concluded that coverage was in effect at
the time Mrs. Burton incurred her medical expenses and therefore
rendered judgment in favor of Burton. The court’s conclusion was
based on its interpretation of Article II, Section 11 of the plan,
which provides as follows:
Your Sponsor has a 31 day grace period for the payment of
each premium due after the first premium. Your coverage
pursuant to Your Sponsor’s Application and Subscription
Agreement will continue in force during the grace period
unless Your Sponsor has given Us [Pan American] prior
written notice of termination. If such a premium is not
paid by the end of the grace period, all such insurance
will end as of the due date of such premium.
In its order denying Pan American’s motion for a new trial,
the district court concluded that the last two sentences of Article
II, Section 11 are contradictory and that therefore the provision
is ambiguous. Accordingly, the court applied the rule of contra
proferentum, which requires that an ambiguous provision be strictly
construed in an insured’s favor, and concluded that coverage
continued during the grace period.
Pan American argues that the language of the provision is
unambiguous and clearly provides that while coverage will continue
during the grace period, if the premium is not paid by the end of
the grace period, coverage will terminate as of the date on which
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the delinquent premium was originally due. We agree with Pan
American's reading of the policy. The first sentence of Article
II, Section 11 refers to a due date for the premium. The last
sentence provides that if a delinquent premium is not paid by the
end of the grace period, coverage will terminate as of the “due
date” of that premium. Thus, the “due date” in the last sentence
plainly refers to the original due date of the delinquent premium
as provided in the first sentence. The last sentence does not
provide that coverage will terminate as of the end of the grace
period. Pan American certainly could have included such a
provision but it did not. Instead, it granted a thirty-one day
grace period on condition that the premium be paid by the end of
that grace period. Failure to pay the premium by that date
resulted in termination of the policy effective on the due date of
the premium.
B.
As an apparent alternative basis for its decision to award
damages to Burton, the district court noted in its Memorandum
Ruling that it found merit to Burton’s contention that he was
statutorily entitled to notice of termination.
Pan American argues that the court was wrong because: 1) state
law does not provide for notice of termination under the
circumstances presented here; and 2) the state law on which Burton
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purported to rely is preempted by ERISA.1
La. R.S. 22:636(F) provides in pertinent part:
No insurer shall cancel or refuse to renew any policy of
group or family group health and accident insurance
except for nonpayment of premium . . . until sixty days
after the insurer has mailed written notice of such a
cancellation or nonrenewal by certified mail to the
policyholder.
(emphasis added).
Burton relies on Carr v. Port Ship Serv., Inc., 406 So.2d 632,
634-35 (La. Ct. App. 1981), in which the court held that an
employer had a duty to notify an employee of the termination of his
benefits because the employer was considered the agent of the
insurer. It is not clear from that decision, however, why the
plaintiff was entitled to notice of termination. Moreover, Carr
was decided before La. R.S. 22:636(F) was enacted.2 Burton does
not cite any other authority for the proposition that he was
entitled to notice before his coverage could be terminated. Thus,
pretermitting Pan American's argument that La. R.S. 22:636(F) is
preempted by ERISA, we conclude that Burton was not entitled to
notice of termination.
C.
Pan American argues that the district court erred in awarding
attorney's fees under La. R. S. 22:657 because that statute is pre-
1
It is undisputed that the plan at issue is covered by ERISA.
2 La.R.S. 22:636(F) was effective September 7, 1990.
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empted by ERISA. We need not consider this argument because our
conclusion that Burton is not entitled to recover damages prevents
his recovery of fees under the Louisiana statute.
III.
For reasons stated above, the judgment of the district court
is reversed and a take nothing judgment is rendered in favor of Pan
American.
REVERSED and RENDERED.
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