Austell v. Raymond James & Assn

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

DAVID AUSTELL,
Plaintiff-Appellant,

v.
No. 96-1974
RAYMOND JAMES & ASSOCIATES,
INCORPORATED,
Defendant-Appellee.

Appeal from the United States District Court
for the District of South Carolina, at Greenville.
Henry M. Herlong, Jr., District Judge.
(CA-95-3983-6-3)

Argued: May 7, 1997

Decided: July 22, 1997

Before WILKINSON, Chief Judge, MICHAEL, Circuit Judge,
and COPENHAVER, United States District Judge for the
Southern District of West Virginia, sitting by designation.

_________________________________________________________________

Affirmed by published opinion. Judge Copenhaver wrote the opinion,
in which Chief Judge Wilkinson and Judge Michael joined.

_________________________________________________________________

COUNSEL

ARGUED: Robert Edward Hoskins, FOSTER & FOSTER, L.L.P.,
Greenville, South Carolina, for Appellant. Thomas Louis Stephenson,
NEXSEN, PRUET, JACOBS & POLLARD, L.L.P., Greenville,
South Carolina, for Appellee. ON BRIEF: David M. Yokel, MITCH-
ELL, BOUTON, DUGGAN, YOKEL, MCCALL & CHILDS, Green-
ville, South Carolina, for Appellant. Elizabeth M. McMillan,
NEXSEN, PRUET, JACOBS & POLLARD, L.L.P., Greenville,
South Carolina, for Appellee.

_________________________________________________________________

OPINION

COPENHAVER, District Judge:

The sole issue on appeal is whether the district court erred in deter-
mining that the Consolidated Omnibus Budget Reconciliation Act
(COBRA), 29 U.S.C.A. § 1161(a), does not require sponsors of
employee welfare benefit plans to offer continuation coverage for dis-
ability insurance.

Section 1161(a) provides:

The plan sponsor of each group health plan shall provide,
in accordance with this part, that each qualifying beneficiary
who would lose coverage under the plan as a result of a
qualifying event is entitled, under the plan, to elect, within
the election period, continuation coverage under the plan.

29 U.S.C.A. § 1161(a). The term "group health plan" is described in
COBRA as meaning "an employee welfare benefit plan providing
medical care (as defined in section 213(d) of Title 26) to participants
or beneficiaries directly or through insurance, reimbursement, or oth-
erwise." § 1167(1). "Medical care" is defined, in turn, as meaning
amounts paid for, inter alia, "the diagnosis, cure, mitigation, treat-
ment, or prevention of disease, or for the purpose of affecting any
structure or function of the body." 26 U.S.C.A.§ 213(d).

The appellant, Austell, maintains that this language should be con-
strued as including disability insurance which he was receiving at the
time his employment terminated with appellee, Raymond James &
Associates. He presents two arguments in support of his position. The
first purports to rest on ERISA's definition of an"employee welfare
benefit plan," as including "any plan . . . established . . . by an

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employer . . . for the purpose of providing . . . through the purchase
of insurance or otherwise, (A) medical, surgical, or hospital care or
benefits, or benefits in the event of sickness, accident, disability . . . ."
§ 1002. Austell takes the liberty of substituting the meaning of "em-
ployee welfare benefit plan" for the term "group health plan," con-
tending that section 1161(a) should thus be interpreted as requiring
the plan sponsor to provide continuation coverage for all coverage
being offered under the plan, including the disability insurance cover-
age he had during his employment. Such a reformulation of section
1161(a) would effectively read out of COBRA's definition of "group
health plan" the qualification that the plan be one "providing medical
care." See § 1167(1). It would also require the court to ignore the
qualifying word "health" and impermissibly broaden the scope of sec-
tion 1161(a) to render it applicable to a group plan, whether a "health"
plan or not. We decline to accept Austell's suggested revision of sec-
tion 1161(a).

There is no indication that Austell's reading would be consistent
with the intent of Congress to protect against the loss of health care
coverage. Other courts note in general that the continuation require-
ment of COBRA is designed to focus on the provision of health care
coverage. See Smith v. Hartford Ins. Group, 6 F.3d 131, 140 n.10 (3d
Cir. 1993) (stating that COBRA is remedial legislation enacted to
address Congressional concern about "reports of the growing number
of Americans without any health insurance coverage and the decreas-
ing willingness of our Nation's hospitals to provide care to those who
cannot afford to pay") (quoting H.R. Rep. No. 241, 99th Cong., 2d
Sess. 44, reprinted in 1986 U.S.C.C.A.N. 42, 579, 622); Local 217
Hotel & Restaurant Employees Union v. MHM, Inc., 805 F. Supp. 93,
113 (D. Conn. 1991) (stating that COBRA was enacted to require
employers to continue to provide health coverage), aff'd, 976 F.2d
805 (2d Cir. 1992). As the district court noted in Jefferson, the pur-
pose of section 1161(a) "is to prevent individuals covered under their
employer's ERISA plan from having no group health coverage at all
from the time a qualifying event terminates their coverage to the time
in which they are able to secure some other coverage." Jefferson, 818
F. Supp. at 1524 (citing National Companies Health Benefit Plan v.
St. Joseph's Hosp. of Atlanta, Inc., 929 F.2d 1558, 1569 (11th Cir.
1991)).

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It is also observed that two federal courts have stated in dicta that
COBRA continuation rights do not apply to disability insurance.
Moffitt v. Whittle Communications, L.P., 895 F. Supp. 961, 968 n.6
(E.D. Tenn. 1995) (stating that "it appears that these provisions of
COBRA mandate continuation of coverage and conversion privileges
with respect to employee welfare benefit plans which provide health
insurance, as distinguished from disability insurance"); Burgess v.
UNUM, No. C-95-0229 SI, 1995 WL 581151, at *3, n.3 (N.D. Cal.,
Sept. 25, 1995) (stating that "[l]ong-term disability coverage is explic-
itly exempted from COBRA, since it is not considered a `medical
benefit' as defined by COBRA") (citing Prop. Treas. Reg., 52 Fed.
Reg. 22716, Q & A 7 (1987));* cf. Jefferson v. Reliance Standard
Life Ins. Co., 818 F. Supp. 1523, 1524-25 (M.D. Fla. 1993) (stating
that COBRA does not require continuation coverage for life or acci-
dental death and dismemberment insurance offered through an
employee welfare benefit plan), rev'd on other grounds, 85 F.3d 642
(11th Cir. 1996) (unpublished table decision).

Second, Austell contends that even if "group health plan" means
only that aspect of the plan which provides "medical care," disability
insurance qualifies as "medical care" because it is an "amount paid"
for the "mitigation" of disease within the meaning of section 213(d)
of the Internal Revenue Code. This argument is equally unpersuasive.

The word "mitigate" is defined as: "To modify (a quality or condi-
tion) in force or intensity; alleviate." The American Heritage Dictio-
nary of the English Language 841 (new college ed. 1976). Disability
insurance payments cannot reasonably be viewed as sums paid for the
mitigation of disease within the meaning of section 213(d), calling for
_________________________________________________________________
*Austell cites two cases, Webster v. United States, 262 F. Supp. 718
(W.D.N.Y. 1965), aff'd, 371 F.2d 441 (2d Cir. 1967), and Heard v. Com-
missioner of Internal Revenue, 269 F.2d 911 (3d Cir. 1959), as support
for the proposition that premiums paid on disability insurance policies
are deductible medical expenses under section 213(d). The holdings in
those cases are no longer valid in light of subsequent Revenue Rulings.
E.g., Revenue Ruling 68-212, 1968-1 C.B. 91 (premiums paid for insur-
ance policies providing indemnity for, inter alia, "loss of earnings during
disability, will not be deductible as medical expenses for taxable years
beginning after December 31, 1966").

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the "diagnosis, cure, mitigation, treatment or prevention of disease";
that is, disability insurance is not an amount paid to modify or allevi-
ate disease, just as it is not an amount paid to diagnose, cure, treat or
prevent disease. It is instead basically designed to replace lost wages.
See, e.g., Standard Oil Co. of Calif. v. Agsalud, 442 F. Supp. 695,
698-99 (N.D. Calif. 1977), aff'd, 633 F.2d 760 (9th Cir. 1980), aff'd,
454 U.S. 801 (1981).

The judgment of the district court is affirmed.

AFFIRMED

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