Metz v. US LIFE INS. CO. IN CITY OF NEW YORK

10-4305-cv
Metz v. United States Life Insurance Company

United States Court of Appeals
FOR THE SECOND CIRCUIT

August Term 2011

Argued: September 28, 2011 Decided: December 8, 2011

No. 10-4305

_____________________________________

FLORENCE H. METZ,

Plaintiff-Appellant,

-v.-

THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK,

Defendant-Appellee.
_____________________________________

Before: WALKER, STRAUB, and LIVINGSTON, Circuit Judges.

Plaintiff-Appellant Florence Metz (“Metz”) appeals from a judgment and order

of the United States District Court for the Southern District of New York (Jones, J.)

granting Defendant-Appellee United States Life Insurance Company’s (“U.S. Life”)

motion to dismiss Metz’s complaint pursuant to Rule 12(b)(6) of the Federal Rules of

Civil Procedure. Metz sued U.S. Life for failing to pay insurance benefits to which she

claimed to be entitled under the terms of her insurance policy with U.S. Life, as those

terms are putatively interpreted under New York law. U.S. Life contended that it was

instead U.S. Life’s refusal to pay benefits that was grounded in the proper definition

given by New York law to the relevant terms. The district court agreed with U.S. Life’s
view and dismissed the complaint. Finding no error in the district court’s

interpretation of the insurance policy, we AFFIRM.

NOAH H. KUSHLEFSKY, Kreindler & Kreindler LLP,
New York, New York (Gretchen M. Nelson, Kreindler
& Kreindler, Los Angeles, California; Allan A. Shenoi
and Daniel J. Koes, Shenoi Koes, LLP, Pasadena,
California on the brief) for Plaintiff-Appellant.

LEE E. BAINS, JR., Maynard, Cooper & Gale, P.C.
(Michael D. Mulvaney, Edward A. Hosp, and
Christopher C. Frost, Maynard, Cooper & Gale; Fred
N. Knopf and Michelle M. Arbitrio, Wilson, Elser,
Moskowitz, Edelman & Dicker LLP on the brief) for
Defendant-Appellee.

PER CURIAM:

Plaintiff-Appellant Florence Metz (“Metz”) sued United States Life Insurance

Company (“U.S. Life”), with which she has a catastrophic medical insurance policy,

because U.S. Life told her that she had not yet “incurred” sufficient charges to satisfy

its deductible. Metz claimed that U.S. Life’s refusal to pay benefits rested on a

deliberate misinterpretation of “incurred” and breached the insurance contract. She

appeals from a September 22, 2010 judgment of the United States District Court for

the Southern District of New York (Jones, J.), granting U.S. Life’s motion to dismiss

for failure to state a claim. The district court held that Metz, a Medicare recipient,

could not have incurred charges that her physicians had agreed with Medicare to forgo

prior to providing treatment. On appeal, Metz argues that the district court incorrectly

read “incurred” (as in “incurred charge”) in the insurance policy as including only those

amounts that the insured paid or was legally obligated to pay. She contends that,
properly understood, the amount of an incurred charge for medical treatment is

instead the full reasonable and customary charge for that treatment. We hold that the

district court correctly interpreted “incurred,” and therefore affirm.

BACKGROUND

In 1995, Florence Metz took out a catastrophic care insurance policy from U.S.

Life. The policy, as it pertains to Metz, carries a $25,000 deductible. The policy’s

coverage and benefits go into effect once the insured has satisfied the deductible, which

in turn requires the insured to have “incurred” at least $25,000 in “reasonable and

customary” charges for certain medical treatments listed in the policy. At issue here

is only whether Metz in fact “incurred” those charges.

In September 2007, Metz, under the belief that she had incurred the requisite

$25,000 in charges, filed a claim with U.S. Life for medical benefits under the policy.

U.S. Life, however, denied her claim. Discussions between Metz and her

representatives and U.S. Life failed to resolve the dispute, and in August 2009, Metz

brought a putative class action, seeking declaratory and injunctive relief and damages,

in California state court.1 U.S. Life removed the matter to federal district court in

California, under the court’s general diversity jurisdiction, 28 U.S.C. § 1332(a),2 and

the Class Action Fairness Act, 28 U.S.C. § 1332(d), then obtained a transfer of venue

to the Southern District of New York.

1
The district court granted U.S. Life’s motion to dismiss before Metz moved for
class certification; certification and any issues raised thereby are not at issue on
appeal.
2
Metz is a resident of California, and U.S. Life is a New York corporation.
 U.S. Life moved to dismiss under Federal Rule of Civil Procedure 12(b)(6); it

argued that its denial of Metz’s claim was consistent with the accepted definition of

“incurred” for insurance purposes under New York law,3 namely “to become liable or

subject to.” U.S. Life argued that Metz could not be liable for expenses that her doctors

were legally bound, under their preexisting agreements with Medicare, not to charge

her. For her part, Metz argued that “incurred” refers to the full amount representing

a reasonable and customary charge for treatment, regardless of whether an insured

paid or was legally obligated to pay that full amount.

The district court concluded that one cannot be liable for or subject to medical

treatment charges that a doctor has agreed ahead of time to forgo. Accordingly, the

court held that Metz’s construction of the contract was unreasonable and without basis

in New York law, and thus that the complaint failed to state a claim upon which relief

could be granted. This appeal followed.

DISCUSSION

We review de novo a district court’s dismissal of a complaint under Rule 12(b)(6).

Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190,

194 (2d Cir. 2008). We must “accept[] all factual allegations as true and draw[] all

reasonable inferences in favor of the plaintiff.” ECA & Local 134 IBEW Joint Pension

Trust of Chi. v. JP Morgan Chase Co., 553 F.3d 187, 196 (2d Cir. 2009). “To survive a

motion to dismiss, a complaint must plead enough facts to state a claim to relief that

is plausible on its face.” Id. (internal quotation marks omitted).

3
The policy, attached as an exhibit to the complaint, states that it was “issued
in and governed by the laws of New York.”
 I.

The parties do not dispute that this appeal is controlled by New York

substantive law, which defines “incurred” for insurance purposes as “to become liable

or subject to.” New York precedent makes clear that in this context liability for a

charge begins at the time of treatment for which the charge is imposed, and that an

insured may be considered liable for a charge even if the insured does not ultimately

pay that charge in full or in part. See, e.g., Rubin v. Empire Mut. Ins. Co., 25 N.Y.2d

426, 429 (1969). Metz argues that she therefore incurred the full amount of the

reasonable and customary charges for certain treatments simply by undergoing

treatment.

The question, however, is not whether Metz incurred the dollar amounts of

certain charges at the time of treatment, but which amounts she in fact incurred. On

appeal, Metz does not contest the district court’s view that, under the applicable

regulatory framework, physicians treating Medicare beneficiaries agree prior to

treatment that they will not seek amounts exceeding the Medicare-approved fee. To

incur a charge under New York law, an insured must at some point be legally liable to

pay that charge, even if liability is later extinguished prior to payment by the insured.

Rubin, 25 N.Y.2d at 429. Metz cannot, as she contends, incur a charge for which she

implicitly concedes she was never liable.4 We find no error in the district court’s

4
Metz does not allege that any of her doctors actually attempted to charge her
more than the amounts permitted in their agreements with Medicare, or that she faced
liability at any point for more than the Medicare-approved amounts for any other
reason. We need not and do not resolve whether such allegations, if present, would
produce a different result.
conclusion that Metz did not incur more than the amounts that her physicians had

agreed ahead of time they would seek from her.

II.

Metz also contends on appeal that the district court erred by dismissing the

complaint with prejudice, thus implicitly denying her request for leave to amend in the

event of dismissal. We review the denial of leave to amend for abuse of discretion.

Green v. Mattingly, 585 F.3d 97, 104 (2d Cir. 2009).

Here, Metz sought leave to amend only in the final sentence of her opposition to

the motion to dismiss. On appeal, she does not advance new factual allegations that

she would make if granted leave to amend, but merely claims in conclusory fashion

that had she been permitted to amend, she could have pled allegations sufficient to

make out a claim under the district court’s construction of the policy. We find no

abuse of discretion in these circumstances. See Pacific Inv. Mgmt. Co. v. Mayer Brown

LLP, 603 F.3d 144, 160-61 (2d Cir. 2010).

CONCLUSION

We have reviewed Metz’s remaining arguments and find them to be without

merit. For the foregoing reasons, the judgment of the district court is AFFIRMED.