United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT May 30, 2007
Charles R. Fulbruge III
Clerk
No. 06-30449
MICHAEL J. MCLACHLAN; LORI DAVENPORT MCLACHLAN,
Plaintiffs-Appellants,
versus
NEW YORK LIFE INSURANCE COMPANY,
Defendant-Appellee.
--------------------
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:05-CV-52
--------------------
Before HIGGINBOTHAM, WIENER, and PRADO, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
In applying for increased life insurance coverage, Michael
McLachlan submitted blood and urine samples to his insurer, New
York Life. Although the results indicated elevated levels of two
chemicals, phosphatase and creatinine, New York Life mentioned only
the former in its letter to McLachlan, explaining that it would
issue a policy, but with a higher premium given the elevated
phosphatase. McLachlan was later diagnosed with kidney failure.
McLachlan sued New York Life under general Louisiana negligence
law, complaining of the failure to advise him of the elevated
creatinine. The district court dismissed the case, concluding that
New York Life neither owed a duty to disclose nor assumed such a
duty. We affirm.
I
Michael McLachlan had life insurance with New York Life.
After his first child was born in July 2000, McLachlan applied for
increased benefits. As part of the application, New York Life
required him to submit blood and urine samples so that it could
determine the appropriate premium. The samples were forwarded to
a laboratory contracted for by New York Life. That lab reported to
New York Life that McLachlan had high alkaline phosphatase levels
and an “elevated” creatinine level of 2.1 mg/dL.1
New York Life wrote to McLachlan that it had accepted his
application, but at a non-preferred rate due to the high alkaline
phosphatase levels, which increased his risk for several diseases.
McLachlan completed the application process and coverage began. He
told his gastroenterologist of the alkaline phosphatase levels,
which they both began to monitor. His gastroenterologist never
screened for creatinine, a decision the Louisiana Medical Review
Panel later concluded was not professionally inappropriate. New
York Life never informed McLachlan of his elevated creatinine
levels. McLachlan did not request a copy of the test results and
none was sent to him.
1
Creatinine is a waste by-product expelled by the kidneys. The level
of creatinine in the blood is the simplest measure of kidney function. The
normal amount is 0.5-1.5 mg/dL.
2
McLachlan’s creatinine levels continued to rise unchecked,
until a subsequent test in December 2001 found a creatinine level
of 3.4. Doctors told the thirty-four year old McLachlan that the
increasingly elevated creatinine indicated irreversible kidney
damage, necessitating a transplant. In pursuing a malpractice
claim against his doctors, McLachlan subpoenaed the 2000 test
results from New York Life in 2004 and discovered the early
indication of the problem.
McLachlan and his wife sued New York Life in a Louisiana
federal district court with diversity jurisdiction over their
Louisiana law negligence claim. The claim is that the kidney
damage could have been prevented had New York Life disclosed the
test results when it issued the policy, and that New York Life
either had a duty to disclose initially the test results for
creatinine or assumed such a duty when it disclosed only his
alkaline phosphatase levels. New York Life filed a motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6) and motion
for judgment on the pleading under Rule 12(c), contending that New
York Life owed no relevant duty here, even given the facts of the
McLachlans’ complaint. The district court granted the motion to
dismiss.
The McLachlans appeal. We review the district court’s ruling
de novo, taking all facts alleged in the complaint as true and
affirming “only if it appears that no relief could be granted under
3
any set of facts that could be proven consistent with the
allegations.”2
II
This appeal turns on whether New York Life owed a relevant
duty to the McLachlans.3 We note first that the McLachlans do not
rely on Louisiana insurance law. And they cannot, because it
creates no duty to disclose in the current situation.4 Rather, the
McLachlans rely on general Louisiana negligence law, codified in
LA. CIV. CODE arts. 2315 and 2316.
Under Louisiana law, the existence of a duty, and the
corollary issue whether the duty extends to protect a particular
plaintiff from a particular harm, are questions of law usually
2
See Abraham v. Singh, 480 F.3d 351, 354 (5th Cir. 2007) (internal
citation and quotation marks omitted).
3
The McLachlans briefly assert that, under Louisiana law, a categorical
“no duty” defense is strongly disfavored; rather, courts generally assume some
sort of duty and, if no liability should attach, find no breach. See Pitre v.
La. Tech. Univ., 673 So. 2d 585, 597 (La. 1996) (Lemmon, J., concurring).
This is at odds with the Louisiana cases holding that the duty inquiry
requires analysis of whether the duty extends to a particular risk of harm.
See infra note 5. In any event, even if this case were better analyzed as a
“no breach” case, the McLachlans themselves argue nothing but duty after
citing Pitre. So this case is a “duty” case.
4
The only provision touching this issue, the provision stating that
“[e]very insurer who requires from an applicant for insurance a written
authorization to obtain medical records of the applicant shall furnish copies
of the medical records received by the insurer to the applicant on written
request,” LA. REV. STAT. ANN. § 22:2(A)(1) (2004), is irrelevant here because
New York Life never sought McLachlans’s medical records and McLachlan never
requested such records in writing. Relatedly, other provisions explicitly
regulate all facets of insurers’ HIV testing, LA. REV. STAT. ANN. 40:1300.11
(2004), and none require disclosure of HIV test results without a written
request.
4
determined together, case-by-case.5 In answering these questions,
Louisiana jurisprudence looks to moral, social, and economic
factors, including: 1) whether the imposition of a duty would
result in an unmanageable flow of litigation; 2) the ease of
association between the plaintiff’s harm and defendant’s conduct;
3) the economic impact on society and similarly situated parties;
4) the nature of the defendant’s activity; 5) moral considerations,
particularly victim fault; 6) precedent; and 7) the direction in
which society and its institutions are evolving.6
The McLachlans make two claims here: that New York Life had an
affirmative duty to disclose the creatinine information because it
was important, and that it assumed a duty to disclose that
information when it disclosed the alkaline phosphatase information.
We address each in turn.
A
Although there is no recognized affirmative duty to disclose
in the exact situation presented here, Louisiana provides a general
negligent misrepresentation cause of action where there is a legal
duty to provide correct information and the defendant fails to
5
See Hill v. Lundin & Assocs., 256 So. 2d 620, 623 (La. 1972); Ellison
v. Conoco, Inc., 950 F.2d 1196, 1204-05 (5th Cir. 1996) (construing Louisiana
law).
6
See Meany v. Meany, 639 So. 2d 229, 233 (La. 1994). Citing Posecai v.
Wal-Mart Stores, Inc., 752 So.2d 762, 766 (La. 1999) (deciding whether Sam’s
Club had duty to protect shopper who was carjacked in store parking lot), the
McLachlans argue that foreseeability and gravity of harm are additional, and
the most important, factors. Posecai, however, by its own terms analyzed when
businesses have a duty to protect their customers from criminal acts of third
parties. The Meany factors control here.
5
disclose or discloses misinformation.7 However, in such cases a
legal duty to disclose exists only where there was privity of
contract or a fiduciary relationship between the parties.8 Under
Louisiana law, the insurer-insured relationship doesn’t give rise
to a fiduciary duty9 and there was no privity of contract between
the McLachlans and New York Life.10 In one case, Barrie v. V.P.
Exterminators, Inc.,11 the Louisiana Supreme Court imposed a duty
where there was no privity or fiduciary relationship. However, in
Barrie a termite inspector made a faulty report for a seller of a
home, and the buyers, intended users of the report, sued. Here, by
contrast, New York Life purchased the medical tests for its own
purposes, not the McLachlans’.
Our conclusion accords with a similar Erie-guess made by this
court in Deramus v. Jackson National Life Insurance Company.12 In
Deramus, the insurance company rejected Deramus’s life insurance
application after its required blood test found that Deramus had
7
See Barrie v. V.P. Exterminators, Inc., 625 So. 2d 1007, 1016 (La.
1993).
8
See Daye v. General Motors Corp., 720 So. 2d 654, 659 (La. 1998).
9
See, e.g., Nat’l Union Fire Ins. Co. v. Cagle, 68 F.3d 905, 910 (5th
Cir. 1995).
10
The McLachlans and New York Life had privity regarding the existing
life insurance policy, but they did not have privity regarding the
anticipated, future policy because an application for increased coverage is a
proposed new contract, not an extension of an old contract. That the contract
was eventually entered into does not change anything.
11
625 So. 2d at 1016-18.
12
92 F.3d 274 (5th Cir. 1996).
6
HIV. The insurer told him that it had rejected his claim for
medical reasons, but nothing more; Deramus tried to learn more, but
he could not. After Deramus died of AIDS three years later, his
wife sued. The district court, in concluding that the insurer had
no duty to disclose under Mississippi law, considered many of the
factors that Louisiana courts consider. It observed that insurers
mitigate risk, not protect life, and that their testing is only for
their own purposes. In light of that, and the fact that the
insurer didn’t promise to warn Deramus of any medical risks, the
court concluded that Deramus shouldn’t have expected the insurer to
warn him. The court also noted that the insurer didn’t set the
disease in motion. Turning to the economic and social consequences
of its holding, the court observed that holding insurers to the
same standards of disclosure as doctors would require an expertise
that insurers do not have. Finally, the court noted that the
overwhelming majority of courts to have considered this duty have
rejected it.13 The same reasoning applies here.14
13
See, e.g., Eaton v. Continental Gen. Ins. Co., 147 F. Supp. 2d 829,
834 (N.D. Ohio 2001); Doe v. Prudential Ins. Co., 860 F. Supp. 243, 252-53
(D.Md. 1993); Petrosky v. Brasner, 279 A.2d 75, 78 (N.Y. App. Div. 2001);
Nolan v. First Colony Life Ins. Co., 784 A.2d 81, 85-86 (N.J. Super. 2001).
14
The McLachlans’ attempts to distinguish Deramus are unconvincing.
They argue that Deramus had no privity with his insurer, but McLachlan didn’t
either. See supra note 9. They argue that Deramus was told he was rejected
only “for medical reasons,” which should’ve put him on notice of a problem,
whereas here Mr. McLachlan was told about the phosphatase, but not the
creatinine, but, as we explain later, that partial disclosure didn’t create a
duty to disclose more. And they argue that Deramus was already stricken with
AIDS, raising serious issues of causation, whereas here Mr. McLachlan could’ve
saved his kidneys with sufficient warning, but that goes to causation, not
duty.
7
The McLachlans urge that insurers like New York Life routinely
run medical tests for the explicit purpose of discovering abnormal
results, and it would be cheap and easy to either forward the
complete results to applicants or simply notify applicants of
anything labeled “elevated” or “out of the ordinary,” perhaps in
the same letters the insurers send with the finalized premium, and
that the risk of harm is great because applicants may not otherwise
discover serious ailments. We aren’t so sure. It’s difficult to
foresee the practical impacts of imposing a duty here - what
insurers would have to test for or would have to disclose. The
risk that applicants may not otherwise discover serious ailments is
not a risk created or borne by the insurer.15
We recognize that a recent Tenth Circuit opinion, Pehle v.
Farm Bureau Life Insurance Company,16 suggests a contrary
conclusion. In Pehle, the insurer failed to inform Pehle of his
HIV-positive status in its letter rejecting coverage “based on
blood results” and advising Pehle that it would disclose the
results “if he so wished.” The court, applying Wyoming law, held
that the insurer had a “duty to disclose to the applicant
15
Cf. Hannah E. Greenwalk, What You Don’t Know Could Save Your Life: A
Case for Federal Insurance Disclosure Regulation, 102 DICK. L. REV. 131 (1997)
(arguing for Congress to impose a duty by statute); but see Ronald Pelmese,
Jr., Recent Developments in New York Law: Holding that an Insurance Company
Had No Duty to Disclose a Life-Threatening Medical Condition Highlights the
Need for a New Approach, 76 ST. JOHN’S L. REV. 1047 (2002) (arguing that courts
should impose a duty).
16
See 397 F.3d 897 (10th Cir. 2005).
8
information sufficient to cause a reasonable applicant to inquire
further.” The court stated:
By encouraging the Pehles to purchase life insurance
through them, Farm Bureau purported to act with the
Pehles’ best interests in mind. In submitting to a
procedure for extraction and consenting to an examination
of their blood, the Pehles demonstrated that Farm Bureau
had gained their confidence. We do not think that
insurance companies must exist to treat or diagnose HIV
in order for a duty to arise that necessitates that
applicants be properly put on notice to inquire
further....We must inquire who is in ‘the best position
to guard against...injury.’
Although the panel was divided, it is sufficient here to note that
the court reached its decision largely after characterizing the
relationship between the insurer and the applicant as one of trust
and confidence, a position rejected by Louisiana and in any event
not sustainable on the facts here. Given Louisiana law, we cannot
follow Pehle here.
Finally, the McLachlans make a related argument that
“negligent misrepresentation” actually encompasses two theories:
negligent misrepresentation causing pecuniary harm, governed by
RESTATEMENT (SECOND) OF TORTS § 552 and requiring that the statements
were made in the course of business or employment, and negligent
misrepresentation causing physical harm, governed by RESTATEMENT
(SECOND) OF TORTS § 311 and, as comment (c) to that section
recognizes, covering even gratuitous statements not made in the
course of business or for the speaker’s benefit, that is,
9
statements made by anyone.17 The McLachlans argue that the district
court missed the distinction, analyzing only the first theory and
citing cases, which required privity or a fiduciary relationship,
relevant only to the first theory. Although “Louisiana
jurisprudence has not thoroughly developed” the latter cause of
action, they assert, Louisiana courts have suggested it exists: in
Devore v. Hobart Manufacturing Company,18 the Louisiana Supreme
Court highlighted the exact distinction at issue and cited both
Restatement provisions in holding that its case was a pecuniary
loss case governed by § 552.19
Devore only alluded to the possibility of a § 311 claim. More
importantly, § 311 - like § 552 - by its own terms requires an
affirmative misstatement, not just a non-disclosure. That is, §
311 declares that when someone makes a statement that might
otherwise cause physical harm, as when someone having a business
relationship with the plaintiff makes a statement that might
otherwise cause pecuniary harm under § 522, he must be truthful.
Section § 311 does not impose an affirmative duty to warn everyone
of the risk of physical harm. Although Louisiana has extended the
17
Section 311 references § 552, stating that § 311 is “somewhat
broader.” Of course, § 311 still requires that the plaintiff have made
“reasonable reliance” on the statement, a requirement that probably will, in
most circumstances, imply some sort of relationship between the parties, but
there is no express requirement of a business relationship.
18
367 So. 2d 836, 839 (La. 1979).
19
They also cite Daye v. General Motors Corp., 720 So.2d 654 (La.
1998), but that case seems to require privity or a fiduciary relationship for
all negligent misrepresentation claims, although the court doesn’t address the
“two theories” possibility.
10
“negligent misrepresentation” theory to include situations of non-
disclosure, it has done so - implicitly under and as an extension
to § 552 - where there was some sort of business relationship
making it reasonable to imply an affirmative duty.20 Which is why
the relevant cases required privity or a fiduciary relationship.
We are unwilling to create an affirmative duty to disclose under §
311, a duty that would require everyone to warn everyone else of
various physical dangers, regardless of the relationship.
B
The McLachlans assert that New York Life assumed a duty to
disclose the elevated creatinine when it elected to disclos the
elevated alkaline phosphatase. Under Louisiana law, a party
assumes a duty to disclose if it makes a statement which a
reasonable person would think is a complete, accurate statement as
to certain matters.21 Here, New York Life disclosed the high
alkaline phosphatase levels only to explain to McLachlan why his
premium would be high, not for his well-being, and it made no
representations about the comprehensiveness of its tests or the
intent behind them. As the lower court stated, “McLachlan could
20
See supra note 7 and accompanying text.
21
See Dornak v. Lafayette Gen. Hosp., 399 So. 2d 168, 170-171 (La.
1981); see also Ratliff v. State, 844 So. 2d 926 (La. App. 2003) (holding that
state had assumed duty to ensure that bridge was properly maintained by
sending out inspectors to inspect bridge); Creel v. Southern Natural Gas Co.,
917 So. 2d 491, 499-500 (La. App. 1995) (holding that in maintaining strip of
land and discussing location of right of way with landowner, gas company
assumed duty not to mislead landowner as to location of right of way).
Although most cases involve an assumed duty other than a duty to disclose,
Dornak makes clear that one can assume a duty to disclose.
11
not have reasonably understood New York Life’s communication to
indicate either that he had a clean bill of health apart from what
was reported or that New York Life would undertake to protect him
from future maladies.” A reasonable person would have thought that
New York Life did the tests only for its benefit and reported only
what it thought actuarially relevant, not medically relevant.
Moreover, as the district court noted, if McLachlan “held any
misconceptions about the purposes of the blood work at the time his
blood was drawn, receiving notice of an increased premium ought to
have corrected them.”
As they did below, the McLachlans rely primarily on Dornak v.
Lafayette General Hospital.22 In Dornak, a hospital’s examination
of Dornak for the purpose of determining her fitness for employment
revealed tuberculosis. The hospital later hired Dornak, without
disclosing to her the test results. The Louisiana Supreme Court
found that by undertaking the exam and employing her, the hospital
assumed a duty to disclose the results. The district court here
stated:
Dornak is distinguishable from the context presented
here. The Dornak plaintiff could reasonably expect that
the hospital had voluntarily undertaken to render
services to protect plaintiff’s health because ‘she was
employed by the hospital to perform duties placing her in
contact with co-employees and hospital patients.’
[citing Dornak]. The hospital’s examination in Dornak,
unlike New York Life’s tests, was performed because it
had a special interest in certifying Dornak’s suitability
to work with patients. When the hospital hired her,
22
399 So. 2d 168 (La. 1981).
12
Dornak quite reasonably understood that she was in fact
healthy in the opinion of the examining doctor.
Furthermore, a doctor examined Dornak; New York Life
merely sent Mr. McLachlan’s blood sample to a lab.
Individuals have a right to expect a certain degree of
care and disclosure when a doctor is directly involved.
[citing Deramus’s distinction of Dornak].
We agree. Put in simpler terms, most employers don’t check their
prospective employees’ health, so when they do, there is an
argument that the employees might rely on the employer’s tests and
representations. Indeed, a Louisiana appellate court has
subsequently held that Dornak limited itself to pre-employment
physical exams.23 In the end, the present case is more like Gilbert
v. B.D.O.W.S., Inc.,24 where a Louisiana appellate court held that
an insurer’s inspection of a swimming pool to determine if it met
underwriting requirements did not mean the insurer had assumed a
duty to inform the pool owner of the pool’s safety.
IV
Finally, the McLachlans claim that the district court made two
findings of fact improper on a motion to dismiss. First, that New
York Life disclosed the phosphatase and didn’t disclose the
creatinine because only the former was relevant to its
underwriting, when possibly the creatinine should have had
underwriting significance under New York Life policy but didn’t or
that it had underwriting significance but wasn’t disclosed,
23
See Thomas v. Kenton, 425 So. 2d 396 (La. App. 1982).
24
711 So. 2d 765 (La. App. 1998).
13
intentionally or by mistake. This, it is argued, is suggested by
the fact that New York Life ordered a creatinine test in the first
place. Second, that McLachlan could not reasonably have understood
the partial disclosure to be a full disclosure. New York Life
responds that the McLachlans in their own complaint averred the
first fact, and that the second “fact” is a conclusion of law. The
first fact, even if true, wouldn’t create a duty. And the second
“fact” is a conclusion of law.
V
The district court’s ruling is AFFIRMED. We do not find the
applicable Louisiana law to be uncertain and DENY the McLachlans’
motion to certify questions to the Louisiana Supreme Court.
14
McLachlan v. New York Life Insurance
Court: Court of Appeals for the Fifth Circuit
Date filed: 2007-05-31
Citations: 488 F.3d 624
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