Comment by Jeanne Louise Carriere
Confronting a question of Louisiana insurance law, Judge Alvin B. Rubin of the United States Court of Appeals for the Fifth Circuit observed that a medical benefits claim “ought to be a simple case, the resolution of which could readily be found in the provisions of the policy or, if the policy provisions are not in compliance with the Louisiana Insurance Code, then in the statute.”' A commonly recurring scenario faced the judge. An insured individual either develops an illness or suffers an injury that requires long-term treatment. His medical expenses are at first covered under his health and accident insurance policy. After treatment begins, however, coverage somehow ends: the policy's term runs, or the policy is cancelled or modified to lessen or to exclude the benefits that the insured is relying on. The insured cannot now acquire new coverage for his existing condition. The question before the Fifth Circuit—and before many Louisiana courts as well—was whether the original insurer continues to be liable for the postcoverage expenses of the injury or illness that occurred while the original policy was in effect. Had the right to benefits under the policy vested in the insured once he incurred the risk that he was insured against, so that termination or amendment of the contract could not end or change the insurer's liability?
The judge's formula appears to provide an appropriate means to find the answer to this question. State court decisions long ago categorized insurance policies as contracts governed by the Louisiana Civil Code, which grants their terms the force of law between the parties. Moreover, the insurance statute should fill any hiatus in the contract. The Louisiana Legislature, when establishing the state's Insurance Code in 1959, made the sweeping assertion that “[i]nsurance is a business affected with the public interest and it is the purpose of this Code to regulate that business in all its phases.”'
Part I of this Comment demonstrates that, for many years, the Code failed to fulfill this promise in the area of amending or terminating the coverage of health and accident insurance policies once the insured suffered a covered illness or injury. The statute did not define the point at which compensation for a claim became a vested property right of the insured. Therefore, no guideline indicated the circumstances under which the insurer could make changes in coverage. On such a specific issue, the Civil Code's obligations articles did not fill the gap. The result was a conflict in the jurisprudence governing individual and group policies, described in part II. Recently, the Louisiana Legislature attempted its own remedy, set forth in part III: Act No. 249 of 1985, amending the Insurance Code and confining the determination of vested rights to the insurance policy's terms alone. But this retreat from the statute's regulatory purpose preserves both the gap in the law and the conflict that it created. Part IV proposes combining the new statute with the earlier law to establish a definitive point at which the insured's right to benefits vests.
About the Author
Jeanne Louise Carriere. B.A. St. Mary's Dominican College; M.A., Ph.D., University of California at Los Angeles; J.D., Tulane University.
Citation
61 Tul. L. Rev. 653 (1987)