Not Reported in S.W.2d

Not Reported in S.W.2d, 1990 WL 113682 (Tex.App.-Hous. (14 Dist.))

(Cite as: Not Reported in S.W.2d)

Prudential Ins. Co. of America v. BrownTex.App.-Hous. (14 Dist.), 1990.Only the Westlaw citation is currently available.

NOTICE: NOT DESIGNATED FOR PUBLICATION. UNDER TX R RAP RULE 47.7, UNPUBLISHED OPINIONS HAVE NO PRECEDENTIAL VALUE BUT MAY BE CITED WITH THE NOTATION “(not designated for publication).”

Court of Appeals of Texas, Houston (14th Dist.).

PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant,

Billy W. BROWN, Appellee.

No. B14-89-00695-CV.

Aug. 9, 1990.

On Appeal from the 151st District Court Harris County, Texas Trial Court Cause No. 81-31687.

Before SEARS, CANNON AND DRAUGHN, JJ..

Opinion

DRAUGHN, Justice.

*1 Prudential Insurance Company of America appeals from a judgment for breach of an insurance contract and breach of the duty of good faith and fair dealing rendered in favor of Billy W. Brown. Prudential brings eight points of error, claiming (1) the trial court erred in granting the new trial; (2) the Employment Retirement Insurance Security Act (”ERISA”) preempted Brown's claims; (3) the contract between Brown and his doctor was illegal; (4) the evidence was legally and factually insufficient to support the jury's findings of Brown's mental anguish; (5) the submission of two special issues permitted the jury to compensate Brown twice for the same element of damages; (6) the evidence was legally and factually insufficient to show that Prudential acted with conscious indifference to, or in reckless disregard of, Brown's rights; and (7) the trial court erred in excluding material, admissible evidence offered by Prudential. We affirm.

In 1979, Brown was diagnosed with bladder cancer. Chemotherapy proved ineffective as a treatment against Brown's cancer. Brown then began a series of radiation treatments in preparation for surgery to remove his bladder and prostate gland. Without the surgery, the probability that Brown would die within five years was 85%. Prior to the surgery, Brown learned of Dr. Stanislaw R. Burzynski and alternative cancer treatments he was administering. Brown contacted Dr. Burzynski and began receiving treatment with a series of drugs called antineoplastons, which Dr. Burzynski had developed. Within six weeks of beginning Dr. Burzynski's treatment, Brown was diagnosed by his urologist as being free from all bladder cancer. Over ten years later he has had no recurrence of bladder cancer.

At the time Brown received his treatment from Dr. Burzynski, he had group insurance with Prudential, which was purchased through the Independent Garagemen's Association Insurance Trust (”the insurance trust”). The insurance trust served as a conduit through which premiums were paid by various employers for the purpose of obtaining major medical and life insurance for the employer members of the Independent Garagemen's Association. Brown's claims to Prudential for Dr. Burzynski's treatment were forwarded by the Insurance Trust to Prudential. Prudential denied Brown's claims on the grounds that the treatment was not reasonably medically necessary and, therefore, was not covered under the group insurance policy. Brown filed suit against Prudential for breach of its contract of insurance. Brown also alleged that Prudential had breached its duty of good faith and fair dealing. The case was originally tried on May 20, 1986. The jury verdict and judgment in the first trial were in favor of Prudential. Brown filed a motion for new trial on the grounds of jury misconduct. The trial court granted Brown's motion and, on January 26, 1989, the case was tried again. The jury verdict and judgment in the second trial were in Brown's favor.

*2 In its first point of error Prudential claims the trial court abused its discretion in granting Brown's motion for new trial because the record from the hearing on the motion does not show that an outside influence affected the jury's decision. Following the first trial, Brown filed a motion for new trial on the grounds that the jury had engaged in misconduct. The affidavits of the jurors showed that the jurors received outside influence from a newspaper article that stated that Dr. Burzynski was the subject of a federal grand jury probe and under court order not to ship his medications across state lines. The affidavit further alleged that jurors also received outside influence from a friend of one of the members of the jury. That friend was a lawyer and told one of the members of the jury that Dr. Burzynski was a “quack” and that Prudential would win the case. The trial court granted Brown's motion for new trial and Prudential now attempts to appeal that ruling.

An order granting a new trial is not reviewable on appeal if, as here, the motion for new trial is timely filed and the court's order is made during its period of plenary jurisdiction over the judgment. Cummins v. Paisan Construction Co., 682 S.W.2d 235, 236 (Tex. 1984). We have no jurisdiction to consider this point. Hinote v. Local 4-23, 777 S.W.2d 134, 146 (Tex. App.-- Houston [14th Dist.] 1989, writ denied). Point of error one is overruled.

In its second and third points of error Prudential claims the trial court erred in not granting Prudential's motion for judgment notwithstanding the verdict because all of the state law claims pleaded by the plaintiff are preempted by ERISA, and in denying Prudential's motion to strike Brown's demand for jury trial because ERISA does not permit jury trials.

The Independent Garagemen's Association (”IGA”) was an association composed of employers whose primary business was repair of automobiles. The IGA created an insurance trust for the purpose of obtaining major medical and life insurance for the employer members of the association. Brown's employer, Sonny's Automotive Transmission Service, obtained Prudential insurance through the insurance trust. The insurance trust was created so the employers could obtain insurance at group rates. The trust's only duties were to send bills to the employers, accept premium payments, and distribute claims. Prudential paid the claims, but the trust administered them. Prudential determined the amount of the premiums to be charged to the employers. The employers had no input into the operation or administration of the trust or the selection of insurance.

Prudential argues that the insurance trust is an “employee welfare benefit plan” under ERISA and, therefore, Brown's state law causes of action are preempted. ERISA preempts state common law actions based on the improper handling of a claim for benefits under an employees' group insurance policy. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). The rationale for federal preemption of state causes of action covered by ERISA is to prevent trustees of plans from being subjected to the threat of conflicting and inconsistent federal and state regulations. Ames v. Ames, 776 S.W.2d 154 (Tex. 1989). ERISA regulates employee welfare benefit plans including group health insurance policies. ERISA defines an “employee welfare benefit plan” as:

*3 any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment[.]

29 U.S.C. Sec. 1002(1).

The insurance trust involved in this case was neither established nor maintained by a statutory employer or employee organization, see 29 U.S.C. Sec. 1002(4), 1002(5), and therefore, falls outside the scope of ERISA. Neither Sonny's Transmission, nor any other employer, participates in the insurance trust's day to day operation or administration. The activities of the trust consist of transferring premium payments and claims between the employers and the insurance companies. ERISA does not regulate bare purchases of health insurance where, as here, the purchasing employer neither directly nor indirectly owns, controls, administers, or assumes responsibility for the policy or its benefits. See Taggart Corp. v. Life and Health Benefits Admin. Inc., 617 F.2d 1208, 1211 (5th Cir. 1980). Because the trust cannot be considered an employee welfare benefit plan, ERISA does not preempt Brown's state law causes of action. Points of error two and three are overruled.

In its fourth point of error Prudential claims the trial court erred in not granting Prudential's motion for judgment notwithstanding the verdict because the underlying contract between Brown and Dr. Burzynski and Burzynski research institute was illegal. Prudential argues that, because antineoplastons had not been approved by the Food and Drug Administration (”FDA”) before Dr. Burzynski administered them to Brown, the contract between Brown and Dr. Burzynski was illegal and that, as a matter of public policy, Prudential should not pay for the use of drugs that are not approved by the FDA.

Prudential's argument fails for two reasons. First, the illegality defense does not prevent Brown from recovering on his contract with Prudential. The contract sued on is the insurance contract, not the contract between Brown and Burzynski.

Second, Prudential did not incorporate the public policy it now urges when it drafted its contract with Sonny's Transmission. The insurance contract could have precluded payment for illegal drugs or experimental drugs, or provided that all drugs must have been declared safe and effective by the FDA before they would be covered expenses under the contract. See McLaughlin v. Connecticut General Life Ins. Co., 565 F.Supp. 434, 449 (N. D. Ca. 1983). Where the terms of an insurance policy are plain, definite, and unambiguous, the courts cannot vary those terms. Gulf Atlantic Life Ins. Co. v. Disbro, 613 S.W.2d 511, 512 (Tex. Civ. App.-- Beaumont 1981, no writ). The policy provides that Prudential will not cover “charges for any service or supply not reasonably necessary for the medical care of the patient's sickness or injury.” That is the exclusion under which Prudential attempted to deny coverage. The policy does not exclude charges for drugs not approved by the FDA. Point of error four is overruled.

*4 In its fifth point of error Prudential claims the trial court erred in submitting special issues 3 and 4 to the jury because there was no evidence or insufficient evidence of mental anguish suffered by Brown. An objection to an issue that the evidence is factually insufficient to support the submission of the issue does not preserve factual insufficiency of the evidence for our review. Further, Prudential failed to file a motion for new trial that challenged the factual sufficiency of the evidence. See Tex. R. Civ. P. 324b. Therefore, our review is limited to the legal sufficiency of the evidence.

With regard to legal insufficiency points, we will consider only the evidence tending to support the finding, viewing it in the most favorable light in support of the finding, giving effect to all reasonable inferences that may properly be drawn therefrom and disregarding all conflicting evidence. Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965).

A plaintiff can establish the existence of pain and suffering by circumstantial evidence. Landreth v. Reed, 570 S.W.2d 486, 489 (Tex. Civ. App.--Texarkana 1978, no writ). The courts presume pain and suffering and mental anguish naturally accompany a severe physical injury. Griffith v. Casteel, 313 S.W.2d 149, 152 (Tex. Civ. App.--Houston 1958, writ ref'd n.r.e). Because of its nature, the existence of pain and suffering and mental anguish is not capable of being accurately determined and, accordingly, there is no fixed rule or standard for its measurement. Thus, the degree must be left to the sound judgment of the jury, subject only to correction by the courts for abuse and excessiveness. Landreth v. Reed, 570 S.W.2d at 489.

Brown testified that he was “upset” with the way Prudential handled his claim. He said he had seen inter-office memos that showed how Prudential tried to deny his claim. He also was afraid he might have to sell his family farm to pay his bills. Further, when he was in the hospital, he was not released at the time he was supposed to be released because he could not pay the bill, and Prudential refused to pay it. We conclude there was legally sufficient evidence to show Brown suffered mental anguish as a result of Prudential's refusal to pay his claim. Point of error five is overruled.

In its sixth point of error Prudential claims the trial court erred in submitting special issues 2 and 5 because the submission of both issues permitted the jury to compensate Brown twice for the same element of damages i.e., mental anguish from Prudential's claims handling decision.

Question 2 asked the jury if Prudential breached the duty of good faith and fair dealing it owed to Brown. Question 5 asked the jury if Prudential unreasonably delayed in communicating its denial of Brown's claim. Prudential argues that Question 5 is merely a phase or shade of Question 2. Prudential did not object to Question 2, or Question 5 on the grounds that one was a phase or shade of the other. Therefore, Prudential has waived point of error six. Chrysler Corp. v. Roberson, 619 S.W.2d 451, 459 (Tex. Civ. App.--Waco 1981, no writ); TEX. R. CIV. P. 274.

*5 In its seventh point of error Prudential claims the trial court erred in submitting special issue number 8 to the jury because there was no evidence of Prudential's alleged “conscious indifference to, or reckless disregard of Brown's rights or welfare.” Question 8 asked the jury if Prudential's failure to act fairly and in good faith toward Brown demonstrated a conscious indifference to, or reckless disregard of his rights or welfare.

Clinton Miller, an expert in insurance bad faith litigation, testified that, based on his review of Prudential's claim file, Prudential did not meet the standard in the industry for the handling of Brown's claim. An internal memo stated that Prudential needed “a little more to base [its] rejection on rather than the standard exclusion -charges . . . not reasonably necessary . . . etc.”' Miller testified that the adjuster who wrote the memo did not have a reasonable basis to reject the insured's medical bills. Miller testified that the standard in the industry, due to the superiority of the insurance company in the bargaining process, is that, the policy is construed in favor of the insured. If the insurance company discovers that a treatment has cured the insured, it should pay the insured's claim. Prudential, in trying to recoup money it had already paid to Brown for this treatment, deducted $1415 from benefits they had already paid Brown. Prudential deducted the $1415 while Brown was in the hospital. He could not leave the hospital until he paid the money out of his own funds. This action did not meet the industry standard and, in Miller's opinion, constituted bad faith.

Later, Prudential claimed they were not going to pay Brown because his treatment was “experimental in nature.” There was, however, no exclusion in Brown's policy for experimental treatment. Prudential paid claims to other patients who were undergoing the same treatment from Dr. Burzynski. Prudential took from February 1980 to May 30, 1980 to send a denial letter to Brown. This four month delay was unreasonable in Miller's opinion. The denial letter sent to Brown stated three to four exclusions that were not included in Brown's policy. The letter denied the claim on the basis that “the service or supply must not be educational or experimental in nature.” That exclusion was not included in Brown's policy. We find this is sufficient evidence to support the finding that Prudential acted with conscious indifference to, or in reckless disregard of Brown's rights or welfare. Point of error seven is overruled.

In its eighth point of error Prudential claims the trial court erred in excluding the testimony of Glenda Steed and Dr. Emil J. Freireich and testimony contained in the bills of exceptions from Dr. Stanislaw R. Burzynski and Angelina Wise. The testimony offered by Prudential from Glenda Steed and Dr. Emil Freireich, and the bills of exceptions from Angelina Wise and Dr. Burzynski are hearsay within the definition of Tex. R. Civ. Evid. 801. The testimony Prudential attempted to offer came from testimony at the first trial. The testimony of a witness at a former hearing is not admissible, unless there is a showing by the proponent of the evidence that the witness is unavailable. Tex. R. Civ. Evid. 804.

*6 The requirement of unavailability in rule 804 establishes a preference for testimony, indicating that the particular indicia of trustworthiness in the exceptions are regarded as inferior to the testimonial conditions. Wellborn, Article VIII: Hearsay, 20 Hous. L. Rev. 445, 538 (1983 Tex. R. Evid. Handbook). Rule 804(a) names five separate grounds that suffice to constitute unavailability: (1) a claim of privilege; (2) refusal to testify; (3) lack of memory; (4) death or physical or mental illness or infirmity; (5) absence from the hearing and inability of the proponent to procure his declarant's attendance or testimony by process or other reasonable means. Prudential did not demonstrate unavailability through any of these means. Point of error eight is overruled.

The judgment of the trial court is affirmed.

Do Not Publish - TEX.R.APP.P. 90.

Tex.App.-Hous. (14 Dist.), 1990.

Prudential Ins. Co. of America v. Brown

Not Reported in S.W.2d, 1990 WL 113682 (Tex.App.-Hous. (14 Dist.))

END OF DOCUMENT