                                                                                 United States Court of Appeals
                                                                                          Fifth Circuit
                                                                                       F I L E D
                       IN THE UNITED STATES COURT OF APPEALS
                                                                                        March 22, 2006
                                FOR THE FIFTH CIRCUIT
                                                                                   Charles R. Fulbruge III
                                  __________________________                               Clerk
                                         No. 04-30781
                                  __________________________


ANNIE MAE WILLIAMS,
                                                                                 Plaintiff-Appellant,

versus

TRUSTMARK INSURANCE CO., ET AL.,
                                                                                        Defendants,
TRUSTMARK INSURANCE CO.,

                                                                               Defendant-Appellee.

                  ___________________________________________________

                          Appeal from the United States District Court
                             for the Eastern District of Louisiana
                                      No. 2:03-CV-1330
                  ___________________________________________________


Before BARKSDALE, STEWART, and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:*

         This case requires us to interpret a Louisiana state law that awards penalties to insurance

beneficiaries whose claims were wrongly denied. We affirm in part and reverse in part.

                                I. FACTS AND PROCEEDINGS

         Annie Mae Williams began participating in the Terrebonne Parish School Board’s health



*
 Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and
is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

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insurance plan in 1990. Her policy allowed a lifetime maximum benefit of one million dollars.

Additionally, the policycontained an annual restoration provision (or “add-back” provision), by which

the lesser of two thousand dollars or the actual benefits paid in a given year would be restored to the

lifetime maximum benefit. In 1998, Trustmark Insurance Co. (“Trustmark”) acquired the School

Board’s insurance plan from its previous provider. Trustmark retained the services of the plan

administrator, Gilsbar, Inc., that had serviced Williams’s plan since its inception. Trustmark did not

alter the plan’s lifetime maximum benefit or add-back provision.

       Beginning in May 2002, Trustmark denied Williams’s incoming claims, explaining that

Williams had reached her policy’s lifetime maximum benefit. Williams believed that she had not

reached the lifetime maximum benefit, though she had no documentation to confirm her belief.

Williams submitted a complaint against Trustmark and Gilsbar to the Louisiana Department of

Insurance (“DOI”). DOI requested Trustmark itemize the paid benefits. Trustmark sent two

response letters in July, informing DOI that Gilsbar was assembling the requested information and

that Trustmark also was contacting the School Board to determine if it had any record of certain

claims. On July 31, Trustmark sent Gilsbar’s computer records of Williams’s benefit payments to

DOI. Though one record showed a total of one million dollars in paid benefits, Gilsbar’s records only

documented itemized expenses totaling $912,954.48.1

       On August 6, DOI informed Trustmark that it would only accept itemized expenses as

substantiation that Williams’s lifetime maximum had been reached. Trustmark responded that it had

requested additional detailed reports from Gilsbar. On September 10, Trustmark admitted to DOI


1
 The records showed an additional $71,333.90 in paid benefits from July 1, 1995, to June 30, 1996,
and $7,216.30 in paid benefits for prescription drugs. However, these aggregate subtotals were not
substantiated by itemized expenses.

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that Gilsbar was unable to provide detailed data on any claims prior to 1996, when Gilsbar had

replaced its computer system. Unsatisfied with Trustmark’s documentation, DOI required Trustmark

to count only itemized expenses toward Williams’s lifetime maximum. Subsequently, Trustmark

allowed payment for an additional $87,045.52 in claims that Williams had accrued between January

and September 2002. Additionally, conceding that it had neglected to follow the add-back provision

for the entirety of Williams’s policy coverage, Trustmark paid an additional $24,000 toward

Williams’s unpaid claims.

       Louisiana law, however, provides a more substantial remedy than simply paying improperly

denied benefits. Under LA. REV. STAT. § 22:657, an insured may recover an additional penalty from

an insurer in the amount of the improperly denied claim when the insurer denied the claim without

“just and reasonable grounds.” Williams sued Trustmark in state court pursuant to the statute, and

Trustmark timely removed the case to federal court. The case was submitted to the district court

upon stipulated facts and oral argument. The district court denied additional statutory penalties for

the $87,045.52 in benefits because Trustmark reasonably relied on Gilsbar’s data and its relationship

with Gilsbar. However, the district court penalized Trustmark $12,000 for not applying the add-back

provision for the six years between 1997 and 2002; it did not require Trustmark to remit any add-

back money from 1990 to 1996 because, as Williams herself argued, Williams accrued no expenses

in those years and, therefore, no add-back was required. As previously noted, Trustmark had paid

$24,000 pursuant to DOI’s interpretation of the add-back provision; of this amount, based on the

district court’s judgment, Trustmark properly paid $12,000 in benefits pursuant to the add-back

provision, but overpaid $12,000. Since Trustmark already had mistakenly paid an extra $12,000 on

Williams’s behalf, though not directly to her, the district court credited Trustmark’s overpayment


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toward the $12,000 statutory penalty Trustmark owed Williams under LA. REV. STAT. § 22:657,

finding the penalty satisfied.2 Additionally, the district court ordered Trustmark to pay $4,000 in

attorney’s fees.

       Williams timely appealed the district court’s decision refusing to penalize Trustmark for the

$87,045.52 in denied benefits and its finding that Trustmark already had satisfied the $12,000 penalty.

                                  II. STANDARD OF REVIEW

       In a suit for penalties under LA. REV. STAT. § 22:657, the district court’s finding of “just and

reasonable grounds” is a fact determination, which we will not disturb absent clear error. Nolan v.

Golden Rule Ins. Co., 171 F.3d 990, 993–94 (5th Cir. 1999). See FED. R. CIV. P. 52(a). “‘A finding

is ‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire

evidence is left with the definite and firm conviction that a mistake has been committed.’” Cox v. City

of Dallas, Tex., 430 F.3d 734, 747 (5th Cir. 2005) (quoting Anderson v. City of Bessemer City, N.C.,

470 U.S. 564, 573 (1985)). “A factual finding is not clearly erroneous as long as it is plausible in the

light of the record as a whole.” Sealed Appellant v. Sealed Appellee, 394 F.3d 338, 342 (5th Cir.

2004) (internal quotation omitted). The district court’s interpretation of whether payments to third-

parties satisfy the penalty provisions of LA. REV. STAT. § 22:657 is a purely legal question, which we

review de novo. Salve Regina College v. Russell, 499 U.S. 225, 231 (1991); Vero Group v. ISS-Int’l

Serv. Sys., 971 F.2d 1178, 1181 (5th Cir. 1992).

                                         III. DISCUSSION



2
 Specifically, the district court stated: “The record indicates that although the terms of the policy
required Trustmark to pay Ms. Williams $12,000 in restoration benefits, Trustmark has already paid
Ms. Williams $24,000 in restoration benefits. Accordingly, Trustmark’s penalty interest obligation
to Ms. Williams has been satisfied.”

                                                  -4-
A.     Louisiana Law

       La. Rev. Stat. § 22:657 provides, in pertinent part:

       All claims arising under the terms of health and accident contracts issued in this state
       . . . shall be paid not more than thirty days from the date upon which written notice
       and proof of claim, in the form required by the terms of the policy, are furnished to
       the insurer unless just and reasonable grounds, such as would put a reasonable and
       prudent businessman on his guard, exist. . . . Failure to comply with the provisions
       of this Section shall subject the insurer to a penalty payable to the insured of double
       the amount of the health and accident benefits due under the terms of the policy or
       contract during the period of delay, together with attorney’s fees to be determined by
       the court. . . .

LA. REV. STAT. § 22:657(A). The double damages penalty is inclusive of payment of the improperly

denied benefits. See Bischoff v. Old Southern Life Ins. Co., 502 So. 2d 181, 185 (La. Ct. App.

1987). Courts construe strictly the phrase “just and reasonable grounds,” levying penalties only if

the insurer’s refusal to pay was arbitrary and capricious. Nolan, 171 F.3d at 993 (citing Shrader v.

Life Gen. Sec. Ins. Co., 588 So. 2d 1309, 1317 (La. Ct. App. 1991)).

B.     The $87,045.52 Penalty

       With regard to the $87,045.52 in denied benefits, Williams argues that the district court erred

in interpreting and applying the “just and reasonable” standard, and in any event, the district court

should have ruled in her favor because Trustmark acted arbitrarily. Williams’s arguments are

unavailing.

       In denying Williams’s request for penalties, the district court stated:

       The record indicates that Gilsbar’s assurances were based on records that indicate that
       Trustmark had made $1,000,000 in benefit payments. Gilsbar’s records did not
       itemize Trustmark’s expenditures, and thus they ultimately proved inadequate to
       eliminate Trustmark’s dutyto provide $87,045.52 in additional benefits. Nonetheless,
       Trustmark’s decision was based on some objective evidence and made in good faith.
       Its determination that Williams had reached her $1,000,000 maximum benefit was
       therefore not arbitrary and capricious.


                                                 -5-
The district court’s finding was plausible in light of the entire record and, therefore, was not clearly

erroneous. Gilsbar’s records, relied upon by Trustmark, were not precisely clear but were not so

devoid of information that it was unreasonable for Trustmark to conclude that Williams’s lifetime

maximum had been reached. Trustmark worked with Gilsbar and DOI to determine which available

number should control—the gross number showing one million dollars in paid benefits or the smaller

aggregate total of itemized expenses. Importantly, Williams never brought forth evidence, or even

alleged, that Louisiana law or DOI’s prior practice was to allow companies to substantiate denied

benefit claims only with itemized expenses rather than aggregate category totals. Once DOI decided

that the latter number should control, Trustmark promptly paid the claims.3 The district court did not

clearly err in finding that Trustmark relied on “just and reasonable grounds,” even though the denial

of benefits later was deemed improper. Accordingly, we affirm this portion of the district court’s

ruling.

C.        The $12,000 Penalty

          The district court found that Trustmark did not have “just and reasonable grounds” to deny

crediting Williams’s policy $12,000 pursuant to the add-back provision. Trustmark did not appeal

the district court’s ruling, so the only issue before this court is whether the district court properly

allowed Trustmark to offset the penalty against claims Trustmark had erroneously paid on Williams’s

behalf. Pursuant to DOI’s command, Trustmark had paid $24,000 in Williams’s medical claims

pursuant to the add-back provision; the district court found that Trustmark only properly should have

added back $12,000. The district court found that Trustmark had satisfied the debt, since Trustmark


3
 Trustmark stands by its position that it had already paid one million dollars in benefits for Williams
by May 2002. However, because DOI subsequently required more substantiation than Trustmark
could provide, Trustmark followed DOI’s command to pay the additional $87,045.52 in benefits.

                                                  -6-
owed Williams $12,000 in penalties but had also overpaid $12,000 to her creditors on her behalf.

        The district court’s solution is not supported by the statute’s plain language. The statute

states: “Failure to comply . . . shall subject the insurer to a penalty payable to the insured. . . .” LA.

REV. STAT. § 22:657 (emphasis added). Trustmark cites no caselaw in support of the offset.

Furthermore, Trustmark does not suggest the existence of any lien, subrogation, or creditor

intervention that would justify the district court in accepting the third-party payment in satisfaction

of the statutory penalty. Since the statute is clear as to whom the benefit should be paid, we reverse

the district court’s decision to allow Trustmark to offset the penalty against the overpaid amounts.

D.      Attorney’s Fees

        Because Williams partially prevails on appeal, she is entitled to attorney’s fees. See LA. REV.

STAT. § 22:657. See also P.T. Tugs, Inc. v. U.S. Fire Ins. Co., 796 F.2d 125, 128 (5th Cir. 1986)

(awarding attorney’s fees necessary to defend against an insurance company’s appeal of an adverse

district court judgment under LA. REV. STAT. § 22:658, a similar statute); Lanclos v. Guardian Life

Ins. Co. of Am., 607 So. 2d 1089, 1093 (La. Ct. App. 1992) (“[T]he trial judge correctly awarded

penalties and attorney’s fees . . . under . . . [LA. REV. STAT. §] 22:657. Additionally, plaintiff is

entitled to additional attorney’s fees for the appeal of this matter.”). On remand, the award of

attorney’s fees is to be recalculated to include Williams’s appellate fees for the claim on which she

here prevails.

                                         IV. CONCLUSION

        We AFFIRM the district court’s judgment that Trustmark acted with “just and reasonable

grounds” even though improperly denying the $87,045.52 in benefits. With regard to the $12,000

in denied benefits, we REVERSE AND REMAND the district court’s decision to allow offset against


                                                   -7-
third-party payments. Additionally, on remand, the district court shall award attorney’s fees Williams

expended on her prevailing claim on appeal.




                                                 -8-
