                 IN THE UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT

                      __________________________

                      Nos. 00-31207 and 01-30722
                      __________________________


HENRY THURMON,
                                                    Plaintiff-Appellee,

versus


PROVIDENT AMERICAN INSURANCE CO.,
                                                    Defendant-Appellant.

         __________________________________________________

            Appeal from the United States District Court
                for the Western District of Louisiana
                           (No. 99-CV-1045)
                             April 4, 2002


Before POLITZ, STEWART and CLEMENT, Circuit Judges.

PER CURIAM:*

     Provident American Insurance Company (“Provident”) appeals

from the judgments of the district court awarding Henry Thurmon the

amount of his remaining unpaid medical claims as well as penalties

and attorney’s fees pursuant to La. Rev. Stat. § 22:657.        For the

following reasons, we affirm.

                       I.   FACTS AND PROCEEDINGS

     From January 28, 1993 until March 28, 1999, Thurmon was



     *
        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that this opinion should not be published and is not precedent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.
insured under a major medical expense policy issued by Provident

(the “policy”).      The policy contains a provision that limits

benefits under the policy when an insured qualifies for Medicare

(the “Medicare provision”). A similar endorsement that purports to

allow for a reduction of benefits to the extent of an insured’s

Medicare eligibility was allegedly added to the policy effective

July 1, 1997 (the “Medicare endorsement”).          The policy is also

subject to an endorsement that excludes coverage for diseases or

disorders involving the cardiovascular system (the “cardiovascular

endorsement”).

     In May 1998, Thurmon was diagnosed with renal failure.          From

that time until March 1999, Thurmon received medical treatment from

medical providers who submitted invoices and medical claim forms to

Provident.   Some of the initial claim forms listed diagnoses that

suggested that the claims were excluded under the cardiovascular

endorsement,     while   several   others    indicated   diagnoses   that

suggested that the cardiovascular endorsement was inapplicable.

     Without obtaining additional medical records or consulting

medical personnel, Provident initially denied payment on all claims

received between June 10, 1998 and October 22, 1998 on the ground

that the cardiovascular endorsement barred coverage.         However, it

re-opened the case after receiving a December 23, 1998 letter from

one of Thurmon’s service providers requesting that Provident review

its denial of Thurmon’s claims.         By letters dated January 18 and

February 4, 1999, Provident requested that Thurmon execute a

                                    2
medical authorization form to allow Provident to obtain additional

medical records from Thurmon’s providers.           Provident received the

authorization form from Thurmon on February 18.                  Thereafter,

Provident reviewed Thurmon’s claims and, on March 31, informed him

that the claims would be considered for payment.                In May 1999,

Provident     paid   some   of   the       claims   (approximately     $2500,

representing claims received from October 1998 to February 1999).

     Seeking    to   determine   the       applicability   of   the   Medicare

endorsement, Provident also requested that Thurmon provide it with

information regarding his Medicare eligibility by letters dated

January 18, February 4, February 18, and March 31.                     Thurmon

provided the requested information on July 27.

     Provident acknowledged its responsibility for the claims by a

letter dated July 8, but did not actually pay the claims until mid-

October   (approximately    $23,000,        primarily   representing    claims

received from June 1998 to December 1998).              Provident attributes

this delay to staffing shortages related to the company’s Year 2000

preparations. Provident also paid another claim in the days before

trial in February 2000 ($6200, representing a claim received in

July 1998).

     In all the payments it made, Provident applied the Medicare

endorsement to reduce Thurmon’s benefits to the extent of his

Medicare eligibility. After all the foregoing payments, the claims

that remained unpaid totaled $23,386.13, which includes the amounts

by which Provident reduced Thurmon’s benefits pursuant to the

                                       3
Medicare endorsement.

       Thurmon filed suit against Provident on May 5, 1999, seeking

payment of the remaining unpaid claims as well as penalties and

attorney’s fees pursuant to La. Rev. Stat. § 22:657 for Provident’s

alleged unreasonable delay in paying all the claims. After a bench

trial, the district court found that (1) Provident was liable for

the   remaining     unpaid      claims   because    it   impermissibly     reduced

Thurmon’s benefits on account of his Medicare eligibility, and (2)

Provident was liable for penalties and attorney’s fees under §

22:657 because it unreasonably delayed payment of Thurmon’s claims.

Accordingly, it entered judgment in Thurmon’s favor in the amount

of    $80,937.88,    representing        $23,386.13      in   unpaid   claims   and

$57,551.75 in penalties, plus interest and costs.                      By separate

judgment, the district court awarded Thurmon $31,000 in attorney’s

fees.      Provident now appeals from both judgments.1

                           II.    STANDARD OF REVIEW

       The standard of review for a bench trial is well established:

findings      of   fact   are    analyzed     for   clear     error,    and   legal

conclusions are reviewed de novo.             Gebreyesus v. F.C. Schaffer &

Assocs., 204 F.3d 639, 642 (5th Cir. 2000).                     Whether just and

reasonable grounds exist for an insurer’s failure to pay a claim


       1
        Provident does not contest the reasonableness of the
amount of the fee award. Instead, it requests only that the
award of attorney’s fees be vacated if this court reverses, in
part or in full, the district court’s ruling on the § 22:657
claim.

                                          4
timely is a question of fact to be decided upon the facts and

circumstances of a particular case.            Nolan v. Golden Rule Ins. Co.,

171 F.3d 990, 993 (5th Cir. 1999); Holland v. Golden Rule Ins. Co.,

688 So. 2d 1186, 1189 (La. Ct. App. 1996).

           III.      REDUCTION OF BENEFITS DUE TO THURMON’S
                            MEDICARE ELIGIBILITY

      We first consider whether the district court properly awarded

Thurmon the amount by which Provident reduced his benefits on

account of his Medicare eligibility. The district court found that

both the Medicare provision and the subsequent Medicare endorsement

on which Provident had relied to reduce Thurmon’s benefits were

invalid, and thus that Provident was without authority to reduce

the   amount    of    Thurmon’s   benefits       because     of    his   Medicare

eligibility.

               A.    Validity of the Medicare Endorsement

      At trial, Provident introduced a copy of an endorsement that

authorizes     Provident   to   reduce       benefits   to   the   extent   of   an

insured’s Medicare eligibility. The endorsement recites that it is

“made part of the Policy to which it is attached” and indicates

that it revises Policy Form MMB-LA 9/92, the form of Thurmon’s

policy.   Provident contends that the endorsement was validly added

to Thurmon’s policy effective July 1, 1997.

      A change or addition to an insurance policy is valid only if

it complies with the terms of the policy and with Louisiana law.

The “Entire Contract Changes” clause of Thurmon’s policy provides

                                         5
that alterations or additions to the policy must be “approved by

[Provident’s] executive officer and endorsed or attached to this

Policy” to be valid.     Further, La. Rev. Stat. § 22:628 provides

that no modification of an insurance policy is valid unless “it is

in writing and physically made a part of the policy . . . or it is

incorporated in the policy . . . by specific reference to another

policy or written evidence of insurance.”        A written modification

is deemed to be physically made a part of a policy “whenever such

written agreement makes reference to such policy . . . and is sent

to the holder of such policy . . . by United States mail, postage

prepaid, at such holder’s last known address as shown on such

policy . . . or is personally delivered to such holder.”         Id.   La.

Rev. Stat. § 22:628 embodies the policy that the parties to an

insurance   contract   should   have   the   entire   contract   in   their

possession.   Lindsey v. Colonial Lloyd’s Ins. Co., 595 So. 2d 606,

611 (La. 1992).   An insurer bears the burden of showing that an

endorsement was validly made a part of the policy.          See Brown v.

Permanent Gen. Ins. Co., 783 So. 2d 467, 471 (La. Ct. App.), writ

denied, 793 So. 2d 196 (La. 2001).

     We agree with the district court that Provident has failed to

show that the Medicare endorsement was validly added to the policy.

The record is devoid of evidence that indicates that Provident ever

sent or delivered the endorsement to Thurmon, as Provident admits

§ 22:628 requires.      Accordingly, on this record, the Medicare


                                   6
endorsement cannot be said to have been validly added to Thurmon’s

policy.

             B.     Validity of the Medicare Provision

     Provident contends that even if the Medicare endorsement is

invalid, the reduction of Thurmon’s benefits was authorized by the

Medicare provision. Although it admits that the Medicare provision

was unenforceable at the time the policy was issued by virtue of

La. Rev. Stat. § 22:213(D) (repealed 1995), which precluded an

insurer from considering the benefits payable by government plans

such as Medicare when determining benefits under the policy,

Provident contends that the provision became enforceable after the

repeal of § 22:213(D) in 1995 and thus was effective at the time of

Thurmon’s claims.

     Pursuant to the policy’s “Conformity with State Statutes”

clause, “[a]ny provision of this Policy which, on the Policy Date,

is in conflict with the statutes of [Louisiana] is hereby amended

to conform to the minimum requirements of such statutes.”       The

policy schedule reveals that the “Policy Date” is January 28, 1993.

It is not disputed that on January 28, 1993, the Medicare provision

conflicted with Louisiana law and thus was amended out of the

policy.   Provident has not pointed to, nor have we found, any

provision in the policy by which the stricken Medicare provision

would be revived after the repeal of the conflicting statute.   In

these circumstances, it appears that the Medicare provision was not

a valid part of the policy at the time of Thurmon’s claims.

                                  7
     Nevertheless, Provident argues that the policy was renewed

subsequent to the repeal of § 22:213(D) in 1995 and that the

Medicare provision was thereafter a valid part of the policy.    As

an initial matter, we observe the “Conformity with State Statutes”

clause specifies that the relevant date for determining whether a

policy provision conflicts with state law is the “Policy Date,”

which the record shows to be January 28, 1993.   Further, we observe

that there is no evidentiary basis to conclude that there was a

post-1995 renewal.     Although the record is clear that the policy

remained in effect until March 1999, Provident has not provided any

direct or indirect evidence of the policy’s renewal after 1995.

     On this record, we must conclude that the Medicare provision

was not effective at the time of Thurmon’s claims.     We therefore

affirm the district court’s award of the amounts by which Provident

reduced Thurmon’s benefits.

         IV.   PENALTIES AND ATTORNEY’S FEES PURSUANT TO
                      LA. REV. STAT. § 22:657

     We now turn to the question whether the district court erred

in awarding Thurmon penalties and attorney’s fees pursuant to La.

Rev. Stat. § 22:657.     That statute provides that an insurer must

pay claims made under a health and accident insurance policy within

30 days of their receipt.    If the insurer fails to comply without

“just and reasonable grounds,” it will be subject to a penalty of

double the amount of benefits due plus attorney’s fees.         “The

statutory scheme is apparent; insurers are discouraged from lightly


                                  8
denying coverage.”   Boudreaux v. Fireman’s Fund Ins. Co., 654 F.2d

447, 451 (5th Cir. Unit A Aug. 1981).

     In this case, Provident asserts that its delay in paying

Thurmon’s claims was reasonable under the circumstances, offering

three explanations for its delay.       First, it submits that its

denial of the initial claims was justified based on its belief that

the cardiovascular endorsement barred coverage.    Second, Provident

attributes its further delay to Thurmon’s failure to provide

information regarding his Medicare eligibility until July 1999.

Finally, Provident blames its failure to pay the claims for nearly

three months — from July 1999, at which time it admittedly had all

the information it allegedly needed, until October 1999 — on

staffing problems caused by Year 2000 preparations.

     The district court found that none of Provident’s proffered

explanations justified its delay in paying Thurmon’s claims, and we

discern no clear error in this finding.   Given the inconsistencies

and apparent conflicts on the initial claim forms, the district

court had a reasonable basis to conclude that Provident had a duty

to investigate Thurmon’s claims further before denying them and

that its failure to do so was unreasonable:    “The indication that

the patient’s illness might be related in part to an excluded

condition does not automatically exclude coverage for the entire

illness and hospitalization.”   Broussard v. National Am. Life Ins.

Co., 302 So. 2d 627, 630 (La. Ct. App. 1974).     Provident’s second

reason for its delay — that Thurmon did not provide his Medicare

                                 9
eligibility information until July — is moot in light of our

determination that both the Medicare provision and the Medicare

endorsement are invalid, for “[a]n insurer must take the risk of

misinterpreting its policy provisions.   If it errs in interpreting

its own insurance contract, such error will not be considered as a

reasonable ground for delaying the payment of benefits, and it will

not relieve the insurer of the payment of penalties and attorney’s

fees.”   Carney v. American Fire & Indem. Co., 371 So. 2d 815, 819

(La. 1979); Sanders v. Home Indem. Ins. Co., 594 So. 2d 1345, 1350

(La. Ct. App. 1992).   Finally, the district court did not err in

rejecting Provident’s explanation that its efforts to achieve Year

2000 compliance was a reasonable basis for its delay.         That

Provident chose to shirk its responsibilities under § 22:657 by

diverting its work force from processing claims to prepare for the

Year 2000 transition, a foreseeable circumstance that could have

been handled without diverting claims personnel, does not justify

its delay.

                          V.   CONCLUSION

     For the foregoing reasons, the judgments of the district court

are AFFIRMED.




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