Polan v. State of New York Insurance Department

3 A.D.3d 30, 768 N.Y.S.2d 441, 2003 N.Y. App. Div. LEXIS 12709

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: December 2, 2003
• Status: Published

Opinions

OPINION OF THE COURT

Andrias, J.

Petitioner, who has been unable to work since March 24, 1994 because of chronic depression suffered at a time she was insured under a group disability insurance policy issued to her employer, appeals from the dismissal of her CPLR article 78 proceeding brought to annul a determination of the Department of Insurance that Metropolitan Life Insurance Company (Metlife) did not discriminate against her by reason of mental disability and, therefore, did not violate Insurance Law § 4224 (b) (2).¹

Because the Insurance Department properly concluded that the subject policy administered by Metlife did not violate the antidiscrimination provisions of Insurance Law § 4224 (b) (2) by providing more extended long-term disability coverage for physical disabilities than for mental disabilities, we affirm the implicit finding of the IAS court that respondent Insurance Department’s determination was not “affected by an error of law” (CPLR 7803 [3]).

As stated by the dissent, the material facts underlying this proceeding are not in dispute and the issue presented is whether Metlife violated Insurance Law § 4224 (b) (2) by limiting long-term disability coverage in the case of disabilities caused by “mental and nervous disorders or diseases” to 24 months, unlike physical disabilities which are covered until the disability ceases or the insured reaches the age of 65.

Inasmuch as petitioner offered no evidence to show that the coverage available to her, as opposed to the coverage generally available to her coemployees under the subject policy, was in any way limited, much less impermissibly limited, by reason of her disability, she failed to demonstrate that the policy violated the statute (see e.g. Ford v Schering-Plough Corp., 145 F3d 601 [1998], cert denied 525 US 1093 [1999]; Fermin v Conseco Direct Life Ins. Co., 2001 WL 685903, 2001 US Dist LEXIS 6204 [WD Tex, May 1, 2001]; Pelletier v Fleet Fin. Group, Inc., 2000 WL 1513711, 2000 US Dist LEXIS 16456 [D NH, Sept. 19, 2000]; see also McNeil v Time Ins. Co., 205 F3d 179 [2000], cert denied 531 US 1191 [2001]).

The dissent takes issue with the Insurance Department’s argument that “the statute only forbids an insurer from discriminating between disabled and non-disabled persons in making coverage available,” concluding instead that “[i]t applies to insurance policies that ‘limit the amount’ or ‘extent or limit of coverage’ or charge a different rate for the same coverage solely because of physical or mental disability, impairment or disease ... of the insured.” Such conclusion is belied, however, by the wording of the statute, which specifically refers to insurers, not insurance policies. Moreover, the statute is included in article 42, entitled “Life Insurance Companies and Accident and Health Insurance Companies and Legal Services Insurance Companies,” which governs the capitalization, organization and conduct of the various types of insurers doing business in New York and defines the various types of policies that may be offered to the public.

Insurance Law § 4235, entitled “Group accident and health insurance,” defines what a group accident and health insurance policy is and requires that any group accident and health insurance issued to an employer must, with or without evidence of insurability satisfactory to the insurer, insure all employees of such employer, or all of any class or classes thereof determined by conditions pertaining to employment, and provide insurance coverage for each person insured based upon some plan which will, with limited exceptions, preclude individual selection (subd [c] [1] [A]). As to the contents of a group accident and health insurance policy, including one such as the policy in issue, which insures against disablement, disease or sickness (excluding disablement which results from accident), section 4235 (b) mandates that no such policy shall be delivered or issued for delivery in New York unless it conforms to the requirements of Insurance Law § 3221.

Unlike section 4224, section 3221, entitled “Group or blanket accident and health insurance policies; standard provisions,” is aptly included in article 32, entitled “Insurance Contracts— Life, Accident and Health, Annuities,” which governs the form and contents of the various types of insurance policies delivered or issued for delivery in New York. Section 3221 sets certain minimum requirements for covered policies and prohibits covered insurers from establishing rules for eligibility (including continued eligibility) of any individual or dependent to enroll under a covered policy based upon his or her medical condition (including both physical and mental illnesses) (subd [q] [1] [B]). However, nothing in the section prohibits an insurer from offering different terms of coverage for physical or mental illnesses.

As noted by the dissent, the language of section 4224 (b) (2) is apparently taken from section 3 of the National Association of Insurance Commissioners’ (NAIC) Model Regulation on Unfair Discrimination in Life and Health Insurance on the Basis of Physical or Mental Impairment. The statute, according to the dissent, is keyed, not to an insurer’s issuance of a policy, but to the policy terms and conditions that exclude coverage or limit the same “because of” the insured’s “physical or mental disability, impairment or disease” and is violated precisely because the policy in issue, in the absence of any justification “based on sound actuarial principles” or a relationship to “actual or reasonably anticipated experience,” limits the amount of coverage available solely because of the nature of the disability.

However, “unfair discrimination” is a word of art used in the field of insurance which, “[i]n a broad sense . . . means the offering for sale to customers in a given market segment identical or similar products at different probable costs” (1 New York Insurance Law § 12.02 [4], at 12-13 [Matthew Bender & Co.; Wolcott B. Dunham, Jr., ed]). As stated by the NAIC’s Task Force on Unfair Discrimination Against the Handicapped, which drafted the Model Regulation alluded to by the dissent:

“Section 3. Unfairly Discriminatory Acts or Practices

“The following are hereby identified as acts or practices in life and health insurance which constitute unfair discrimination between individuals of the same class: refusing to insure, or refusing to continue to insure, or limiting the amount, extent or kind of coverage available to an individual, or charging a different rate for the same coverage solely because of a physical or mental impairment, except where the refusal, limitation or rate differential is based on sound actuarial principles or is related to actual or reasonably anticipated experience” (1979-2 NAIC Proceedings 257, 262).

Contrary to the dissent’s contention that such antidiscrimination provision focuses on the policy terms and conditions, not an insurer’s issuance of a policy, the Task Force, in its Drafting note to the section, specifically stated:

“The regulation is not intended to mandate the inclusion of particular coverages, such as benefits for normal pregnancy, or of levels of benefits such as for mental illness, in a company’s policies or contracts. In virtually every state, mandates of any coverages or benefits are the subject of separate legislation. The model unfair trade practices act has never been interpreted to provide the basis for such mandates but rather to assure that such coverage and benefits as are offered by insurers are provided on a basis which is not unfairly discriminatory among individuals of the same class” (id. at 263 [emphasis added]).

Equally unavailing is the dissent’s attempt to distinguish the Fifth Circuit’s decision in McNeil v Time Ins. Co. (supra, 205 F3d 179 [2000]), which turned on its finding that the plain language of the essentially similar Texas statute required that the violation must be committed by the insurer, not by a term of the policy.

In McNeil, the plaintiff bought a group policy which contained no limitation on preexisting conditions and provided maximum lifetime benefits of $2 million, but limited coverage for several specific health problems, including a limit of coverage for AIDS to $10,000 during the first two years of the policy, while providing maximum benefits after that. In dismissing plaintiffs claim under Texas Insurance Code Annotated article 21.21-3, which provided that an insurer who issues a policy may not limit the amount or extent of coverage to an individual solely “because of handicap,” the Fifth Circuit found that the statute focused on the conduct of the insurer. In short, the court found the statute was not violated where the insurer offered this general policy without distinguishing between individual applicants based on whether or not they had AIDS.

The dissent contends that such rationale misses the mark in that the New York statute, like the Texas statute, is keyed, not to an insurer’s issuance of a policy, but to its refusal to insure or to continue to insure or its limitation of the amount, extent or kind of coverage available. Rather, the dissent contends, the statute’s focus is on the policy terms and conditions that exclude or limit coverage “ ‘because of the insured’s ‘physical or mental disability, impairment or disease.’ ” As noted above, however, such analysis was specifically rejected by the drafters of the Model Regulation and there is nothing in the legislative history of section 4224 (b) (2) to indicate that the Legislature intended the type of departure from the Model Regulation espoused by the dissent.² Indeed, that the Legislature did not intend section 4224 (b) (2) to mandate insurers to provide the same coverage for mental disabilities as for physical disabilities is evidenced by the recent report in the New York Law Journal that “advocates for a mental health parity bill are making a last-ditch effort to revive legislation staunchly opposed by the powerful insurance and business lobbies.” (John Caher, Mental Health Advocates Push for Bill, NYLJ, Sept. 11, 2003, at 1, col 3.) The so-called “ ‘Timothy’s Law’ . . . would mandate that health insurers cover mental health similarly to the way they cover physical health” (id.). Obviously, if section 4224 (b) (2) already provided such coverage, such effort would be unnecessary.

As correctly found by the Department of Insurance in the determination under review, petitioner “does not allege that Metlife refused to provide to her the same LTD [long-term disability] benefits coverage as all other MetPath employees. On the contrary, Ms. Polan was eligible for the same package of LTD benefits provided to all employees .... Her complaint is that the package of benefits would have paid her more if she had incurred a different kind of disability. Nothing in Section 4224 (b) (2) requires an insurance company to provide the same benefits for all conditions. Because Ms. Polan was offered the same benefits as all other MetPath employees, there has been no violation of § 4224 (b) (2).”

Accordingly, the order and judgment (one paper) of the Supreme Court, New York County (Robert Lippmann, J.), entered February 19, 2002, which denied the petition and dismissed the proceeding brought pursuant to CPLR article 78 to annul a determination of respondent, dated August 22, 2001, finding that the subject policy administered by petitioner’s insurer, Metropolitan Life Insurance Company, did not discriminate against petitioner by reason of mental disability and, therefore, did not violate Insurance Law § 4224 (b) (2), should be affirmed, without costs.

1 . Insurance Law § 4224 is entitled “Life, accident and health insurance; discrimination and rebating; prohibited inducements and interdependent sales” and provides, in pertinent part:

“(b) No insurer doing in this state the business of accident and health insurance . . . shall: . . .

“(2) refuse to insure, refuse to continue to insure or limit the amount, extent or kind of coverage available to an individual, or charge a different rate for the same coverage solely because of the physical or mental disability, impairment or disease, or prior history thereof, of the insured or potential insured . . . .” (Emphasis added.)

2 . See McNeil v Time Ins. Co., supra at 184 n 5 (“We cannot read ‘limit the amount or extent of coverage because of handicap’ as ‘limit the amount or extent of coverage for handicap.’ First, ‘because of and ‘for’ clearly have different meanings. Second, that interpretation would raise vexatious questions for courts whenever they faced any limitation in a policy. Such a construction would require insurers to have an actuarial basis or past experience in support of every limitation on coverage for anything that could be construed as a handicap. Had the legislature intended such a drastic change in the legal requirements on the way insurers do business, we assume that it would have made that intent clearer.”)