Teweleit v. Hartford v. Texas Municipal League
(United States Court of Appeals for the Fifth Circuit, LEXIS 2300)
When her COBRA coverage was cancelled by the Hartford Life and Accident
Insurance Company (Hartford), Victoria Cooley Teweleit filed suit. The case was filed
against Hartford and her father’s employer, the Texas Municipal League (TML),
through whom she had been on COBRA continuation coverage. She sought payment of $30,000
in medical bills, which she had accrued while on COBRA, and various damages.
The dispute originated when Hartford found out that, after electing
COBRA, Teweleit had become covered by her husband’s group health plan. Her husband’s
plan contained a pre-existing condition provision that, in her case, would not cover
the follow-up treatment she needed after a heart and lung transplant. The cancellation
of coverage by Hartford occurred on May 12, 1989, prior to the OBRA 1989 amendment that
definitively allowed dual coverage in a situation like this. Teweleit had been told
by TML in late 1988 that if she elected COBRA and later became covered by her husband’s
plan, she could continue her COBRA coverage if the plan contained a pre-existing condition
provision that affected her. Hartford and TML settled out of court with her for a total
of $360,000. Hartford filed suit against TML to recover its half of the settlement.
DISTRICT COURT RULING
The district court decided that TML was bound by verbal promises
it made regarding Teweleit’s coverage. The coverage was cancelled by Hartford,
in line with its plan terms. Judge Norman Black’s opinion stated that Hartford
had written plan terms that were “unambiguous and will be enforced” by the
court. Hartford was awarded $520,148.59, plus interest and certain contingent legal
fees. Conservative estimates put the total award at $750,000. TML appealed.
APPELLATE COURT RULING
In her written opinion, reversing the lower court ruling,
Judge Edith H. Jones stated that the dispute was, “Whether covered under any other
group health plan means that the beneficiary of COBRA coverage (a) generally has or
obtains some second policy of health insurance, or (b) has or obtains a second policy
with substantially the same benefits as the initial policy.” Hartford argued point
(a); TML point (b). Judge Jones agreed with TML . The judge decided that since Teweleit’s
claims were not covered by her husband’s plan, a “significant gap”
occurred in her coverage. Holding with other courts, including another Fifth Circuit
case (Brock v. Primedica), Judge Jones decided the gap created by a pre-existing condition
exclusion qualified as significant, and dual coverage would be allowable.
The appellate court conceded that the events in this case occurred
prior to the passage of the OBRA 1989 amendment that would have allowed Teweleit to
continue her COBRA coverage. This court took the view, however, that the amendment was
not really a change in the law, but merely a clarification of the law.
The court found that Hartford acted reasonably, in light of the legal
authority available at the time. Judge Jones wrote, “Unfortunately for Hartford,
it is possible to be reasonable and yet wrong.” The appellate court then remanded
the case to district court for a decision on whether TML was entitled to recover its
fees and costs incurred in litigating and settling Teweleit’s lawsuit.
As of the date of the appellate decision, the judge noted that
fighting the $30,000 claim, the parties had spent in excess of $600,000.