Marion Jack Henry and Janet K. Henry v. Mutual of Omaha Insurance Company

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 06-41571
MARION JACK HENRY AND JANET K. HENRY
Plaintiffs - Appellants
v.
MUTUAL OF OMAHA INSURANCE COMPANY
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
Before JOLLY, DAVIS, and WIENER, Circuit Judges.
PER CURIAM:
On behalf of their deceased son, the Plaintiffs-Appellants Marion Jack
Henry and Janet K. Henry (the “Henrys”) filed suit in Texas state court against
Defendant-Appellee Mutual of Omaha Insurance Company (“MOIC”), the issuer
of their son's health insurance coverage, alleging that MOIC’s denial of coverage
for intravenous immunoglobulin (“IVIG”) replacement therapy caused their son,
Bradley David Henry (“Brad”), to commit suicide. MOIC removed the case to
district court, which granted MOIC’s motion for summary judgment. We affirm.
United States Court of Appeals
Fifth Circuit
F I L E D
October 5, 2007
Charles R. Fulbruge III
Clerk

-- 1 of 10 --

No. 06-41571
2
I. FACTS AND PROCEEDINGS
A. Facts
Brad had purchased a health insurance policy from MOIC which covered
the expense of services and supplies for the treatment of medically necessary
injuries and sickness. Brad's insurance policy defined a medically necessary
service or supply as one that: "(a) is appropriate and consistent with the
diagnosis in accord with accepted standards of community practice; (b) is not
experimental or investigative; (c) could not have been omitted without adversely
affecting the insured person's condition or quality of medical care; and (d) is
delivered at the lowest and most appropriate level of care and not primarily for
the sake of convenience." MOIC rejected the medical necessity of Brad's
prescribed IVIG treatment. Brad subsequently committed suicide.
The dispute between Brad and MOIC began in 2002, after Dr. Michael
Bullen diagnosed Brad with hypogammaglobulinemia immunological deficiency
and recommended Brad undergo monthly IVIG infusions for one year. A second
opinion from Dr. Glenn Bugay confirmed Dr. Bullen's diagnosis and concurred
in the prescribed IVIG treatment. Dr. Bullen administered Brad's first IVIG
treatment on December 10, 2002. On that same date, Dr. Bullen's office phoned
MOIC to verify that Brad's policy would cover IVIG treatment, which was
expensive (from $10,000 to $16,000 per monthly session). MOIC’s oral response
was non-committal.
Dr. Bullen followed up his phone call with a formal letter to MOIC on
December 26, 2002, in which he requested a "predetermination" that Brad's
policy would cover one year of monthly IVIG infusions. Dr. Bullen's
predetermination request included his professional opinion (along with fifteen
pages of notes and other supporting documents) that the prescribed treatment
was medically necessary.

-- 2 of 10 --

No. 06-41571
3
A physician employed by MOIC reviewed the claim and determined that
Brad might not need or benefit from the prescribed IVIG treatment. MOIC also
consulted an independent immunologist for a second opinion. That doctor
similarly recommended that MOIC deny Brad's claim for IVIG treatment.
Armed with two proffered opinions that IVIG therapy was not medically
necessary, MOIC notified Dr. Bullen that Brad's policy would not cover his IVIG
treatments.
After this initial rejection, Dr. Bugay, at Dr. Bullen's urging, wrote to
MOIC, reiterating his and Dr. Bullen's agreement that IVIG treatment was
medically necessary for Brad. MOIC forwarded Brad's file to a second in-house
physician — the third MOIC-affiliated doctor to review it — who concluded that
there was no basis for changing the initial recommendations. By a letter dated
March 8, 2003, MOIC notified Dr. Bullen and Brad that it stood by its original
determination of no coverage. MOIC also informed Dr. Bullen and Brad of their
right to request review of its decision by an independent organization and
provided the forms to be used in requesting such a review. Dr. Bullen and Brad
never requested an independent review.
Despite MOIC's two official rejections of the claim, Dr. Bullen continued
to administer monthly IVIG treatments to Brad and to request reimbursement
from MOIC; and MOIC paid Dr. Bullen's invoices for Brad's December, January,
February, and March treatments. In a letter dated April 2, 2003, however,
MOIC notified Dr. Bullen and Brad that the benefits for previous treatments
had been paid in error "[d]ue to the confusion of our previous handling," but that
charges for IVIG treatments after April 1, 2003 "will be handled per policy
provisions regarding medical necessity, based on the information currently in
file," viz., denied unless new information surfaced regarding the medical
necessity of Brad's claim. MOIC again reminded Dr. Bullen and Brad of their

-- 3 of 10 --

No. 06-41571
4
right to seek a review by an independent organization and invited them to
submit any additional relevant documentation.
Brad then consulted Dr. Howard Rosenblatt of the Allergy and
Immunology Clinic at Houston's Texas Children Hospital. Dr. Rosenblatt
performed a thorough history and physical examination and ordered numerous
laboratory tests. Unlike Drs. Bugay and Bullen, Dr. Rosenblatt did not
unequivocally conclude that the IVIG treatment was medically necessary, but
did report that "it would be expected that [Brad] would derive clinical benefit
from IVIG replacement therapy." Dr. Rosenblatt also recommended that Brad's
dosing schedule be modified to increase the amount of monthly dosage of IVIG
or to increase the frequency with which the current dosage was administered
from every month to every two to three weeks. Thus Dr. Rosenblatt did
recommend IVIG therapy for Brad, becoming the third doctor to do so.
On May 1, 2003, Brad received his fifth IVIG treatment. One week later,
Brad forwarded Dr. Rosenblatt's report to MOIC with an accompanying note
stating that he intended to continue his IVIG therapy "as this is my only
alternative for a reasonably functional life, to maintain a job and have some
hope of not being chronically ill." MOIC sent Dr. Rosenblatt's report to yet
another independent physician for a review of the claim. Before this review was
completed, Brad contacted MOIC for an update on the status of his claim. MOIC
informed him that an independent physician — the fourth doctor assigned to the
case by MOIC — was in the process of reviewing the new information from Dr.
Rosenblatt and that this latest review would take a couple of weeks to complete.
Brad threatened legal action if MOIC continued to reject his claim, but four days
later (and five days before his wedding was to take place) Brad committed
suicide.
On June 2, 2003, MOIC's second independent physician reviewer
concurred in the recommendation of MOIC's three previously contracted doctors.

-- 4 of 10 --

No. 06-41571
1 The Insurance Code prohibits bad faith claim denial. Under Article 21.21, prohibited
conduct includes "failing to attempt in good faith to effectuate a prompt, fair, and equitable
settlement of a claim with respect to which the insurer's liability has become reasonably clear."
Texas Ins. Code. Ann. art. 21.21 § 4(10)(a)(ii).
2 A duty of good faith and fair dealing exists under Section 17.46 of the DTPA, which
prohibits "[f]alse, misleading or deception acts of practices in the conduct of any trade or
commerce," including acts which violate Article 21.21 of the Insurance Code. Tex. Bus. & Com.
Code § 17.46.
3 Tex. Civ. Prac. & Rem. Code § 71.021.
5
After learning that Brad had committed suicide, MOIC paid for Brad's fifth and
final IVIG treatment.
B. Prior Proceedings
The Henrys filed suit in Texas state court against MOIC and an insurance
agent, alleging breach of contract and breach of the duty of good faith and fair
dealing under the common law, Article 21.21 of the Texas Insurance Code,1 and
the Texas Deceptive Trade Practices Act ("DTPA").2 These claims were brought
pursuant to the Texas Survival Statute, which allows an executor to pursue
causes of action on behalf of a decedent's estate.3 Brad's estate sought damages
for his physical pain and mental anguish before his death, funeral and burial
expenses, and punitive damages. The Henrys also filed a wrongful death action,
seeking damages for their own pecuniary loss, mental anguish, loss of
companionship and society, and punitive damages.
MOIC succeeded in having the case removed to federal court on the basis
of diversity jurisdiction after claiming fraudulent joinder of the non-diverse
insurance agent. It then filed a motion for summary judgment, which the
district court granted, based on the recommendation of a magistrate judge. In
this appeal, the Henrys do not question the district court's grant of summary
judgment dismissing their breach of contract claim, but do contest the ruling on
their extra-contractual claims of failure to act in good faith and deal fairly, as
well as on their wrongful death claim.

-- 5 of 10 --

No. 06-41571
4 Both parties extensively briefed the question whether MOIC’s coverage denial was the
cause of the Henrys’ damages, viz., Brad’s suicide. As we affirm the district court’s
determination that MOIC did not breach its duty of good faith and fair dealing, we need not
reach the issue of causation.
5 American Int'l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 260 (5th
Cir. 2003).
6 Weeks Marine, Inc. v. Fireman's Fund Ins. Co., 340 F.3d 233, 235 (5th Cir. 2003).
7 Id.
6
II. ANALYSIS
This case presents two key issues: (1) whether there are genuine issues of
material fact concerning MOIC’s breach of the duty of good faith and fair
dealing;4 and (2) whether any of the Henrys’ causes of action survive Brad’s
death. As we determine that the Henrys’ claims conclusively fail on the merits,
it is not necessary for us to reach the question whether their claims survive
Brad’s death.
A. Standard of Review
The district court's decision to grant summary judgment is reviewed de
novo.5 A motion for summary judgment should be granted only when there is no
genuine issue of material fact.6 In determining whether there is a genuine issue
of material fact, the reviewing court views all facts and draw all inferences
therefrom in the light most favorable to the non-moving party.7
B. Bad Faith Claims
The Henrys have advanced three discrete claims grounded in breach of the
duty of good faith and fair dealing. Two of these claims are statutory, arising
respectively under the DTPA and the Insurance Code; the third claim is based
on the common law. All of the claims that MOIC breached this duty fail because
MOIC had a reasonable basis for its decision to deny coverage.
The reasonable-basis test applies to all three of the Henrys' bad faith
causes of action against MOIC. Under the common law, an insurer breaches the

-- 6 of 10 --

No. 06-41571
8 Higginbotham v. State Farm Mut. Auto. Ins. Co., 103 F.3d 456, 459 (5th Cir. 1997).
9 Id. at 460.
10 Id.
7
duty of good faith and fair dealing if it "has no reasonable basis for denying or
delaying payment of a claim."8 Similarly, causes of action against insurers for
bad faith under the DTPA and the Insurance Code "require the same predicate
for recovery"9 as common law claims: "Plainly put, an insurer will not be faced
with a tort suit for challenging a claim of coverage if there was any reasonable
basis for denial of that coverage."10 Whether based on statute or the common
law, MOIC's conduct for all of the Henrys’ bad faith claims is judged on the
reasonable-basis standard. Only if MOIC did not have any reasonable basis for
denying Brad's prescribed IVIG treatment on the asserted ground of no medical
necessity could MOIC have breached its duty of good faith and fair dealing to
Brad.
The evidence confirms that MOIC did have a reasonable basis for its
decision to deny coverage for Brad's IVIG treatment. MOIC urges that its
reliance on the proffered opinions of several board-certified doctors who reviewed
Brad's claim, including independent specialists, demonstrates good faith. The
Henrys, on the other hand, insist that the reports prepared by MOIC's in-house
and independent physicians were not objective, because these physicians were
paid by MOIC, thereby making MOIC’s reliance on them unreasonable. The
Henrys might justifiably question the objectivity of MOIC's in-house doctors and
even its "independent" physicians. There was, however, at least a bona-fide
dispute as to the medical necessity of Brad's treatment, and the process that
MOIC employed to resolve this dispute was sufficiently thorough and objective
to satisfy the reasonable-basis standard. MOIC’s doctors were not patently
off-base in their analysis and conclusions regarding the IVIG treatment

-- 7 of 10 --

No. 06-41571
11 The Henrys also contend that MOIC could not have had a reasonable basis to deny
coverage for Brad’s IVIG treatment, because MOIC knew (but failed to inform Brad or his
treating physicians) that a proper evaluation of his claim required additional information
about his medical background and physical condition. Although the record does indicate that
Brad’s immune function “workup” was incomplete in some respects when MOIC’s consulting
doctors reviewed his claim, no more information about Brad was necessary for them to reach
their diagnoses. This is because they did have copies of test results showing only a slight or
minimal deficiency in Brad’s immunoglobulin level, and these results alone formed an
independent basis for the doctors’ unanimous conclusion that IVIG treatment was not
medically necessary for Brad. That Brad’s file was less than complete and that MOIC was
aware thereof does not show that MOIC did not have a reasonable basis to deny Brad’s claim.
8
prescribed by Brad's doctors. The professional justifications underlying the
proffered recommendations relied on by MOIC certainly were not illegitimate or
specious. Indeed, Dr. Rosenblatt, the independent specialist with whom Brad
consulted for a third opinion, did recommend IVIG treatment for Brad, but his
diagnosis was not unequivocal. The physicians whose opinions MOIC relied on
reviewed Brad's claim multiple times, and MOIC repeatedly explained to Brad
and his doctors that he could have his claim reviewed cost-free by an
independent organization. The question is not whether in the end MOIC's
doctors were right or wrong in their diagnosis of Brad's condition and medical
needs; the question is whether their methods and conclusions were reasonable,
and whether MOIC was reasonable in relying on these conclusions. We are
satisfied that MOIC did not breach its duty of good faith and fair dealing,
because it clearly had a reasonable basis on which to deny coverage of Brad's
IVIG treatment for lack of medical necessity.11
MOIC supports its good faith argument by pointing out that it ultimately
paid for all five of Brad's IVIG treatments. The Henrys counter by noting that
MOIC denied Brad's claim from the beginning and should get no good faith
credit for their administrative error or exceptions in paying for Brad's
treatments. This quibble is irrelevant. The question of good faith turns on the
reasonable-basis standard, and there is no genuine question of fact whether

-- 8 of 10 --

No. 06-41571
12 Tex. Civ. Prac. & Rem. Code § 71.002.
9
MOIC had a reasonable basis to reject Brad's claim as medically unnecessary.
MOIC cannot be found in bad faith unless it knew (or should have known) that
it had no reasonable basis for its decisions and rejected Brad's claim for coverage
anyway.
C. Wrongful Death
The Texas Wrongful Death Statute states that a "person is liable for
damages arising from an injury that causes an individual's death if the injury
was caused by the person's or his agent's or servant's wrongful act, neglect,
carelessness, unskillfulness, or default."12 Parents of a deceased individual are
generally entitled to bring a wrongful death action under this statute. In the
instant case, however, the Henrys cannot maintain a cause of action against
MOIC under the Texas Wrongful Death Statute because MOIC’s denial of
benefits to Brad was not “wrongful.” As discussed above, and as held by the
district court, even if, arguendo, MOIC’s denial of IVIG treatment for Brad was
the cause of his death, MOIC bears no liability because it had a reasonable basis
to deny coverage of his IVIG treatment as not medically necessary. The Henrys
cannot employ the Wrongful Death Statute for a claim against MOIC in which
they cannot prove that MOIC denied their son’s coverage in bad faith, viz.,
wrongfully.
III. CONCLUSION
The district court’s grant of summary judgment was proper. MOIC proved
that, as a matter of law, it did not breach the duty of good faith and fair dealing
in denying Brad's claim for medical benefits. The objectivity of an insurer’s
in-house and independent physicians may always be somewhat questionable, but
here there does appear to have been a bona-fide dispute between well-
credentialed medical professionals over the medical necessity of Brad's IVIG

-- 9 of 10 --

No. 06-41571
10
treatment. In addition, MOIC employed a thorough, multi-layered process to
resolve this dispute, including notification to Brad and his doctors about yet
another layer of appeal, which they did not bother to explore. As MOIC had a
“reasonable basis” for denying coverage of Brad’s IVIG treatment for lack of
medical necessity, the summary judgment of the district dismissing the Henrys’
actions is
AFFIRMED.

-- 10 of 10 --