Riverside Court Condominium Phase II v. Maurice

Citations: 587 So. 2d 152; 1991 La. App. LEXIS 2461; 1991 WL 189253Docket: No. 90-CA-0798

Court: Louisiana Court of Appeal; September 26, 1991; Louisiana; State Appellate Court

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The Riverside Court Condominiums, Phase II (Riverside) appeals a First City Court judgment that exempted disability payments made by Hibernia National Bank to Madeline Maurice from garnishment. The plaintiff had previously secured a money judgment against Maurice in 1989 and sought a writ of fieri facias for garnishment of her disability payments. Hibernia reported paying Maurice long-term disability benefits—25% from Hibernia and 50% from Pacific Mutual, totaling $1,430.75 monthly. The First City Court determined these payments were exempt from garnishment.

On appeal, Riverside argues that the trial court incorrectly classified Hibernia as an insurer, asserting that all debtor property is subject to seizure unless exempted by statute. The plaintiff contends that long-term disability wages are not exempt under Louisiana statutes LSA-R.S. 13:3881 and LSA-R.S. 20:33(2), which do not include Hibernia's payments among exempt categories such as pension plans or IRAs. The court referenced the Killebrew v. Abbott Laboratories case, where the Louisiana Supreme Court ruled that an employer is not considered an insurer if not engaged in the business of insurance. The case established that attorney fees cannot be recovered unless authorized by statute or contract.

The excerpt further cites Louisiana R.S. 22:646, which states that disability insurance proceeds are exempt from the insured's debts, and R.S. 22:5(1), which defines insurance to include employee benefit trusts. The court's conclusion affirms the exemption of Hibernia's disability payments from garnishment, based on these legal definitions and precedents.

The appellate court in Nelson concluded that Killebrew, while not an insurance provider, facilitated a long-term disability plan for its employees through a trust. The amended statute extended to the State as an employer offering a self-funded medical benefit program. Similarly, Hibernia provided a long-term self-funded medical benefit disability plan through a trust. In Segura v. Travelers Ins. Co., the court found that an employer, although not an insurer, acted as an agent for Travelers Insurance, which resulted in penalties and attorney fees under the insurance code due to the employer's role in soliciting insurance and processing claims.

Hibernia's policy manual outlines the long-term disability payment requirements, which mandate medical examinations by a designated physician to verify ongoing disability. The Flexible Security Plan Handbook defines long-term disability as an illness or injury lasting over five months, with 'total disability' requiring regular care from a licensed physician and an inability to perform job duties. Coverage options include 50% or 75% of an employee's predisability salary, with basic 50% coverage automatically effective from the first workday. Additional coverage can be chosen after two months of service.

The cost of coverage varies based on selected options, with Hibernia covering the full cost of the basic option. Employees can use flexible dollars to pay for additional coverage, which can be funded through salary conversion or vacation sales. While the basic coverage is fully insured, the optional 25% coverage is self-insured by Hibernia, with final claim decisions made by the insurance company. This arrangement classifies the plan as an insurance plan, as it involves a contract to indemnify or pay specified amounts under certain conditions. The court affirmed that Hibernia qualifies as an insurer under the law, and the supplemental benefits are exempt from garnishment, upholding the trial court's ruling.