PHI Air Medical, LLC v. Texas Mutual Insurance Company, Hartford Underwriters Insurance Company, TASB Risk Management Fund, Transportation Insurance Company, Truck Insurance Exchange, Twin City Fire Insurance Company, Valley Forge Insurance Company
03-17-00081-CV
| Tex. App. | Jan 2, 2018Background
- PHI Air Medical, LLC sued Texas Mutual Insurance Company et al. in the Third District Court of Appeals seeking to challenge regulatory scope under McCarran-Ferguson.
- The dispute concerns whether certain Texas workers’ compensation payments fall within the business of insurance.
- PHI contends a bright-line rule distinguishes payment to the insured from payment to third parties, arguing third-party payments are not the business of insurance.
- Texas Mutual argues that payments of medical benefits to providers are the insurer’s performance under the insurance contract and thus within the business of insurance.
- The letter cites Supreme Court authority to support that actual performance of an insurance contract is central to the business of insurance, applying to both direct-to-insured and third-party payments.
- Texas law imposes maximum medical benefits and defines the scope of the insured risk; the court treats these terms as state regulation affecting the business of insurance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is paying medical benefits to providers part of the business of insurance? | PHI argues such payments to third parties are not the business of insurance. | Texas Mutual contends these payments are the insurer’s performance under the policy, hence the business of insurance. | Yes; payments to providers are within the business of insurance. |
| Does Fabe apply to both direct-to-insured and third-party payments? | PHI relies on distinctions based on who is paid to exclude third-party payments from the business of insurance. | Fabe applies to all insurance payments, regardless of recipient. | Fabe applies to both types of insurance payments. |
| Do Pireno and Royal Drug create a non-binding distinction between payment types? | PHI cites these cases to justify a separation between payment types. | These authorities do not support PHI’s rule; Fabe clarifies the relationship. | No; PHI’s distinction is not supported by controlling authority. |
| Are Texas workers’ compensation terms regulated as part of the business of insurance? | PHI argues the generic policy term is too attenuated to regulate the business of insurance. | The term defining benefits and coverage is a state regulation directly regulating the business of insurance. | Yes; Texas policy terms regulate the business of insurance. |
Key Cases Cited
- United States v. Fabe, 508 U.S. 491 (Supreme Court, 1993) (actual performance of an insurance contract is central to the business of insurance)
- Pireno, 458 U.S. 119 (Supreme Court, 1982) (defines scope of risk insured by the policy)
- Royal Drug Co. v. United States, 440 U.S. 205 (Supreme Court, 1979) (royal drug cited in interpreting business of insurance and policy terms)
- Eagle Med, LLC v. Cox, 868 F.3d 893 (10th Cir., 2017) (non-binding dicta; not controlling on state regulation of business of insurance)