impact of Title III of the Americans with Disabilities Act on employer-provided insurance plans: Is the insurance company subject to liability?, The

Washington and Lee Law Review, Winter 1999 by Schultz, Jill L

I. Introduction

At least forty-three million Americans have one or more physical or mental disabilities.1 Insurance is critical to these individuals because it provides them with the means to participate fully in society.2 The specific terms of employer-provided insurance plans, however, often discriminate against individuals with disabilities and are not as beneficial to those individuals as they may appear.3

Employers providing insurance to their employees typically purchase a universal policy directly from an insurance company and then offer coverage to their employees under that policy.4 These employer-provided policies discriminate against employees with disabilities in the following ways: (1) they often treat physical and mental ailments differently, (2) they regularly exclude coverage for "pre-existing" conditions, and (3) they frequently exclude certain ailments or subject those ailments to lower benefit levels.5 Individuals with disabilities face such discrimination in health insurance6 and long-term disability insurance plans.7

Congress enacted the Americans with Disabilities Act of 1990 (ADA)8 to eliminate discrimination against Americans with disabilities9 and to bring these individuals into the social and economic mainstream of American life.10 The ADA defines causes of action in terms of the environment in which discriminatory acts may occur.11 Title I prohibits discrimination in private employment,12 Title II prohibits discrimination in public services,13 and Title III prohibits discrimination by public accommodations.14

Many employees look to the provisions of the ADA for protection from disability-based terms of their employer-provided insurance plans.15 Employees sue their employers under Title I,16 which governs employment practices and applies to employer-provided insurance.17 Many employees, however, also initiate a cause of action against the insurance company that issues the employer-provided insurance plan on the theory that the insurance company violated Title III.18 Title III, perhaps the broadest title in the ADA,19 prohibits discrimination by people who own, lease, or operate places of public accommodation,20 including insurance offices.21

A determination of whether Americans with disabilities have a cause of action under Title III against insurance companies on the basis of the discriminatory terms of employer-provided insurance plans requires a two-part inquiry. First, Title III must be broad enough to authorize an employee's claim challenging the substantial terms of a policy issued by the insurance company.22 Unless Title III authorizes the suit, the potential plaintiff with a disability has no cause of action against the insurance company and must proceed solely against the employer.23 Second, Section 501(c) of the ADA24 must not provide immunity for the actions of the insurance company.25 Section 501(c) protects the insurance industry's current practice of providing insurance based on state-regulated risk classification schemes.26 Section 501(c) appears, however, to limit its own scope.27 It protects insurance companies only when they use risk classification schemes that do not violate state law28 and do not otherwise evade the purposes of Title III.29 Courts recognize that Section SOl(c) does not provide absolute immunity to insurance companies.30 The exact scope of the protection offered insurers under Section SOl(c) has, however, yet to be determined and is beyond the scope of this Note. This Note focuses on the issue that courts largely have ignored: Does Title III authorize plaintiffs to sue insurance companies when the terms of their employer-provided insurance plans discriminate on the basis of a disability?

Two federal courts of appeals have considered whether Title III provides an employee with a disability a cause of action against an insurance company based on the discriminatory terms of an employer-provided insurance policy.31 The two cases provide diametrically opposed answers32 and inadequate analyses.33 In Carparts Distribution Center, Inc. v. Automotive Wholesaler's Ass'n,34 the United States Court of Appeals for the First Circuit determined that the broad language and the intent of Title III35 suggested that a plaintiff could directly sue an insurance company based on the discriminatory, disability-based health coverage of an employer-provided insurance plan.36 In Parker v. Metropolitan Life Insurance Co.,37 however, the United States Court of Appeals for the Sixth Circuit interpreted Title III narrowly38 and concluded that Title III does not provide potential plaintiffs a direct cause of action against an insurance company.39 Neither court provided satisfactory guidance for potential plaintiffs, potential defendants, or district courts.

This Note examines whether Title III provides Americans with disabilities a cause of action against insurance companies on the basis of the discriminatory terms of employer-provided insurance plans. Part II provides an overview of the insurance system, including the principles of risk classification that tend to discriminate against employees with disabilities.40 Part III discusses the background and language of Title III.41 Part IV presents a critical analysis of the scope of Title III protections as it currently exists under case law.42 Part IV.A focuses the Title III inquiry within the employer-provided insurance context,43 and Parts IV.B and IV.C present the competing analyses of the Carparts and Parker courts, respectively, within that context.44 Part V critiques the Carparts and Parker decisions, explores their omissions, and concludes that Title III is broad enough to subject insurance companies to liability based on discrimination in the terms of employer-provided insurance plans.45