Insurance ruling strays from precedent in drunken driving case
December 12, 2012
By Mark D. DeBofsky
Mark D. DeBofsky is a name partner of Daley, DeBofsky & Bryant. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage, and Social Security law.
When an intoxicated driver dies in a collision, can his survivors collect under an accidental death insurance policy? Most courts deem such an occurrence an accident; however, in Whinery v. Life Ins.Co. of North America, 2012 U.S.Dist.LEXIS 160667 (C.D.Cal. Nov. 7, 2012), the court upheld an insurer's benefit denial under a deferential standard of review. The group policy, issued by the Life Insurance Company of North America (LINA) to Timothy Whinery's employer, Citigroup, provided that benefits were payable "for loss from bodily injuries: (a) caused by an accident which happens while an insured is covered by this policy; and (b) which, directly and from no other causes, result in a covered loss." However, the policy did not define the term "accident," nor did it contain a drunken driving exclusion, as many policies now have.
According to a newspaper account of the accident, Whinery drove back and forth down the same street at a high rate of speed. Police records showed that he struck the median several times before he lost control of his car, hit a tree and died. Toxicology results showed Whinery's blood alcohol level was above .20, well in excess of the legal limit. LINA denied the accidental death claim, asserting that a drunken driving death was not an accident and stating, "For the purposes of this policy an accident is a sudden, unforeseeable, external event." However, no such language appears in the policy, nor did the policy define what constitutes an "accident."
Whinery's wife appealed the denial herself, pointing out " the vast majority of the people who drive with alcohol in their system do not die." However, LINA reaffirmed its position that a drunken driving death is not an accident and, in addition, the insurer also rejected the claim as an "intentional, self-inflicted injury" since Whinery was "intentionally operating a vehicle while under the influence of alcohol." Litigation ensued.
In the course of litigation, the plaintiff uncovered an internal LINA document titled, AD&D Instructor's Guide, that provided guidelines for analyzing accidental death claims that were more favorable than the standards used to deny the claim. The insurer maintained those standards were out of date. However, the insurance company's regional claim manager admitted in his deposition that standards differ if the policy grants LINA discretionary authority and that adjusters get to "decide for themselves how to interpret the policy at issue. If they do not have discretion, LINA claims' handlers confer with in-house counsel regarding how to interpret the policy."
The claim manager and adjuster also defined foreseeability differently - the adjuster testified it meant that death is "likely to happen," while the manager defined it as "taking on a significant assumption of an undue risk."
Despite two recent appellate rulings involving the same insurer, the same policy and nearly identical circumstances, McClelland v. Life Ins. Co. of N. Am., 679 F.3d 755 (8th Cir. 2012) and Firman v. Life Ins. Co. of N. Am., 684 F.3d 533 (5th Cir. 2012), the district court found for the insurer. The court acknowledged LINA's conflict of interest and determined that it would apply a high level of skepticism, finding the insurer "has a practice of utilizing incorrect policy definitions to deny claims involving intoxicated drivers." Nonetheless, the court still sided with the insurer.
The court agreed with LINA's conclusion that "a reasonable person, with background and characteristics similar to the insured, would have viewed the resulting injury or death as substantially certain to result from the insured's conduct." The court also found it "particularly compelling" that Whinery was not wearing a seat belt.
This decision is puzzling in many respects. Although the court stated it was applying heightened skepticism to the insurer's decision, it never discussed the two recent rulings that found against LINA. In both Firman and McClelland, the decedent had a blood alcohol level comparable to Whinery's, yet in both cases, the claim denials were overturned despite the applicability of a deferential standard of review.
This ruling is even more surprising because it failed to take into consideration the critical points made in Metro.Life Ins.Co. v. Glenn, 554 U.S. 105 (2005) about an insurer's conflict of interest and how the conflict is to be taken into consideration. Although the court disregarded the impact of Stephan v. Unum Life Ins.Co., 697 F.3d 917 (9th Cir. 2012) on one issue, Stephan points out the significance of an insurer's history of biased decision-making. LINA's track record of excluding intoxication claims in the absence of a specific policy exclusion was never considered.
Nor did the court address the evidence suggesting that LINA treats similarly situated claimants in a disparate manner. The U.S. Department of Labor pronounced in the Federal Register that Employee Retirement Income Security Act (ERISA) plan administrators are required to maintain "administrative safeguards and processes designed to ensure and to verify that benefit claims determinations are made in accordance with governing plan documents and that, where appropriate, the plan provisions have been applied consistently with respect to similarly situated claimants.
Courts have long recognized that such consistency is required even under the most deferential judicial standard of review." 65 FR 70246, 70251 (Nov. 21, 2000) (citing Lutheran Medical Center v. Contractors, Laborers, Teamsters and Engineers Health and Welfare Plan. 25 F.3d 616, 620-22 (8th Cir. 1994); De Nobel v. Vitro Corp. 885 F.2d 1180, 1188 (4th Cir. 1989)). The Supreme Court added in its Glenn ruling that ERISA imposes "higher-than-marketplace quality standards" on plan administrators (554 U.S. at 115), but LINA's admissions show they applied lax standards when given discretionary authority.
Consequently, although no one would condone drunken driving, the issue is one of contract, not morality. Unless LINA was able to prove that Whinery intended to kill himself, which it failed to do, the court utilized a deferential standard of review to permit the insurer to rewrite its policy to imply a commonly found provision that it could have, but neglected to incorporate in the policy - an exclusion for death caused by driving while intoxicated.
The author represented the plaintiff in the Stephan v. Unum case cited in this article.