What is an accident? When it comes to accidental death insurance, that question is often difficult to answer.
However, the U.S. Court of Appeals for the Ninth Circuit offered its thoughts on the question in Wolf v. Life Insurance Co. of North America, decided Aug. 25.
In addition to concluding the decedent’s death was due to an accident despite the insured’s reckless behavior, the court discussed a bedrock Employee Retirement Income Security Act principle that precludes benefit plans from raising new issues for the first time in litigation. The absence of a policy exclusion was also critical to the outcome of the case.
The case involved the death of Scott Wolf Jr., who died in a single-car accident that occurred while he was intoxicated and driving at high speed in the wrong direction on a one-way road. Wolf lost control of his car, which flipped over after hitting a speed bump and landed in a pond.
The decedent’s father was the beneficiary of Wolf’s accidental death insurance policy, and filed a claim for accidental death benefit with the Life Insurance Co. of North America, or LINA. However, LINA denied the claim on the ground that Wolf’s intoxication and reckless driving precluded coverage.
A subsequent lawsuit filed in the U.S. District Court for the Western District of Washington overturned that determination, finding Wolf’s death was accidental. The Ninth Circuit affirmed.
The policy defined a “covered accident” as “[a] sudden, unforeseeable, external event that results, directly and independently of all other causes.”
While the policy contained exclusions for hazardous activities such as skydiving, hang gliding, parachuting or acrobatic flying, there was no exclusion for driving under the influence of alcohol, speeding or engaging in reckless conduct.
Since there was no applicable policy exclusion or terminology that would have precluded coverage, both the district court and the court of appeals followed the test established in Padfield v. AIG Life Insurance Co. in the Ninth Circuit in 2002, an accidental death insurance case that involved autoerotic asphyxiation, and held that under an accidental death insurance policy, benefits are due unless the insured’s conduct was so reckless that death or serious bodily injury was substantially certain to result.
The ruling in Padfield was based on the 1990 seminal U.S. Court of Appeals for the First Circuit ruling in Wickman v. Northwestern National Insurance Co., which established a test that first asks whether the insured would have subjectively expected to die or suffer serious bodily injury from his or her conduct. If the insured’s subjective expectations cannot be ascertained, though, the court asks
whether 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.
Although Padfield was established precedent in the Ninth Circuit, LINA argued the test should have been whether Wolf’s behavior made his death reasonably foreseeable rather than substantially certain. The court pointed out, though, that LINA failed to make that argument to the Western District of Washington and therefore forfeited it.
The court further noted that LINA also waived the reasonable foreseeability argument by failing to assert it as the basis for denying the claim.
LINA’s failure to assert a reasonable foreseeability test as grounds for the claim denial is problematic under ERISA, since the Ninth Circuit has held that:
When making a claim determination under ERISA, an administrator may not hold in reserve a known or reasonably knowable reason for denying a claim, and give that reason for the first time when the claimant challenges a benefits denial in court.
The court explained that because the denial did not assert a reasonable foreseeability test, the plaintiff was deprived of the opportunity to argue and present evidence to rebut that contention, thus precluding the insurance company from raising the argument for the first time during litigation.
Turning to the application of the Padfield and Wickman test, while acknowledging that Wolf’s conduct was reckless, the court ruled the facts did not support a conclusion that his death was substantially certain to have occurred.
Although LINA cited cases involving drunk driving that found for insurers even under the substantially certain test, those cases were decided under a deferential standard of review.
Under the de novo standard, which was also applied in this instance, courts have sided with the plaintiff’s position. The court also cited the U.S. Court of Appeals for the Eight Circuit’s 2012 ruling in McClelland v. Life Insurance Co. of North America which found, under deferential review, that a drunk driving death was an accident.
Examining the facts of the cases where the plaintiffs prevailed, the court observed that the plaintiffs in those cases were even more intoxicated and drove more recklessly than Wolf.
Although the court made it clear that it was not condoning drunk driving, and deemed such behavior as ill-advised, dangerous and easily avoidable, the court made the point that
many accidents, if not most, involve an element of negligence or even recklessness on the part of the insured. People all too frequently fail to heed stop signs, drive while intoxicated, or exceed the speed limit. Death caused by such conduct is, however, a statistical rarity, and the record before us does not show that Scott’s particular act of drunk driving was substantially certain to result in his death.
The court concluded by prescribing a simple expedient — adding an explicit exclusion in accidental death policies for deaths resulting from alcohol- or drug-impaired driving.
Since LINA failed to incorporate such an exclusion in its policy when it easily could have done so, and also failed to preserve its “reasonably foreseeable” argument, the court applied existing precedent and ruled in the plaintiff’s favor.
The court may have been hinting that it is willing to revisit its Padfield and Wickman analysis of accidental death insurance claims. However, that would be a mistake.
If the test were reasonably foreseeable instead of substantially certain, a broad swath of accidental death insurance claims would be eliminated. Indeed, the Ninth Circuit made a strong argument in favor of preserving its existing precedent by pointing out that many accidents occur as a result of momentary negligence.
Even the circumstances of Padfield, which involved autoerotic asphyxiation, a practice viewed by most as reckless and foreseeably fatal, rarely result in death.
Thus, even if LINA had not waived its “reasonably foreseeable” argument, it would likely have failed since Padfield is well-established precedent in the Ninth Circuit. The ERISA issue involved in the court’s waiver analysis was critical, though, and will likely affect future cases.
So long as courts continue to require claimants to exhaust prelitigation claim appeals as a required precondition before filing suit, claimants have the right to know the rationale for the claim denial so that it can be fully addressed before litigation commences.
If the benefit plan can raise a post hoc justification for denying benefits in litigation, claimants would be forced to try to hit a moving target and submitting a prelitigation appeal would be pointless.
It would also be terribly unfair to claimants if plan administrators were allowed to raise new defenses after the claimant successfully rebuts the initial grounds for denial.
Of course, this litigation could have been avoided had the policy contained an exclusion that addressed the specific conduct at issue. As the court pointed out, had an exclusion been written in the policy, the insured could not have reasonably expected that the loss would be covered.
However, so long as accidental death insurance policies cover accidents that result from the insured’s conduct, as they are intended to do, too many exclusions would render such coverage illusory.
Mark D. DeBofsky is a shareholder at DeBofsky Law.
This article was first published by Law 360 on September 1, 2022
 Wolf v. Life Ins. Co. of N. Am., 2022 U.S. App. LEXIS 23838, 2022 WL 3652966 (9th Cir. August 25, 2022.
 Padfield v. AIG Life Insurance Co., 290 F.3d 1121 (9th Cir. 2002).
 Wickman v. Northwestern National Insurance Co., 908 F.2d 1077 (1st Cir. 1990).
 Padfield, 290 F.3d at 1126.
 Citing Beverly Oaks Physicians Surgical Ctr., LLC v. Blue Cross & Blue Shield of Ill., 983 F.3d 435, 440 (9th Cir. 2020); also see Harlick v. Blue Shield of Cal., 686 F.3d 699, 720 (9th Cir. 2012).
 Sanchez v. Life Ins. Co. of N. Am., 393 F. App’x 229, 230–32 (5th Cir. 2010); Davis v. Life Ins. Co. of N. Am., 379 F. App’x 393, 394–395 (5th Cir. 2010);; Stamp v. Metro. Life Ins. Co., 531 F.3d 84 (1st Cir. 2008); Lennon v. Metro. Life Ins. Co., 504 F.3d 617, 619–620 (6th Cir. 2007); Eckelberry v. Reliastar Life Ins. Co., 469 F.3d 340, 342–343 (4th Cir. 2006); Cozzie v. Metro. Life Ins. Co., 140 F.3d 1104, 1106–08 (7th Cir. 1998).
 Johnson v. Am. United Life Ins. Co., 716 F.3d 813, 826 (4th Cir. 2013); LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789, 800, 813–14 (10th Cir. 2010)).
 McClelland v. Life Ins. Co. of N. Am., 679 F.3d 755, 760–61 (8th Cir. 2012).
 Citing Kovach v. Zurich Am. Ins. Co., 587 F.3d 323, 330 (6th Cir. 2009).
 See, https://www.researchgate.net/publication/259110855_Current_Reports_on_Autoerotic_Deaths-Five_Persistent_Myths; but see Tran v. Minnesota Life In. Co., 922 F.3d 380 (7th Cir. 2019) (finding death due to autoerotic asphyxiation constitutes an excluded self-inflicted injury even if death was unintended).