Accidental death and dismemberment insurance frequently present fascinating issues, as illustrated by a recent ruling from the 9th U.S. Circuit Court of Appeals. In Dowdy v. Metropolitan Life Insurance Co., 2018 WL 2223722 (9th Cir. May 16, 2018).

Tommy Dowdy required a below-the-knee amputation following injuries suffered in a car collision. Although such an amputation would normally result in the payment of benefits under an accidental death and dismemberment (AD&D) policy, Dowdy’s claim was denied because he suffered from diabetes and the insurer, MetLife, maintained the diabetes substantially contributed to the amputation.

MetLife also applied an exclusion precluding coverage “for any loss caused or contributed to by … physical … illness or infirmity.”

Although the U.S. District Court upheld MetLife’s finding, the court of appeals found in Dowdy’s favor. Citing McClure v. Life Insurance Company of North America, 84 F.3d 1129 (9th Cir. 1996), the court explained the “policyholder reasonably would expect coverage if the accident were the predominant or proximate cause of the disability.” Id. at 1135-36. Although the court acknowledged that “diabetes was a factor in the injury,” the court ultimately determined “the factual record does not support a finding that diabetes substantially contributed to Mr. Dowdy’s loss.”

The court explained that in order for the exclusion to apply, the underlying condition has to be more than a contributing factor according to Adkins v. Reliance Standard Life Insurance Co., 917 F.2d 794 (4th Cir. 1990), which explained:

“[A] ‘predisposition’ or ‘susceptibility’ to injury, whether it results from congenital weakness or from previous illness or injury, does not necessarily amount to a substantial contributing cause. A mere ‘relationship’ of undetermined degree is not enough.” 917 F.2d at 797 (quoting Colonial Life & Accident Insurance Co. v. Weartz, 636 S.W.2d 891, 894 (Ky. Ct. App. 1982), overruled on other grounds by Mifflin v. Mifflin, 170 S.W.3d 387 (Ky. 2005) ); see also Quesinberry, 987 F.2d at 1028 (holding that “a mere relationship of undetermined degree” was not sufficient to defeat coverage).”

The court also relied on the observations made in the Restatement (Second) of Torts § 431 cmt. a (Am. Law Inst. 1965):

“The word “substantial” is used to denote the fact that the defendant’s conduct has such an effect in producing the harm as to lead reasonable men to regard it as a cause, using that word in the popular sense, in which there always lurks the idea of responsibility, rather than in the so-called “philosophic sense,” which includes every one of the great number of events without which any happening would not have occurred. Each of these events is a cause in the so-called “philosophic sense,” yet the effect of many of them is so insignificant that no ordinary mind would think of them as causes.”

Thus, in order to find substantial causation, “there must be some evidence of a significant magnitude of causation. Such evidence need not be presented with mathematical precision, but must nonetheless demonstrate that a causal or contributing factor was more than merely related to the injury and was instead a substantial catalyst.” (citing Coleman v. Metropolitan Life Insurance Co., 262 F.Supp.3d 295, 312 (E.D.N.C. 2017) (finding against a defendant in an ERISA [Employee Retirement Income Security Act] case where “the record contains no indication that [the plaintiff’s] cancer contributed to his death in any quantifiable or substantial way”); Towers ex rel. Verderosa v. Life Insurance Company of North America, No. 6:09-CV-1318-ORL-28, 2011 WL 3752734, at *6 (M.D. Fla. Aug. 25, 2011) (ruling against defendant under ERISA plan where “the level of contribution of [plaintiff’s] pre-existing conditions to his death has not been quantified … [Thus,] the [c]ourt cannot discern from the record evidence any means of determining the degree of the causal relationship.”)).

Here, because the record showed Dowdy suffered significant underlying injuries without any indication as to “how much of a role” his underlying diabetes played in his failure to recover, the fact that diabetes was a “complicating factor” is insufficient since “it was not identified as a substantial contributor to the ultimate loss.”

And since the burden of providing the applicability of the exclusion fell on the insurer, the court concluded:

“The car accident resulted in a severe injury that came close to amputating his lower leg. Dr. [Christopher] Coufal opined that when attempts were made properly to correct the lower leg, subsequent wound issues were complicated by diabetes and the fracture itself was slow to heal. Ultimately, however, Mr. Dowdy suffered a deep infection that Dr. Coufal considered “related to the original injury.” In light of this evidence, and giving the [e]xclusion the required strict reading, MetLife cannot meet its burden of showing that diabetes substantially caused or contributed to the loss.”

Since the car collision proximately caused the injuries that resulted in the amputation, the plaintiff’s underlying condition was disregarded. The Illinois Appellate Court issued a ruling more than 20 years ago that came to the same conclusion as the one reached in Dowdy. In that case, as in Dowdy, the insured sustained a physical injury complicated by underlying cause that resulted in a leg amputation. The court ruled:

“We hold that an injury compensable under this accident policy may be proximately caused by an accident even where the insured was predisposed to the injury due to a pre-existing illness or condition, as in the case at bar. The clause, “directly and independently of all other causes,” is not synonymous with a finding that, for an injury to be compensable, it must be the result of an accident that is in no way related to a pre-existing illness.

“Where the insured suffers from a pre-existing condition that makes an accidental injury more likely, that accident may still lead “directly and independently of all other causes” to a compensable injury. If defendant had wanted to exclude from coverage injuries that occur to insureds with pre-existing conditions, it could have done so. Since it did not, it cannot escape liability to plaintiff under this policy.” Faulkner v. Allstate Life Insurance Co., 291 Ill. App. 3d 706, 712, 225 Ill. Dec. 680, 684, 684 N.E.2d 155, 159 (1997).

Both Dowdy and Faulkner teach an important lesson in analyzing causation and exclusions in accidental death and dismemberment insurance policies in terms of proximate causation.

This article was initially published in the Chicago Daily Law Bulletin. 

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