A recent ruling from the U.S. Court of Appeals for the Eighth Circuit involving accidental death insurance addressed the meaning of the word “crime” in a policy exclusion.
In Boyer v. Schneider Electric Holdings Inc., the Eighth Circuit overturned the U.S. District Court for the Western District of Missouri’s finding in favor of Amber Boyer, the sister and sole beneficiary of Mark Boyer, who died in a car accident, based on the court’s determination that the claim was barred by the crime exclusion in the policy. Because the evidence showed the decedent had been speeding and passing vehicles in a no-passing zone prior to his losing control of his car, the insurer maintained such acts constituted crimes that barred recovery.
The court of appeals agreed with the defendant. The policy, which was issued by Mark Boyer’s employer and insured by Unum Life Insurance Co. of America, provided indemnity if the insured suffered an accidental bodily injury that resulted in death; and the policy defined an “accidental bodily injury” as “bodily harm caused solely by accidental means and not contributed to by any other cause.” The policy also contained an exclusion as to accidental losses “caused by, contributed to by, or resulting from … an attempt to commit or commission of a crime.” As an employee benefit, the claim was governed by the Employee Retirement Income Security Act . The accident occurred on a two-lane road in Missouri; and the police report from the incident recounted that Boyer was passing vehicles in a no-passing zone and was driving at approximately 80 miles per hour in a 35 mile-per-hour speed zone. Despite the absence of a definition in the policy of the meaning of the word “crime,” the insurer, Unum, maintained that improper passing and speeding constituted misdemeanors under Missouri law that are potentially punishable by incarceration and thus constitute crimes. Although the district court ruled that traffic offenses do not fall within the policy’s crime exclusion, the court of appeals disagreed and ruled for the insurance company under ERISA’s deferential standard of review.
The court of appeals ruled that Unum’s interpretation of the meaning of “crime” was reasonable; and that there was sufficient evidence from five eyewitness reports to support a factual finding that Boyer was speeding and had violated no-passing restrictions posted on the road where the accident occurred. Although the road was apparently icy at the time of the occurrence, the court concluded: “Road conditions do not undermine the administrator’s conclusion that Boyer’s illegal conduct at least ‘contributed to’ the loss.”As to Unum’s finding that Boyer committed a crime, the court explained: “An interpretation of a term is reasonable if the interpretation conforms with ordinary meaning, which can be derived from ‘the dictionary definition of the word and the context in which it is used.'” The court observed that speeding and improper passing are classified as misdemeanors under Missouri law punishable by incarceration. The court further cited various dictionaries defining a “crime” as: “[a]n act that the law makes punishable.” A misdemeanor is “[a] crime that is less serious than a felony.” Lay dictionaries are in accord as to the meaning of “crime.” The court added: Boyer was driving more than twice the legal speed limit and passing vehicles in a nopassing zone on a two-lane road in icy road conditions. This was not a de minimis noncriminal ‘infraction’ for exceeding the speed limit by five miles per hour or fewer. The court then qualified its conclusion by noting: If an administrator were to extend the meaning of ‘crime’ to cover driving 56 miles per hour in a 55-mile-per-hour zone, then there will be time enough to consider the reasonableness of that position. It is not implicated here. While the court acknowledged the purpose of the plan was to provide benefits in the event of an insured’s accidental death, the court cited a different public policy, that a plan “need not draw down the assets contributed by the provident many to shift the cost of self-destructive behavior.” Thus, the court found, “[d]enying benefits to an insured who commits a crime is not inconsistent with the goals of the plan.” The court overruled a finding that was critical to the district court’s decision — that Unum utilized a claim manual that stated the crime exclusion “was not intended to apply to activities which would generally be classified as traffic violations.”
In reaching that conclusion, the court cited a recent nonprecedential ruling from the U.S. Court of Appeals for the Tenth Circuit, Caldwell v. Unum Life Insurance Co., on the same issue, which determined the claim manual “does not purport to be definitive and has substantial play in the joints.” Moreover, the court pointed out the claim manual contains a disclaimer stating: “Each claim is unique and should be evaluated on its own merits.” Finally, the court rejected the plaintiff’s argument that the summary plan description failed to state traffic violations would be viewed as crimes, finding:
- There is nothing inherent in the word “crime” that would lead an average participant to believe that violations of law like Boyer’s are not contemplated, especially where state law criminalizes the conduct. The administrator’s decision does not conflict with the statute.
- The Tenth Circuit’s Caldwell v. Unum ruling relied on by the Eighth Circuit was issued as a nonprecedential ruling, so it is not binding even within the circuit.
- The Caldwell opinion is also unusual since the majority opinion is exceedingly short, while the dissent is lengthy and written as if it were the majority ruling, which suggests there may have been a lastminute vote change by one of the judges.
- Thus, that decision should not necessarily have been given the same consideration as a court of appeals would accord a precedential ruling from a sister circuit.
- Moreover, there is one crystal clear takeaway from the Eighth Circuit’s determination. Boyer illustrates the significance of the ERISA deferential standard of review, since the word “crime” is subject to differing interpretations and has been viewed as ambiguous.
Under the de novo standard of judicial adjudication of ERISA cases, a policy ambiguity compels the application of the rule of contra proferentem, which requires that the ambiguity be construed in favor of the insured. Indeed, in U.S. v. Stitt in 2018, the U.S. Supreme Court observed in a case brought under the Armed Career Criminal Act that “the word ‘crime’ itself … is ambiguous.” Likewise, in American Family Life Assurance Co. v. Bilyeu, the U.S. Court of Appeals for the Sixth Circuit found in 1990 “the contractual language regarding commission of a crime” is ambiguous. The rule of contra proferentem is not applied, though, when courts utilize a deferential standard of review since plan administrators are accorded discretion in how they interpret plan provisions. However, in 2008 the Supreme Court ruled in Metropolitan Life Insurance Co. v. Glenn, that an ERISA plan administrator that both decides eligibility to receive benefits and serves as the funding source of the benefit payments operates under a structural conflict of interest since every dollar not paid in benefits accrues to the insurer’s bottom line.
The court suggested factors indicative of the conflict influencing the claim decision should be a tiebreaker in favor of the claimant irrespective of plan administrator’s discretion. Although the Supreme Court did not mention a plan interpretation of an ambiguous term that is entirely self-serving as one of those factors, contra proferentem is a well-established principle of insurance law and contract interpretation. Thus, there is reason to construe policy ambiguities against the insurance company even under an abuse of discretion standard of judicial review. In this instance, the insurer’s claim manual gives added force to application of the contra proferentem rule because it highlights the ambiguity in the word “crime” explicitly stating that traffic violations would ordinarily not be considered crimes. The court here thus appears to have overlooked a critical point — Unum could easily have drafted and incorporated a definition of the word “crime” in its policy to encompass traffic infractions, a point made in another ruling on a separate case involving comparable facts and issues, Fulkerson v. Unum Life Insurance Co., decided March 21 by the U.S. District Court of the Northern District of Ohio. Allowing Unum to craft an after-the-fact definition to exclude speeding and passing in a no-passing zone defeats the paternalistic intent behind the ERISA law.
Moreover, nowhere in the opinion is there any indication that Boyer was adjudged guilty of committing a crime. While there were several eyewitness reports describing Boyer’s driving, he may have had a defense to the charges that would have secured an acquittal had he been charged and brought to trial. The court also made no mention of the general principle that the burden of proof is on the insurer to prove the applicability of a policy exclusion. The opinion points out that the driving conditions were icy, which suggests Boyer could have lost control of his car irrespective of speeding and improperly passing, a point made in Locklear v. Sun Life Assurance Co. of Canada in the U.S. District Court for the Middle District of Pennsylvania in 2015,  and O’Neal v. Life Insurance Co. of North America in the U.S. District Court for the District of Montana in 2014. In both cases, the courts ruled in favor of the plaintiff in circumstances similar to those presented in this case because the insurer could not establish the speeding violation was the proximate cause of the decedent’s death. Here, too, since there is no clear record establishing how and why Boyer’s car left the road and struck a tree, there is reason to question whether the Eighth Circuit reached the correct result.