What is a crime?
Because accidental death policies exclude coverage if death occurs in the course of a commission of a crime, the question can be challenging as a recent decision by the 10th U.S. Circuit Court of Appeals illustrates.
The ruling in Caldwell v Unum Life Insurance Company of America, 2019 WL 4463495 (10th Cir., Sept. 18, 2019) (nonprecedential), an accidental death insurance case, found that driving in excess of a speed limit fell within the criminal acts exclusion of an accidental death policy.
What makes the court’s decision in Caldwell unusual is that the majority opinion is only a few paragraphs long, while a lengthy dissenting opinion appears to have been drafted as the majority opinion, suggesting a vote was changed at the last minute.
The decedent was killed when he was ejected from his car while driving at an excessive speed on an unpaved road. Unum Life Insurance Company of America denied a claim for accidental death benefits based on an exclusion for losses “caused by, contributed to by or resulting from … an attempt to commit or commission of a crime.”
The court found the provision was properly interpreted within the discretion accorded the insurer. The court also rejected what it characterized as the plaintiff’s “best argument” — that the defendant’s claim manual states the exclusion “was not intended to apply to activities which would generally be classified as traffic violations,” other than driving while intoxicated.
The dissent would have found for the beneficiary. The court found the word “crime” was ambiguous and explained that when the exclusion is viewed in the context of the insurer’s claim manual, the denial should have been deemed arbitrary and capricious.
The dissent described the accident, which occurred in Wyoming, and its reconstruction by the highway patrol. Since the police estimated the speed of the vehicle at the time of the accident was in excess of the speed limit, because Wyoming law classifies speeding as a misdemeanor, Unum invoked the policy’s crime exception to deny the accidental death and dismemberment claim.
Although the dissent concurred that deferential review was appropriate, it viewed Unum’s determination as arbitrary. In interpreting a policy, although a plan administrator with discretion is allowed wide latitude to interpret plan terms, the dissent observed, if “a provision is ambiguous, though, then we must take a hard look…” (citations and internal quotations omitted) in situations where the decision-maker has a structural conflict of interest based on its dual role as the party deciding whether benefits are due as well as the party funding the payment.
The dissent found the word “crime” ambiguous as applied to speeding because it is susceptible to two meanings — “one that covers speeding and one that excepts speeding.” (Citing United States v. Stitt, 139 S.Ct. 399, 405 (2018) (noting, in a case concerning the Armed Career Criminal Act, that “the word ‘crime’ itself[ ] is ambiguous”); American Family Life Assurance Co. v. Bilyeu, 921 F.2d 87, 89–90 (6th Cir. 1990) (per curiam) (affirming district court’s conclusion that “the contractual language regarding commission of a crime” is ambiguous); Stamp v. Metropolitan Life Insurance, 466 F.Supp.2d 422, 429 (D. R.I. 2006) (finding the term “serious crime” as used in an Employee Retirement Income Security Act plan ambiguous)).
Although the dissent conceded that speeding could be viewed as a “crime,” a reasonable reader might think otherwise and consider that only the vehicular offenses listed under the Wyoming code’s “Crimes and Offenses” title would quality — crimes against people or property.
Although the dissent acknowledged the insurer’s claim manual is not incorporated into the plan, it found the manual shed light on the parties’ intended meaning of the term “crime.” The dissent then added, “Unum’s internal policy manual shows that it did not intend “crime” to include traffic violations, except for DUI offenses.”
The dissent also observed that Wyoming courts had also viewed speeding as a mere “traffic violation.” The court also found another case involving the same insurer, Boyer v. Schneider Electric Holdings Inc. Life & Accident Plan, 350 F.Supp.3d 854, 861–66 (W.D. Mo. 2018), which held that speeding did not fall within the criminal act exclusion.
The dissent seems to have the better argument here, especially since the insurance company’s interpretation was inconsistent with its claim manual and because Unum did not appeal from the adverse ruling it received in the Boyer case involving the same issue. In another situation that involved the same insurance company taking a position that deviated from its claim manual, the court pointed out the need for an insurer to maintain consistency in its interpretation of policy terms — Glista v. Unum Life Insurance Co., 378 F.3d 113 (1st Cir. 2004).
Had this case been brought under Illinois law, speeding is not even considered a misdemeanor unless the operator is traveling at least 26 mph above the speed limit (625 ILCS 5/11-601.5).
Although reckless driving is considered a misdemeanor in Illinois (625 ILCS 5/11-503), the statutory requirement to establish such conduct is “a willful or wanton disregard for the safety of persons or property.” Section 11-503(a)(1).
According to People v. Johnson, 30 Ill.App.3d 974, 975, 333 N.E.2d 258, 259 (1975), “It has been held that driving in excess of the lawful speed limit alone will not support a finding that the conduct of the defendant was willful, wanton or reckless in the absence of aggravating factors. (People v. Potter, 5 Ill.2d 365, 125 N.E.2d 510 (1955); People v. Anderson, 310 Ill. 389, 141 N.E. 727 (1923).)”
In two other cases involving a “crime” exclusion, the insured prevailed. In both Locklear v. Sun Life Assurance Co., 2015 U.S. Dist. LEXIS 57276, 61 Empl. Ben. Cas. (BNA) 1046, 2015 WL 1964675 (M.D. Pa. May 1, 2015) and O’Neal v. Life Insurance Company of North America, 10 F.Supp.3d 1132 (D. Mont. 2014), the courts focused on the fact that the insurer could not meet its burden of proving the applicability of the exclusion by establishing that the speeding violation was the proximate cause of the decedent’s death.