In the case of Wolf v. Life Insurance Company of North America, 2022 WL 3652966, (9th Cir. August 25, 2022), the Ninth Circuit Court of Appeals affirmed the determination of the district court agreeing that the tragic death of a young man was an “accident” as defined under an accidental death and dismemberment (AD&D) policy. Applying the Ninth Circuit’s Padfield test, the Court assessed whether the insured, or someone similarly situated to the insured, would view death as a substantially certain outcome of driving at a high rate of speed while legally intoxicated. The Ninth Circuit answered that no, under the circumstances, death was not substantially certain.
Facts of the Case
The deceased, Scott Wolf, Jr., was twenty six years old when he died in a one-vehicle accident where he was the driver of the vehicle. It was determined that, at the time of the crash, he was driving over six times the speed limit, traveling the wrong way on a road, and had a blood alcohol content (BAC) of over two times the legal limit (BAC of .2%). The accident caused his vehicle to leave the roadway and the vehicle overturned in nearby water. The death certificate declared that Scott’s death was an accident and that he died from drowning.
At the time of his death, Scott was covered as a dependent under his father’s AD&D policy through his father’s employer. The policy was issued by Life Insurance Company of North America (LINA) and had a $50,000 accidental death benefit. The policy would pay benefits upon the showing of a covered accident, defined as “[a] sudden, unforeseeable, external event that results, directly and independently of all other causes.” The policy had certain coverage exclusions, listing out various excluded activities such as injuries occurring while skydiving, hang-gliding, parachuting, or acrobatic flying. However, the policy listed no exclusions for injuries caused by or while the insured was under the influence of alcohol, while speeding in an automobile, or while engaged in generalized reckless conduct.
LINA denied the claim made by Scott’s father, stating that the “death was a foreseeable outcome of his voluntary actions, and thus, the loss was not a result of a Covered Accident as the term is defined under the policy.” In the denial letter, LINA further explained that when determining foreseeability, “we must consider whether a reasonable person with a similar background would have viewed serious injury or death as highly likely to occur.”
After an internal appeal was denied by LINA, Mr. Wolf filed suit under the Employee Retirement Income Security Act of 1974 (ERISA). After cross-motions were filed, the district court found in favor of the plaintiff using the framework adopted by the Ninth Circuit in Padfield v. AIG Life Insurance Co., 290 F.3d 1121 (9th Cir. 2002). Of note, LINA never argued in front of the district court that the standard to determine whether this was an accident as defined by the policy was whether the accident was “reasonably foreseeable” under the circumstances. LINA’s counsel only argued that the Padfield standard should be used, even though the “reasonably foreseeable” rationale was used in the denial letter.|
Reasonably Foreseeable vs. Substantially Certain
LINA unsuccessfully argued before the court that it denied benefits because it was reasonably foreseeable that driving under those circumstances would result in death, the test set forth in the insurance policy to defeat an accidental death claim. Rejecting LINA’s rationale, in large part because the insurer failed to argue the “reasonably foreseeable” standard at the district court level, the Ninth Circuit instead applied the “substantially certain” analysis of Padfield.
Finding that although speeding in an automobile while intoxicated is extraordinarily reckless conduct, the court still held that from a subjective and objective perspective, death from such conduct was not substantially certain to occur. Pointing to the fact that the insured was wearing his seatbelt, a subjective perspective, and that a great majority of intoxicated drivers do not die from speeding, an objective perspective, the court sided with the beneficiary.
The court also noted that LINA could have added an express exclusion for losses incurred while driving under the influence of alcohol, similar to the other exclusions related to dangerous conduct, but did not do so.
While this case was governed by ERISA, the court applied de novo review to LINA’s decision to deny coverage. It was not lost on the Ninth Circuit, however, that had the heightened abuse of discretion standard of review applied, the outcome would have been the opposite. That is because a reviewing court need only determine whether the decision of the insurer, as plan administrator, was reasonable.
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