If you have life insurance providing for Accidental Death and Dismemberment (AD&D) benefits, your policy includes various exclusions which, if any apply, may allow the insurer to avoid paying you benefits.  For example, an insurer may refuse to pay benefits if the person covered under the policy was killed or dismembered while committing a felony.  Or, an insurer may refuse to pay benefits if the person died in an accident while intoxicated based on the policy’s intoxication exclusion.  Naturally, some exclusions will apply such that an insurer will not pay benefits.  The Southern District of California has provided some guidance to Californians relating to exclusions in accidental death cases.  Ciberay v. L-3 Commc’ns Corp. Master Life & Acc. Death & Dismemberment Ins. Plans, 2013 WL 2481539 (S.D. Cal. 2013).

Mr. Ciberay was carrying some dishes through his home when he fell down a flight of stairs and broke his pelvis.  He was highly intoxicated at the time – his blood alcohol content (BAC) was .422%, over five times the legal limit for driving.  He had a history of chronic alcohol dependence.  Mr. Ciberay did not undergo any surgical procedures, but stayed in the hospital following his fall.  On the third day in the hospital, he developed a high fever, and the doctors determined that he had bacterial infections that had stopped responding to antibiotic treatment.  On his ninth day in the hospital, he died.  The medical examiner’s report listed the cause of death as complications following pelvic fractures, with other significant conditions of hypertensive cardiovascular disease, alcohol abuse, obesity, and diabetes mellitus.  The manner of death was characterized as an “accident.”

The Plaintiff, Mrs. Ciberay, submitted a claim under the ERISA-governed AD&D policy, which was denied based on an exclusion stating that the policy “does not cover any loss caused in whole or in part by, or resulting in whole or in part from the following … (5) the Insured Person being under the influence of drugs or intoxicants, unless taken under the advice of a Physician.”  The claims administrator, Chartis, sent Mrs. Ciberay a denial letter which stated it had determined Mr. Ciberay’s death “was caused in whole or in part by, or resulting in whole or in part from [Mr. Ciberay] being under the influence of intoxicants.”

To support its denial, Chartis cited the report provided by a forensic pathologist it had hired, which stated:

In essence, Mr. Ciberay came to medical attention because, while he was intoxicated, he fell down the stairs and fractured his pelvis.

The pre-hospital factors that played a role in Mr. Ciberay’s death were pelvic fractures from the fall, acute alcohol intoxication, chronic alcoholism, diabetes, and hypertension.  Complicating factors that developed in the hospital were aspiration pneumonia, small bowel obstruction, and renal failure (of note, his creatinine already appeared slightly elevated at admission).  Based on the echocardiogram, it appears that the complication most closely linked to causing his death was a massive pulmonary embolism.

I would agree with the amended death certificate that the complications of the pelvic fractures from the fall were the direct cause of Mr. Ciberay’s death. [T]he apparent presence of a massive pulmonary embolism would most likely have been a result of the decreased mobility that occurred as a result of the fractures.  Mr. Ciberay’s alcoholism was clearly a very significant factor in causing his death.  His very high blood alcohol level at the time of admission would have to be regarded as playing a role in causing his fall.  His chronic alcoholism very clearly and significantly complicated the medical management of his fractures – so much so that his discharge/death summary stated, “most of his admission was for alcohol withdrawal concerns.”

Mrs. Ciberay sued Chartis, arguing that Chartis abused its discretion because it relied on an unenforceable exclusion and ignored controlling law, and Mr. Ciberay’s intoxication at the time of his fall was not the cause of his death nine days later.  Because, with fully insured plans, California statutes governing insurance are not preempted by ERISA, the court applied California Insurance Code Sections 10369.1 through 10369.12, which apply to AD&D claims.  Section 10369.1 provides in relevant part:

No disability policy delivered or issued for delivery to any person in this State shall contain provisions respecting the matters set forth in Sections 10369.2 to 10369.12, inclusive, unless such provisions are in the words in which the same appear in such sections; provided however, that the insurer mar, at its option, use in lieu of any such provision a corresponding provision of different working approved by the commissioner, which is not less favorable in any respect to the insured or the beneficiary. (Emphasis added.)

The court explained that Section 10369.12 is one of eleven standard provisions that must be directly inserted into insurance policies delivered in California unless the insurer gets approval from California’s insurance commissioner to use alternate, though not less favorable, wording.  The court then stated that Section 10369.12, the intoxication exclusion, must supplant the Policy’s intoxication exclusion language, which provides:

Intoxicants and controlled substances:  The insurer shall not be liable for any loss sustained or contracted in consequence of the insured’s being intoxicated or under the influence of any controlled substance unless administered on the advice of a physician.  (Emphasis added.)

Applying Section 10369.1, the Court concluded the language of Section 10369.12 differs from the Policy’s intoxication exclusion because, while Section 10369.12 excludes “any loss sustained or contracted in consequence of the insured’s being intoxicated,” the Policy excludes “any loss caused in whole or in part by, or resulting in whole or in part from, […] the Insured Person being under the influence of drugs or intoxicants.”

In analyzing whether the Policy language was less favorable than the statutory language, the court stated:

A loss that is caused/resulting “in whole or in part” from the insured’s being intoxicated is more expansive than a loss that is “in consequence of” the insured’s being intoxicated.  Accordingly, under the Policy’s language, Defendant is able to deny more claims than it would be able to under the statutory language.

Importantly, the court held that “This conclusion alone dictates a finding that Defendant abused its discretion by failing to consider the appropriate standard in considering Plaintiff’s claim.”

The court went on to analyze how to interpret Section 10369.12’s “in consequence of” language and relied on California law to interpret this statutory language, Olson v. American Bankers Ins. Co., 30 Cal.App.4th. 816. 828 (1994), stating:

The [Olson] trial court instructed the jury that the statutory language of Section 10369.12 applied and that it should interpret the term “in consequence of” to mean “the proximate cause.”  The California Court of Appeal approved the trial court’s interpretation. [ ] Thus, in applying the language of Section 10369.12, the Court will interpret the “in consequence of” term to require the insured’s intoxication to be the “efficient proximate cause” of the loss in order for the loss. to be excluded.

The court then cited Sabella v. Wisler, 59 Cal.2d 21 (1963), stating that:

The California Supreme Court has explained that the “efficient proximate cause” is the cause “that sets the others in motion.” It is the “cause to which the loss is to be attributed, though the other causes may follow it, and operate more immediately in producing the disaster.”  Thus, “where there is a concurrence of different causes, the efficient cause – the one that sets the other in motion – is the cause to which the loss is to be attributed, though the other causes may follow it, and operate more immediately in producing the disaster.

The court also referred to Garvey v. State Farm Fire & Casualty Co., 48 Cal.3d 395, 257 Cal.Rptr. 292, 770 P.2d 704 (1989), stating that “[s]till, ‘the fact that an excluded risk contributed to the loss would not preclude coverage if such a risk was a remote cause of the loss.’”  The court also looked to other federal courts in its causation analysis, and stated:

Other federal courts have interpreted policy exclusions to require proof of a causative connection between an insured’s excluded state (e.g., intoxication, illness, etc.) and the insured’s loss.

The court cited multiple United States Courts of Appeals cases: First, in Hastie v. J.C. Penney Life Insurance Company, 115 F.3d 895 (11th Cir. 1997), the Eleventh Circuit rejected the insurer’s argument that the insured’s status as intoxicated triggered the relevant exclusion and required some proof of a causal connection between the insured’s intoxication and his death. Second, the court cited to Kellogg, supra.  The Ciberay court noted that the Kellogg court relied on Vickers v. Boston Mutual Life Insurance Co., 135 F.3d 179 (1st Cir. 1998), in which the insured had a heart attack while driving, crashed into a tree, and died.  The First Circuit held that while the heart attack caused the crash, the crash was the sole cause of death, and the illness exclusion thus did not apply.  Finally, the court cited Johnson v. Life Investors’ Insurance Co., 98 Fed. Appx. 814 (10th Cir. 2004), in which the insured, who had muscular dystrophy and a history of falls, fell down stairs, broke his neck, and was taken to the hospital, where he later developed pneumonia and died.  While the immediate cause of his death was “pneumonia due to, or as a consequence of, a cervical spine fracture, and the underlying cause of death [w]as myotonic dystrophy,” the Tenth Circuit held that his death was undisputedly caused by a fall, and it was irrelevant under the policy terms whether the fall was caused by the myotonic dystrophy.

In analyzing the intoxication exclusion, the court reasoned:

[T]he record contains insufficient evidence for Defendant to have reasonably concluded that Mr. Ciberay’s death was “in consequence” of his intoxication.  In the first instance, there is insufficient evidence to reasonably conclude that Mr. Ciberay’s intoxication caused his fall.  But, even assuming there was sufficient evidence to reach that conclusion, Mr. Ciberay’s intoxication was too remote from his death to reasonably conclude his intoxication was the efficient proximate cause of his death.

Mr. Ciberay very likely died of a pulmonary embolism.  The pulmonary embolism was very likely due to Mr. Ciberay’s decreased mobility.  Mr. Ciberay’s decreased mobility was due to his pelvic fractures.  Mr. Ciberay’s pelvic fractures were due to his fall.  And while one may argue, as Defendant does here, that Mr. Ciberay’s intoxication was the efficient proximate cause of his death because it began the chain of events leading to his death, there is simply insufficient evidence to reasonably conclude Mr. Ciberay’s intoxication caused him to fall.

Other than a generic list of the typical effects associated with a blood alcohol level similar to that of Mr. Ciberay’s at the time of his fall – which, importantly, appears to be entirely contradicted by Mr. Ciberay’s activity before falling and by his disposition when paramedics arrived [ ] – one may only speculate as to what actually caused Mr. Ciberay to fall.  (Emphasis added).

The court ultimately concluded that “Defendant could not have reasonably decided if Mr. Ciberay’s intoxication was the efficient proximate cause of his death.”

The upshot of the Ciberay holding is that where an insurer wants to deny a claim based on a policy exclusion in California, the language of the exclusion in the policy must be at least as favorable to the insured as the language in the corresponding California Insurance Code section, otherwise the Code language supplants the policy language.  Whereas insurers could previously use extremely broad language in their policies to justify applying exclusions, under Ciberay and other later cases, policy exclusionary language in California will be construed only as broadly as the Code language.  Therefore, insurers are held to demonstrating an actual and substantial causal connection between the excluded condition and the loss.  Since insurers know they must connect the exclusion to the loss to legitimately apply the exclusion, we would hope that fewer claims will be denied based on overbroad exclusionary language in the first instance.  However, we continue to find that insurers are applying their own very broadly worded exclusions and not applying the applicable California statutory language.  This is why it is important to contact the highly experienced California accidental death attorneys at McKennon Law Group PC if you have a denied AD&D claim.