Accidental Death and Dismemberment Archives

What Are The Differences Between Accidental Death And Dismemberment insurance And Life Insurance?

The main difference between AD&D insurance and life insurance is the types of events they cover. Both provide coverage in the case of the death of the insured, although accidental death and dismemberment insurance, as the name suggests, only covers a death if it is caused by an accident, as defined in the policy. AD&D Policies define accident differently and all have various types of exclusions, such as intentional acts, self-inflicted injuries, and medical conditions that cause or contribute to an accidental death.

AD&D insurance is usually added to a standard insurance policy, as a rider or supplemental insurance. AD&D insurance generally does not stand on its own, but rather as a product added on to a standard policy. Death benefits for an accidental death are not included in a standard life insurance policy, but having AD&D coverage on top of the standard life policy provides for an additional benefit for an accidental death covered by an AD&D policy.

Is A Sudden Death Because Of Illness Considered An Accidental Death?

Accidental death and dismemberment policies exclude coverage for death resulting from a sudden onset of illness. Similarly, if the insured person undergoes medical treatment and subsequently passes away, the death may be excluded from AD&D coverage. The Covid-19 pandemic has brought this factor into a new light as it relates to AD&D insurance. Because Covid-19 is a medical condition, death resulting from Covid-19 will likely be excluded from coverage under most AD&D policies. However, if the exact cause of death is uncertain and whether death is caused by an underlying condition or if some other cause cannot be determined, the matter may need to be litigated to determine whether AD&D coverage applies or is excluded. It is critical that if you believe you have an AD&D claims resulting from an accidental death, you should consult an accidental death insurance lawyer to assist you to determine if you have a covered claim. Many times we find that persons who think they do not have a valid accidental death insurance claim actually do have a valid claim.

What Is A Dismemberment Claim?

Dismemberment coverage applies when a covered person loses a body part or function, or loses the use of a body part or function. Examples of dismemberment that AD&D may cover include:

• Permanent or partial loss of limb or limbs
• Permanent or partial paralysis of limb or limbs
• Loss of speech
• Loss of eyesight
• Loss of hearing

However, coverage varies from policy to policy. The exact coverage will be delineated in the policy.

In cases where an underlying condition contributes to an injury, the many courts will follow what is called a substantial contribution standard. This means that if injuries result from an accident (like a car accident) and require an amputation, the courts will have to determine if the insured had any underlying condition that substantially contributed to the need for amputation. If so, the amputation would be excluded from coverage. If not, there may exist a valid accidental death insurance claim.

If The Deceased Person Was Partially At Fault In Causing The Accident, Does Their AD&D Insurance Still Apply?

As noted above, AD&D policies come with a list of applicable exclusions, which typically include self inflicted injuries or death and deaths occurring in the course of committing a crime. For example, if an insured with AD&D insurance slips, falls, and dies while they are robbing a bank, their death would be excluded from coverage. However, an exclusion will not apply to AD&D coverage unless it is specifically and clearly notated in the policy. Insurers always have the burden of proving the applicability of any exclusions in their policies.

Should I Have Both Life And AD&D Insurance?

Having both life insurance and AD&D insurance is not always necessary but it is recommended. The cost of AD&D insurance is low because the risk of accidental death is low for the average American. Given a choice between the two, life insurance offers a much more stable and secure financial plan if you or a family member pass away. But if you have a job or live a lifestyle that carries a higher risk of accidental injury or death, you should consider AD&D insurance in additional to traditional life insurance.

The dedicated and knowledgeable accidental death insurance attorneys at McKennon Law Group PC are available and ready to answer questions you may have about life insurance, AD&D insurance, and how the two differ. McKennon Law Group PC offers free initial consultations, so you risk nothing by contacting us with your questions.

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.

Accidental Death & Dismemberment (“AD&D”) Insurance Update: Northern District of California Construes the Terms of ERISA-governed AD&D Policy Against the Insurer, Finds that “Near Fatal” Levels of Methamphetamine Did Not Trigger Policy’s Drug Exclusion

On November 15, 2021, Judge Phyllis Hamilton, in Santos v. Minnesota Life Ins. Co., 2021 WL 5302950 (N.D. Cal. Nov. 15, 2021), ruled in favor of an administrator of the estate of a 55 year-old engineer and Apple employee who died alone in his apartment after falling backwards and hitting his head. The death certificate listed the immediate cause of death as “blunt force head trauma with subdural hematoma.” The death certificate indicated that the death was “drug related,” but it also indicated that the manner of death was accidental.

The decedent was insured through an ERISA plan sponsored by his employer, Apple. Under the plan he had $311,000 in life insurance coverage and $311,000 in AD&D coverage. The insurance company paid the life benefit, but it denied coverage under the AD&D policy based on the policy’s “drug exclusion” that provided that the death benefit is not payable where the insured’s death results from or is caused directly or indirectly by: “being under the influence of any prescription drug, narcotic, or hallucinogen, unless such prescription drug, narcotic, or hallucinogen was prescribed by a physician and taken in accordance with the prescribed dosage.” The insurance company also tried to avoid liability under the AD&D policy based on its contention that the incident was not an “accident” due to the significant levels of methamphetamines found in the decedent’s system.

The policy beneficiary filed suit under ERISA based on the insurer’s improper denial of AD&D coverage. The court found that the death was accidental under federal common law and that the policy’s “drug exclusion” did not apply. The beneficiary was entitled to recover the wrongfully denied $311,000 accidental death benefit, and she was entitled to file a motion to recover her attorneys’ fees and costs.

There are three important things to take away from what was a relatively easy decision by the former U.S. Chief District Judge of the Northern District of California who took senior status last February. First, ERISA cases are governed by federal common law, and under federal common law, the term “accident” is interpreted based on the reasonable expectations of the insured. The court explained federal common law assessment of “accident,” using the test mandated by the Ninth Circuit in Padfield v. AIG Life Insurance Company, 290 F.3d 1121, 1126 (9th Cir. 2002):

A death or injury may be “deemed ‘accidental’ under a group accidental insurance policy established under ERISA if the death [or injury] was unexpected or unintentional.” 10 Couch on Insurance § 139:16 (3d ed. 1995 & 2000 Supp.). In determining whether death, or the injury that caused death, was unexpected or unintentional, courts have undertaken an overlapping subjective and objective inquiry. The court first asks whether the insured subjectively lacked an expectation of death or injury. See Wickman v. Northwestern Nat’l Ins. Co., 908 F.2d 1077, 1088 (1st Cir. 1990) (“Requiring an analysis from the perspective of the reasonable person in the shoes of the insured fulfills the axiom that accident should be judged from the perspective of the insured.”). If so, the court asks whether the suppositions that underlay the insured’s expectation were reasonable, from the perspective of the insured, allowing the insured a great deal of latitude and taking into account the insured’s personal characteristics and experiences. See id. If the subjective expectation of the insured cannot be ascertained, the court asks whether a reasonable person, with background and characteristics similar to the insured, would have viewed the resulting injury or death as substantially certain to result from the insured’s conduct.

Applying this analysis, the court found that the decedent’s death was unexpected because a reasonable person in his position would not have viewed the resulting injury and death as substantially certain to result from his conduct. Therefore, the death was accidental under controlling Ninth Circuit precedent, Padfield.

Second, the terms in insurance policies are interpreted based on their usual and ordinary meanings, and ambiguities are interpreted in favor of the insured. Here, the court found that crystal meth was not a “prescription drug” nor a “narcotic” nor a “hallucinogen” based on the ordinary meaning of the terms and with reference to the Merriam-Webster dictionary. Accordingly, it found that the policy’s drug exclusion did not apply. Minnesota Life lost this case because the terms in the drug exclusion in its policy, although broad, did not include more specific wording, such as “controlled substances.” Decisions in cases like this will necessarily depend on the interpretation of the language in the policy at issue.

Third, ERISA claims that are subject to California law will most likely be reviewed de novo by the district court. The court will not give any deference to the insurer’s denial of the claim. This is important to understand because there a number of cases relating to the key issue of whether the death was “accidental” that are distinguishable because they were decided under the deferential “abuse of discretion” standard. It is important to not give up on your claim before consulting a qualified and experienced California life insurance attorney/ AD&D insurance attorney.

McKennon Law Group PC specializes in handling accidental death insurance claims that have been improperly denied by insurance companies based on their misinterpretation of their own policies and on their failure to adequately investigate claims. Under both ERISA and California law, claimants may be able to recover their attorneys’ fees incurred in challenging improper denials of benefits. If you have been denied coverage under a life insurance or AD&D policy, please contact us at (949) 387-9595 to obtain a free consultation.

If an insured member of your family dies accidentally and you make an accidental death insurance claim as a beneficiary, the insurance company may require proof that the death was accidental before paying the claim. If that happens, you should immediately consult with a California insurance claims attorney.

Accidental death and dismemberment (AD&D or accidental death) coverage may be purchased as a stand-alone policy or as a rider to a life insurance policy (although usually, you must specifically request accidental death coverage when you purchase the policy). These policies are often issued through employers, typically as a group policy.

In our practice, we get the following questions: “Should I have accidental death and dismemberment coverage?” “How is accidental death defined by most life insurance companies?” “How does coverage for accidental death insurance work?”

Keep reading for the answers you may need about accidental death and dismemberment coverage and claims, and you will also learn what steps to take – and where to get help – if an insurer denies your accidental death claim.

How Does AD&D Coverage Work?

Accidental deaths happen in every imaginable scenario, but most are caused by car and bike accidents, falling down stairs or in the home, or similar kinds of occurrences.

Most life insurance policies cover accidental deaths along with deaths from natural causes. But accidental death coverage offers additional advantages to a beneficiary when an insured’s death is accidental because it will typically pay a large death benefit if a death was caused by an accident and it was not caused or contributed to by another cause, such as a medical condition, alcohol, drugs, etc.

Suppose a life insurance policy provides $250,000 of coverage, and you add an accidental death and dismemberment rider that pays a $500,000 benefit for accidental death. If the insured’s death is the result of a heart attack, stroke, or COVID-19, for example, the beneficiary will receive only the $250,000 payout.

Because such a death is deemed “natural” and does not meet the definition of an “accident,” the company will not pay the $500,000 accidental death benefit. However, suppose that the insured suffers a heart attack while driving and runs into a tree, resulting in death. Depending on the policy language and the jurisdiction you are in, such a claim may or may not be covered.

What Is an Accidental Death?

An accidental death is an unnatural death caused by an unintentional and/or unforeseen event, such as a slip and fall, traffic collision, or accidental overdose prescription medication or poisoning. Accidental deaths are distinguished from death by natural causes and from intentional homicides and suicide.

Life insurance companies define accidental death very narrowly. Accidental death insurance does not cover death resulting solely from illness or other natural causes. But some policies cover deaths that result partially from illness or natural causes, if the death was caused by an accident in some manner. Most accidental death policies place considerable limits on what types of accidents are covered.

Some accidental death policies do not cover deaths where the decedent was intoxicated at the time of death, the decedent’s own gross negligence caused death, or the death was caused in whole or part by a medical condition or treatment, even if a medical examiner, a coroner, or a police officer determined the death to be accidental.

For example, if the decedent had a stroke while driving and died in a traffic accident, the life insurance company may deny an accidental death claim by determining that the stroke, rather than the traffic collision, was the cause of or contributing factor in death.

Accidental death and dismemberment coverage also usually excludes suicide, war, criminal activities, and professional athletic injuries. Any dangerous activity, such as auto racing or skydiving, may also be excluded.

How Are Accidental Deaths Investigated?

When an accidental death claim is filed, the life insurance company’s claims department opens an investigation. The insurer typically reviews the death certificate, any medical examiners or coroner’s reports, accident/police reports, and the decedent’s health records.

While a coroner’s report or death certificate may describe a car accident or slip-and-fall fatality as accidental, this is not binding on the insurer, which may determine that the accidental death policy does not cover the death because the coroner’s report or death certificate may also mention that a medical condition also contributed to the accident. The denial of an accidental death claim is often linked to a decedent’s pre-existing medical condition.

What Can You Do If Your AD&D Claim Is Denied?

It may be impossible to prove whether a past event, a pre-existing medical condition, or an accident itself caused death. Many life insurance companies exploit that impossibility to deny accidental death benefit claims. If a life insurance company rejects your accidental death claim, schedule a consultation with a California accidental death claims attorney to discuss your rights and options.

Insurance companies commonly deny accidental death claims by taking the position that there is inadequate evidence that a decedent’s death was “accidental.” A good and experienced California accidental death claims lawyer will obtain witness statements, hire necessary experts, conduct appropriate legal research, review the evidence, and either present a well-prepared appeal to the insurer or file a lawsuit against the insurer.

How Will Your Case Be Handled?

If the accidental death coverage was purchased directly from a life insurance company without employer involvement, and your accidental death claim is denied, the state law in the governing jurisdiction will control what law applies to the accidental death claim, and will be important if you decide to sue the insurance company.

However, if the accidental death coverage was obtained through an employer, it is likely governed by the Employee Retirement Income Security Act of 1974 (ERISA), and you will be required to pursue an administrative appeal before suing the insurance company.

If that administrative appeal fails, a California accidental death claims attorney will file your lawsuit in the United States District Court, as the federal courts have jurisdiction in most cases that involve an employer-sponsored insurance plan.

At your administrative appeal or in a federal or state court, the right California accidental death claims lawyer will present the best possible evidence that the death was in fact accidental, and that the beneficiary is therefore entitled to the full accidental death payout.

How Can the Right Attorney Help You?

Even before submitting an accidental death claim to an insurance company, an California accidental death claims attorney can help you. Let an experienced attorney conduct an investigation as discussed above and prepare your claim or appeal of a denial of a claim to submit to the insurance company.

When your claims attorney prepares an accidental death claim, he can investigate the facts surrounding the decedent’s death, anticipate the reasons the insurance company may deny the claim, and address those reasons, all before submitting the appeal. If the appeal is not needed or if it is denied, an experienced accidental death insurance lawyer will file a lawsuit on your behalf.

How Are Most Insurance Claim Disputes Resolved?

The right accidental death claims lawyer can show the insurance company that the claim has merit and possibly negotiate an acceptable out-of-court settlement for you without having to go through a stressful trial.

Most insurance disputes in California are resolved outside of court, but if no reasonable settlement is possible, your lawyer can take your claim to an administrative appeal or to trial.

The accidental death of a loved one is always difficult. Even so, if your accidental death claim is denied, you should reach out immediately to a California AD&D attorney who will aggressively fight the insurance company on your behalf. Choosing the right attorneys, such as McKennon Law Group PC, can make all the difference in the outcome of your AD&D case.

When an insured under an accidental death and dismemberment policy governed by ERISA dies, coverage often turns on whether the death resulted from an “accident,” which is covered, or from the insured’s own intentional conduct which a reasonable person would have viewed as substantially certain to lead to death, which is not covered. In Wolf v. Life Insurance Co. of North America, 2021 WL 2105316, (W.D. Wash. 2021), the court had to determine whether the death of an insured who drowned after a car wreck was an “accident.” The case turned on whether driving 70-80 miles per hour the wrong way down a one-way road next to a bay, with a .17 blood alcohol level, would have led a reasonable person in the insured’s shoes to view death as substantially certain. While calling it a very close call, the court ruled in favor of the insured in finding the death was accidental, for which insurance benefits were due under the policy.

In the Ninth Circuit Court of Appeals, the standard for determining whether an insured’s intentional conduct leading to death was an “accident” for purposes of an accidental death policy governed by ERISA was decided in Padfield v. AIG Life Insurance Company, 290 F.3d 1121, at 1126–27 (9th Cir. 2002). In Padfield, the insured had died while engaged in autoerotic asphyxiation. The Ninth Circuit first had to decide what standard should apply.

The seminal case on this issue was decided by the First Circuit Court of Appeals, in Wickman v. Northwestern National Insurance Company, 908 F.2d 1077, 1088 (1st Cir. 1990). In Wickman, the First Circuit adopted a two-part test for deciding the issue. First, the court looks at whether the insured has a subjective expectation of death from the conduct. The court is to make the subjective intent analysis “from the perspective of the insured, allowing the insured a great deal of latitude and taking into account the insured’s personal characteristics and experiences.” Second, the court is to apply an objective standard if the court cannot determine whether the insured had a subjective expectation of death, or if the court determines that the insured did not have a subjective expectation of death, the court is to apply an objective test to determine whether the insured’s expectations were reasonable. The objective test adopted in Wickman is “whether a reasonable person, with background and characteristics similar to the insured, would have viewed the injury as highly likely to occur as a result of the insured’s intentional conduct.”

In Padfield, the Ninth Circuit adopted the Wickman two-part test with a modified version of the second part of the test –whether a reasonable person, with a background and characteristics similar to the insured, would have viewed death as “substantially certain” to occur as a result of the insured’s intentional conduct. Padfield, 290 F.3d at 1127. Under this standard, the Ninth Circuit determined that a reasonable person with the insured’s experience would not have viewed death as substantially certain from autoerotic asphyxiation. Indeed, the court held that these facts “fell far short” of the substantially certain to result in death standard. The court found that this insured had engaged in autoerotic asphyxiation without dying in the past and also relied on “the uniform medical and behavioral science evidence indicating that autoerotic activity ordinarily has a nonfatal outcome.” On the other end of the spectrum, the court noted that courts have found that playing Russian roulette does involve a reasonable expectation of a substantial certainty of death, regardless of the insured’s subjective expectations.

The Padfield court noted that courts use various formulations to indicate the degree of certainty with which an insured must expect injury for an injury to be nonaccidental, but concluded that “the ‘substantially certain’ test is the most appropriate one, for it best allows the objective inquiry to ‘serve [ ] as a good proxy for actual expectation.’ ” Id. at 1127 (citing Wickman, 908 F.2d at 1088; Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1456 (5th Cir. 1995)).

In Wolf, the court applied the Ninth Circuit’s two-part standard to Wolf’s behavior leading up to his death. The court found that the evidentiary record was inconclusive regarding Wolf’s subjective expectations, although the court observed that his wearing of a seatbelt and use of emergency flashers possibly indicated a subjective intention that his conduct not be fatal. The court ruled that Wolf’s conduct, while “extremely reckless behavior,” was nonetheless an accident under the substantial certainty of death standard:

Speeding along a one-way road the wrong direction in the dark alongside a body of water does not ‘fall far short’ of what a reasonable person might expect to lead to death, [citation], but neither would a reasonable person . . . view death as “substantially certain” in these circumstances.

In contrast, the court in Wolf gave examples of reckless driving scenarios which a reasonable person would consider substantially certain to lead to death:

driving into oncoming highway traffic or driving alongside a cliff without a guardrail with one’s eyes closed.

In Wolf, the court made its decision under the de novo review standard. It emphasized that these facts would have presented a much closer call for the court under the “abuse of discretion” standard, in which the insurance company’s decision to interpret policy language and make coverage decisions is accorded deference by the court. The court cited to cases holding it was not an abuse of discretion for an administrator to deny coverage for claims involving very similar drunk driving scenarios.

Wolf provides a useful roadmap in how the “substantially certain” standard would be applied to other circumstances in which an insured dies while engaged in intentional conduct that was a cause of the death. For example, dying from jumping off a five-story building would not be an accidental death. But dying from jumping off that same building while bungy jumping, due to an equipment failure, would be.

Wolf shows the advantages to the insured beneficiary of having a court review a denial of benefits under an ERISA governed insurance policy under the de novo standard, rather than under an abuse of discretion standard.

Wolf shows the necessity of an insured seeking coverage under an accidental death and disability policy to hire a knowledgeable ERISA accidental death attorney to carefully analyze the factual circumstances of an insured beneficiary’s death, and to successfully navigate the insurance claim through the ERISA appeals process and, if necessary, litigation.

In the April 21, 2021 issue of the Los Angeles Daily Journal, the Daily Journal published an article entitled “Ruling Clarifies who Qualifies as an ERISA Fiduciary” written by the McKennon Law Group PC’s Managing Shareholder, Robert J. McKennon. The article addresses a recent case by the Ninth Circuit Court of Appeals, Bafford v. Northrop Grumman Corp., which addressed the available legal remedies for ERISA plan members who are harmed as the result of repeated gross misstatements of pension benefits. The court held that the ministerial conduct of a third-party delegee who made incorrect pension calculations pursuant to a formula provided to it and transmitted the calculations to the plaintiffs did not constitute fiduciary actions. It also held that pension plan participants could bring state-law professional negligence and negligent misrepresentation claims against non-fiduciaries who make representations regarding plan benefits because such claims are not preempted by ERISA. The ruling provides an important avenue for relief for plan members who are harmed as the result of such repeated gross misrepresentations of plan benefits.

Ruling Clarifies who Qualifies as an ERISA Fiduciary

By Robert McKennon

In its landmark 2011 decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), the U.S. Supreme Court signaled a broad expansion of the availability of equitable remedies to plan participants and their beneficiaries under the Employee Retirement Income Security Act of 1974. The claims are typically brought through actions for breach of fiduciary duty against plan fiduciaries. Courts continue to grapple with issues such as: Who are ERISA fiduciaries and when do they engage in fiduciary acts?

ERISA has been interpreted to limit legal recourse to conduct of plan fiduciaries that is “fiduciary” in nature, as opposed to “ministerial.” Thus, an ERISA breach of fiduciary duty claim will depend on whether the actions at issue involve a fiduciary function.

But what happens when a pension plan’s third-party delegee grossly miscalculates the level of plan benefits and the plan administrator communicates this misinformation to plan members who rely on them? Can the plan sponsor, the plan administrator, or the third-party delegee be liable for breach of fiduciary duty? If the third-party delegee is not liable for breach of fiduciary duty, can it be sued for state law claims because such claims are not preempted by ERISA?

The 9th U.S. Circuit Court of Appeals recently answered these questions in Bafford v. Northrop Grumman Corp., 2021 DJDAR 3501 (April 15. 2021).

Northrop Grumman sponsored an employee pension plan governed by ERISA. Northrop delegated administration of the plan to an administrative committee, which in turn contracted with Hewitt, a company that provided outside administrative services for the plan. One of Hewitt’s responsibilities was to generate statements showing plan participants what their monthly pension benefit would be when they retired. Plaintiffs Stephen Bafford and Evelyn Wilson both requested these statements using an online platform Hewitt provided.

The statements mailed to the plaintiffs in response to their online platform requests grossly overestimated the benefits to which each plaintiff would be entitled. After the plaintiffs retired and began collecting benefits in the amount the statements predicted they would, Northrop sent them notices that the statements generated by the online platform had been incorrect. Instead of the approximately $2,000 and $1,600 per month benefit Hewitt previously estimated, Bafford and Wilson were only entitled to receive $807 and $823 per month, respectively.

The plaintiffs sued. They alleged that Hewitt, the committee, and Northrop had breached their fiduciary duties, and that the committee failed to provide ERISA-required benefit information. In an alternative to their ERISA claims, the plaintiffs asserted state-law professional negligence and negligent misrepresentation claims against Hewitt. The district court granted the defendants’ motion to dismiss, and the plaintiffs appealed.

The Bafford court affirmed in part and reversed in part. The court found that because the calculation of benefits was a “ministerial” task requiring no fiduciary skill or judgment, there was no legal liability under ERISA of the employer, its administrative committee, or of the entity that “ran the numbers” and communicated the grossly inaccurate information to plan members. The court found the Department of Labor regulatory guidance as persuasive evidence regarding whether a task is fiduciary or ministerial. The DOL’s interpretive bulletin identifies a variety of tasks as “ministerial” if they are done by persons who “have no power to make any decisions as to plan policy, interpretations, practices or procedures” and who merely implementing the “policies, interpretations, rules, practices and procedures” in a framework created by other persons, including: “preparation of employee communication material” and “calculation of benefits.” See 29 C.F.R. Section 2509.75-8 (Cmt. D-2). Because, in its view, the error was merely a miscalculation of benefits by a non-fiduciary who was provided a formula to follow — a ministerial duty — the Bafford court found no ERISA legal liability for any of the companies responsible for the error. And it was a big error — Bafford’s benefit amount was overstated by nearly 60%.

The 9th Circuit panel did, however, reverse the district court’s dismissal of the state law claims, holding that the company that miscalculated the benefit amount could be potentially liable for its negligence in the performance of its duties under its contract with Northrop, noting that plaintiffs were intended beneficiaries of that contract. The court concluded that ERISA did not preempt state common law professional negligence and negligent misrepresentation claims for relief. Following Paulsen v. CNF, Inc., 559 F.3d 1061, 1082 (9th Cir. 2009), it held that “the state-law professional negligence claim does not have a ‘connection with’ an ERISA plan … , and ERISA does not preempt the cause of action.”

The Bafford court also recognized that sometimes plan administrators perform fiduciary functions through ministerial agents and that those actions will be imputed to the named and functional fiduciaries. The court cited approvingly the recent 2d Circuit opinion in Sullivan-Mestecky v. Verizon Communications Inc., 961 F.3d 91, 104 (2d Cir. 2020), where the court permitted a suit for breach of fiduciary duty against an employer based on the imputed gross negligence of a third-party ministerial benefits administrator.

Sullivan-Mestecky involved clerical errors by a life insurer that created a higher coverage amount than believed covered by the insurer. Due to a calculation error, Aon Hewitt had coded Sullivan’s annual $18,600 income as her weekly income and represented that her life insurance policy had a death benefit of $582,600. But this mistake was not caught until after she died. Sullivan did not obtain an additional life insurance policy due to the generous value of her employer policy. Based on her mother’s age at the time of her death, the plaintiff believed her mother’s life insurance policy was worth $582,600. After her mother’s death, the plaintiff submitted a claim to Prudential, but Prudential paid only $11,400, which amount it stated was the policy’s correct death benefit. The plaintiff filed suit. The court held that the plaintiff could proceed against Verizon under the equitable remedies of estoppel, surcharge, reformation and breach of fiduciary duty because of Verizon’s continuing negligent misrepresentations regarding the amount of coverage, actions that were undoubtedly fiduciary in nature.

The 9th Circuit distinguished Sullivan-Mestecky because that case involved gross misrepresentations by a plan fiduciary to a plan beneficiary regarding plan benefits: “In other words, if a fiduciary delegates a fiduciary function to an entity that normally performs a ministerial function, that entity’s performance of a fiduciary function can still constitute a breach of fiduciary duty, imputed to the delegating fiduciary.” In Bafford, Northrop’s ministerial delegee Hewitt did nothing more than calculate plan benefits pursuant to a formula provided to it and send estimates of plan benefits based on additional information provided by plan members. The court found the activity to be ministerial “because Plaintiffs [did] not allege that Hewitt was ‘issuing written plan materials like summary plan descriptions,’ or providing ‘individualized consultations with benefits counselors,’” both activities that are clearly fiduciary in nature.

In addition to miscommunication of benefits, the negligence in handling other fiduciary functions that have been held to support claims against ERISA fiduciaries include:

Cases where the benefit calculation under the plan is based on ambiguous plan language. See Kenseth v. Dean Health Plan, Inc., 722 F.3d 869, 883 (7th Cir. 2013); Daniels v. Thomas & Betts Corp., 263 F.3d 66, 74-75.

Cases where the plan accepts premiums and misrepresents coverage based on a misstatement to the plan member of eligibility for the benefit. See McBean v. United of Omaha Life Ins. Co., 2019 WL 1508456 (S.D. Cal. Apr. 5, 2019); Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226 (3d Cir. 1993); Smith v. Hartford Ins. Group, 6 F.3d 131 (3d Cir. 1993).

Cases where the plan approves benefits and then, based on the same information, denies coverage. See Cohorst v. Anthem Health Plans of Kentucky, Inc., 2017 WL 6343592, at *2 (C.D. Cal. Dec. 12, 2017).

In these cases, very often key elements are material misrepresentations to a plan member, which misrepresentations can be imputed to the employer or to the insurers administering the plans. Such circumstances can and do provide aggrieved plan members and their beneficiaries important equitable relief, including surcharge, reformation, estoppel, and waiver.

The Bafford ruling will have limited impact on ERISA claims against plan administrators based on the broad scope of fiduciary functions and the availability of equitable remedies under ERISA. The main significance is its holding is that state-law professional negligence and negligent misrepresentation claims against plan delegees who perform “ministerial “ duties are not preempted by ERISA, thereby providing a potential remedy to plaintiffs for the harm caused by the negligence of the entities performing the ministerial tasks. This is a just and fair result for employees and their beneficiaries, who would potentially be significantly harmed by losing their expected benefits if such a remedy were unavailable.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith and ERISA litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.

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