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How Insurers Rely on Exclusions to Deny Coverage Under Accidental Death and Dismemberment Policies

Many life insurance policies provide for benefits, in addition to the face amount of the policies, when an insured dies as a result of an accident. These extra benefits can be significant, as many policies will pay twice the face amount of the policy, where the insured’s death is by accident.

While insurance companies market accidental death benefits as a way to provide families and dependents with extra security, many policies include clauses (or exclusions) that allow them to deny coverage for these benefits even if the insured died of an accident.  As a result, claims for accidental death benefits can be complex and fact-intensive.

For example, in Duncan v. Minnesota Life Ins. Co. (S.D. Ohio 2020), the Decedent was insured under a policy issued by Minnesota Life. While hospitalized for complications of leukemia, he stood up from his wheelchair and fell to the floor. He died later that day at the age of 65.

The Decedent’s death certificate stated that the immediate cause of death was a subdural hematoma, while describing the manner of death as “accidental.”

Following the Decedent’s passing, his beneficiaries made a claim for basic life benefits and accidental death benefits. Minnesota Life paid the basic life benefits; however, it denied the accidental death benefits relying on an exclusion in the policy for deaths that were “directly or indirectly” caused by an illness. Specifically, Minnesota Life argued that the Decedent’s leukemia was a contributing cause of death, and that, due to the advanced nature of his disease, he had become very weak. Notably, Minnesota Life pointed out that, prior to his death, the Decedent had fallen several times as a result of his condition.

The beneficiaries filed suit to challenge Minnesota Life’s denial of benefits. During the litigation, Minnesota Life again took the position that the Decedent’s death was not an accident because it was caused by “bodily or mental infirmity, illness or disease.” The court agreed. Noting that the use of the term “accident” or “accidental” in a coroner’s report or in medical records is not dispositive, the court accepted Minnesota Life’s argument that the Decedent’s leukemia contributed to his death.

One factor in the court’s decision was that the Decedent had a life insurance policy that was governed under ERISA. (Most, if not all the time, life insurance policies provided through employment are governed under ERISA.) In a case involving an ERISA policy, courts will overturn an insurer’s denial of benefits only if the determination was arbitrary and capricious. That is a favorable standard of review for an insurer because it does not have to prove that it made the right decision, just that it made a rational one.

The court in the Duncan case may have, nevertheless, ruled in favor of Minnesota Life, even if this were not an ERISA case. There was extensive evidence that the Decedent’s leukemia was severe and that he fell as a direct result of his weakened condition. Based on the strength of the evidence relating the Decedent’s fall to his leukemia, it is fairly likely that a judge or jury would have reached the same outcome in a non-ERISA case.

There are limits to the ways by which an insurer, or plan administrator, can take advantage of an exclusion to get out of paying accidental death benefits. In Loan v. Prudential Ins. Co. of Am.,  (6th Cir. 2010) the Decedent, a 53-year-old 205-pound man, fell down two flights of stairs after drinking three glasses of wine in 90-minutes. Although the Decedent’s policy provided for accidental death coverage, Prudential denied a claim for accidental benefits due to a policy exclusion for any death resulting from the insured being “legally intoxicated.” In support of its argument, Prudential noted that the Decedent would have been legally intoxicated under Kentucky’s motor vehicle statute based on his blood alcohol content.

The court rejected Prudential’s claim, noting that Kentucky’s motor vehicle statute did not apply because the Decedent was not driving a car. Although the court did not determine what definition of legally intoxicated it relied on in reversing Prudential’s decision, it nevertheless held that Prudential failed to show that the Decedent’s death was the result of his being legally intoxicated.

Even in an ERISA case, the insurer or plan administrator has the burden to prove that its policy exclusion applies to deny accidental death and dismemberment benefits. As illustrated by the above two cases, sometimes an insurance company can meet that burden, but sometimes it cannot.

It is our law firm’s experience that, if an insurance company has any reason to deny a claim, it will, even if the overall body of evidence supports the payment of benefits. Disputes over accidental death coverage are particularly complex and require experienced lawyers. If you have been denied coverage under a life insurance policy, contact an insurance litigation attorney to help you collect the benefits you are owed.

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