Wolf v. Life Insurance Company of North America, No. 21-35485, __F.4th__, 2022 WL 3652966 (9th Cir. Aug. 25, 2022) involves a dispute over the payment of accidental death and dismemberment (AD&D) benefits under an ERISA-governed insurance policy issued by Life Insurance Company of North America (LINA). The district court found in favor of the insured and the Ninth Circuit affirmed.
Scott Wolf, Jr. (Scott) died in a one-car collision while he was intoxicated and driving at a high speed in the wrong direction. He hit a speed bump, lost control of the car, which flipped over and landed upside down in a body of water adjoining the road. The manner of death was listed by the examiner as “Accident (Drove automobile off roadway into bay while intoxicated).” The toxicology report showed that Scott had a blood alcohol content (BAC) of 0.20%.
Scott Wolf, Sr. (Wolf), Scott’s father, maintained the AD&D policy from LINA through his employer. Scott was insured as his parents’ dependent. The policy pays for a “Covered Accident,” which is defined as “[a] sudden, unforeseeable, external event that results, directly and independently of all other causes.” The policy includes exclusions for injuries caused by certain events, however, the policy does not have an exclusion for losses incurred while the insured was under the influence of alcohol, speeding or engaged in reckless conduct. LINA denied Wolf’s claim for benefits. LINA asserted that Scott’s death was a foreseeable outcome of his voluntary actions, so the loss was not a result of a Covered Accident. LINA further explained that foreseeability involves examining whether a person of similar education and age-based experience would have understood that serious injury or death would be highly likely to occur while operating a vehicle with a BAC of 0.2%, speeding 6.5 times the legal speed limit, the wrong way down a road. Wolf appealed the denial to LINA and argued that the policy did not exclude deaths arising from negligent or even reckless conduct and that Scott’s death was both an accident and due to drowning. LINA engaged a toxicologist, Dr. Theodore Siek, to opine what impact Scott’s intoxication level might have had on his driving. Dr. Siek opined that Scott’s driving ability, attitude about safety, and ability to rescue himself from drowning were all impacted by his gross ethanol intoxication. LINA upheld its denial on the basis that a reasonable person with a background and characteristics similar to Scott’s “would have viewed the resulting death as a probable consequence substantially likely to occur.”
The district court analyzed the case under the framework adopted by the Ninth Circuit in Padfield v. AIG Life Insurance Co., 290 F.3d 1121 (9th Cir. 2002). Though Scott was engaged in extremely reckless behavior, the court concluded that “a reasonable person would not have viewed [Scott’s fatal] injury as substantially certain to occur as a result of his actions, rendering his death accidental under the policy.”
On appeal, LINA argued for the first time that, under the language of the insurance policy, an event is not an “accident” if it is “reasonably foreseeable.” The Ninth Circuit found that LINA forfeited this argument by not raising it in the district court or when it denied Wolf’s claim. An administrator may not hold in reserve a reason for denial and raise it for the first time when a claimant challenges a benefits denial in court. This rule prevents a claimant from being “sandbagged” by a new reason for denial only after the suit has commenced. The district court applied the appropriate test by asking whether the resulting death was “substantially certain” to occur from the insured’s conduct. The court found that Scott’s death was an “accident” because his death was not “substantially certain” to occur under the circumstances. The court noted that all of the relevant cases from its sister circuits have held that a drunk driving death was a covered accident under an AD&D policy when applying de novo review. Lastly, the court explained that LINA could have added an express exclusion for losses incurred while driving under the influence of alcohol. LINA did not do so here. Judgment affirmed.
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