Ambiguity Favors ERISA Claimants

If you ever want to read a case that illustrates the difficulty of working in the ERISA and insurance claims field, take a look at Johnson v. American United, 2013 WL 2284875 C.A. 4 (N.C.) 2013 .

The question involved whether the insurer was required to pay the life insurance benefits under an accidental death and dismemberment clause in a life insurance policy covering Mr. Johnson, the deceased. The issue was whether the deceased with a blood alcohol level of 0.289 (legal limit in North Carolina was 0.08) had died in an “accident”, which would trigger payment of the life insurance benefits.

The insurance company took the position that Mr. Johnson should have foreseen that drinking excessive amounts of alcohol may result in death or bodily harm, therefore his death was not caused by an accident. No place in the policy did the language specifically address drunk driving except in a seat belt bonus clause, which added a bonus to the benefit if the policyholder was wearing a seat belt when a fatal accident occurred. In that policy clause payment of the seat belt bonus was specifically denied when the driver was legally intoxicated under state law.

No such exclusion was delineated in the main AD&D policy language, so the Court was left to interpret the policy without policy language to guide it, forcing the Court into the jungle of conflicting “accidental death” decisions and nitpicking legal language which causes an ordinary reader’s eyes to cross.

The upshot was that the Court determined that the policy contained no clear language covering the issue of what an “accident” is. Therefore, the Court had to invoke a rule of interpretation which is one of the very few which favors claimants: If the policy language is ambiguous on any point, the language should be construed strictly in favor of the insured.

The Court went on to conduct a very searching review of the difficulty involved when a policy fails to define what an “accident” is. It is hard to believe, but there are loads of cases in which courts agonize over the meaning of the word. Generally, if the policy language does not clearly exclude payment to a drunk driver, most courts will construe the language against the insurance company which wrote the policy.

This, of course, will send insurers and their attorneys back to the drawing board so as to modify “accident” language for life insurance policies with AD&D clauses. Most clauses will make sure to exclude drunk driving from being considered an “accident”.

The one lesson claimants should take away from this case is that ambiguous language does not favor the insurance company, it favors the claimant. If policy language leaves room for argument on an issue, don’t take the company’s word for it. Insurers are in the business of denying claims.

If you believe you have a claim, you should make it your business to get an unbiased knowledgeable opinion on how valid it is. That’s the only way you can be sure your claim isn’t covered.





Accidentally On Purpose


We recently handled an insurance case which required us to do heavy research on the meaning of the word “accident”.

There are tons of insurance cases out there that hinge on the meaning of “accident” in all types of insurance policies issued by all kinds of insurance companies and in all jurisdictions.

What struck us was the fact that all of the insurance policies involved, which generally try to define every meaningful word in them to the nth degree, never try to define the word “accident” in their policy language. Is this an “accidental” oversight or is this failure to define deliberate so that insurance companies would have an open door to contest any claim based on an accidental happening?

This failure to define is not an insurance industry oversight. Insurance companies wouldn’t leave such a gaping hole in their policy language unless the hole was one which was advantageous to the insurers.

The companies use the nebulous word “accident” to enable themselves to mount and maintain a legal defense in a court of law. This immediately puts the claimant on the defensive. It means that the claimant is looking at much heavier legal fees and costs (if the claimant can even afford them) and a much longer period of time before any benefits are forthcoming.

Add to this the claimant “Docility Factor” (see post April 29, 2009, below) and it is easy to see that failing to define “accident” in policy language leaves a gaping hole which becomes a graveyard for many a claim.

Undefined “accident” is no accident.