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.