Case law

An accidental death and dismemberment claim (AD&D) denied due to the medical treatment exclusion.O’Daniel v. Hartford Life Ins. Co., 2013 U.S. 2013 Dist. LEXIS 188540 (D.S.D. Sept.20, 2013).

The O’Daniel insured was prescribed a Duragesic transdermal patch which delivers medication through the user’s skin by means of a gel mixture and alleviates pain. The insured was found dead at home wearing a fentanyl patch.  An autopsy found fentanyl in the insured’s blood at a high level and concluded that the insured’s cause of death was due to fentanyl toxicity. The Hartford denied the beneficiary’s ADD claim. The Hartford concluded that because the insured’s death was caused by fentanyl toxicity, and fentanyl had been prescribed to treat her chronic pain, her death resulted from medical treatment for a sickness or disease, and therefore was not a covered injury under the terms of the policy. The court disagreed, however. The O’Daniel court held that the prescribed use of medication which had been prescribed for chronic pain and resulted in death is not excluded by “medical treatment” exclusion.

An accidental death and dismemberment claim (AD&D) denied due the medical treatment exclusion and the prescription drug exclusion. Clark v. Metro. Life Ins. Co., 369 F. Supp. 2d 770, 2005 U.S. Dist. LEXIS 8822 (E.D. Va. 2005).

In Clark, the deceased was determined to have died from medication poisoning from a mixture of five drugs. These drugs had been prescribed to the deceased by his doctor for the treatment of anxiety and panic disorders and acute bronchitis. The deceased took his medication as prescribed. The insurer applied the medical treatment exclusion and denied the beneficiary’s ADD claim. The Clark court held for the beneficiary and opined that if all deaths that were caused by medical treatment of an illness were excluded under the first exclusion, this would include all deaths resulting from the use of medicine prescribed by a doctor where that medicine was prescribed to treat an illness.

An accidental death and dismemberment claim (AD&D) denied due to the medical treatment exclusion and the prescription drug exclusion. Ramsey v. Hartford Life Ins. Co., Civ. No. 4:12-cv-00527-BLW, Docket No. 20, 2013 U.S. Dist. LEXIS 56568, 2013 WL 1693673 (D. Idaho Apr. 17, 2013), vacated on stipulation of the parties, Docket No. 38 (July 31, 2013).

The insured in this case had obtained an AD&D policy through his credit union. The Ramsey insured took medications for a bipolar affective disorder, headaches, and also for chronic flank pain. She died as a result of an accidental overdose-either a toxic cross-reaction between her medications, or because the delivery method of one medication had recently been changed. The Hartford denied the beneficiary’s ADD claim based on the medical treatment exclusion. The Ramsey court, looking through the form to the substance of the Hartford contract, held that the “medical treatment” provision was really an exclusion, regardless of the label Hartford chose to put on it. The court noted that Ms. Ramsey’s death was an accident that would otherwise have been covered under the Hartford policy but for the “medical treatment” exclusion. Construing the “medical treatment” provision with the “unless” clause from the drug exclusion, the court found an ambiguity was created: the “unless” clause would be rendered a nullity by interpreting the “medical treatment” clause to preclude coverage for death from prescribed medications as part of a medical plan of treatment. The Ramsey court interpreted the ambiguity in favor of the insured and found coverage.

An AD&D claim denied where the insurer claimed sickness or disease caused an accident that resulted in the insured’s death. Kellogg v. Metropolitan Life Insurance CO., 549 F.3d 818 (10th Cir. 2008).

In Kellogg v. Metropolitan Life Insurance CO., the plaintiff beneficiary brought an action against MetLife insurance company alleging that she was wrongly denied AD&D benefits under an ERISA regulated plan. The insured’s death resulted from complications of a skull fracture the decedent obtained in single-car automobile accident, was not excluded under a physical illness exception. The insured died after being involved in a single-car automobile accident. The plaintiff submitted an AD&D claim, which MetLife denied, stating that the police report stated that, according to a witness to the crash, after taking off from a stop sign, the decedent’s vehicle veered into a tree. The witness stated that it appeared the decedent was having a seizure. She saw no attempt by the decedent to brake or avoid the tree. The police could find no other cause for the crash. MetLife claimed that under the terms of the plan, AD&D benefits are not payable if a loss is due to a physical illness. MetLife denied the claim by applying the sickness exclusion and stating that the decedent’s physical illness, the seizure, was the cause of the crash. The court held for the beneficiary and emphasized the importance of viewing the policy as an ordinary policyholder would.

An AD&D claim denied where the insurer claimed sickness or disease caused an accident that resulted in the insured’s death. Johnson v. Life Investors’ Insurance Co., 98 Fed. Appx. 814 (10th Cir. 2004).

In this case, the insured (who suffered from muscular dystrophy and had a history of falls) fell down his basement stairs and broke his neck. After being admitted to the hospital, he developed pneumonia and died. According to his physician, the immediate cause of 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 policy at issue excluded coverage “for any loss resulting from any injury caused or contributed to by, or as a consequence of . . . any sickness or infirmity.” (internal quotation marks omitted) (emphasis in original). Strictly construing the language against the insurer, the court determined that coverage is denied under this policy only where the illness causes the hospitalization and death . . . and not where the illness causes an accident that causes the death. The court held that the insurer could have written the policy in such a way as to exclude accidents caused by illness (rather than only losses caused by illness). The court concluded, that since it is undisputed that the immediate cause of [the insured]’s loss was a fall, it is irrelevant under the terms of this policy whether the fall was caused by his myopic dystrophy.

An AD&D claim denied where the insurer claimed sickness or disease caused an accident that resulted in the insured’s death. Orman v. Prudential Ins. Co., 296 N.W. 2d 380 (1980).

In Orman, the insured lost consciousness due to the bursting of a cerebral aneurysm, fell into the bathtub and drowned. The policy excluded losses caused or contributed to by bodily infirmity or disease. The court held for the insured. Although the aneurysm was a disease under the policy, it did not cause the death and therefore was not excluded. The court said that tt was a mere fortuity that the decedent stood over a bathtub full of water at the time the aneurysm burst and rendered her unconscious. In other words, the aneurysm may have contributed to the accident, but it did not contribute to the death. In such circumstances, the aneurysm is simply too remote to be deemed a direct or contributing cause of death.

An AD&D claim denied where the insurer claimed sickness or disease caused an accident that resulted in the insured’s death. National Life & Accident Ins. Co. v. Franklin, 506 S. W.2d 765, 766 (Tex. App. 1974).

In Franklin, the insured, who had a history of epileptic seizures, was found dead in the bathtub; the cause of death was accidental death by drowning. The insurance policy covered losses resulting “directly and independently of all other causes, from bodily injuries effected solely through external, violent and accidental means,” and contained an exclusionary clause prohibiting payment for losses that result from or are contributed to by any disease or mental infirmity. The court assumed that even if the insured’s epilepsy caused him to lose consciousness and fall into the bathtub, it did not cause death by drowning. The court explained that epilepsy was merely a cause of a cause and was therefore too remote to bar recovery.

A life insurance claim denied when the conditions for issuance of a policy of insurance have been satisfied but the formalities of issuance and deliverance have not occurred. Hodgson v. Banner Life Ins. Co., 124 Cal. App. 4th 1358, 21 Cal. Rptr. 3d 907, 2004 Cal. App. LEXIS 2145, 2004 Cal. Daily Op. Service 11005, 2004 Daily Journal DAR 14892 (Cal. App. 3d Dist. 2004).

In Hodgson, the father had completed an application for life insurance and paid an initial premium. The application included a conditional receipt. Within days, the insurer returned the check for the initial premium and declared the conditional receipt ineffective. The insurer continued to process the father’s application for permanent coverage. About two weeks later, the father suffered mortal injuries in a motor vehicle accident. The insurer considered the policy terminated prior to the accident. The children argued their father was covered by the policy at the time of his death. The court held that the law imposes a coverage obligation whenever the conditions for issuance of a policy of insurance have been satisfied but the formalities of issuance and deliverance have not occurred. The requirements for coverage were satisfied. The father submitted an application with a premium check and the same was received by the insurer. Although the insurer returned the check, it retained the ability to secure payment of the monthly premium from the father’s bank account and continued to underwrite his application. Ultimately, the insurer approved the application. In Hodgson the court held that an ordinary person who pays the premium at the time the person applies for insurance is justified in assuming that payment will bring immediate protection, regardless of whether or not the insurer ultimately decides to accept the risk.

A life insurance claim denied due to a material misrepresentation on the policy.  Security Life Ins. Co. of Am. V. Meyling, 146 F.3d 1184 (9th Cir. 1998).

In Meyling, the court held that if the insurance company expected a misrepresentation on the application and provided for an automatic remedy-mandatory modification of the benefit plan – it cannot claim that the misrepresentation was material and cannot, therefore, rescind the policy. IN this case the court ruled that when an insurer anticipated application misstatements and crafted a concomitant remedy which did not include rescission or termination, but it elected to provide an automatic compensation mechanism to ensure it provided the correct benefit for the premium it received, the insurer received the benefit of its bargain. Specifically, the Meyling court stated that prevarication alone is legally insufficient to actuate rescission. If the contrary were true, a materiality requirement would have no meaning. Thus, when an insurer does not claim it altered its conduct in reliance on the misrepresentation and cannot demonstrate net economic consequences, it has not established materiality. In essence, materiality is determined by the misrepresentation’s effect on the insurer’s informed acceptance of risk, i.e., would knowledge of the true facts have influenced the insurer in deciding whether to accept the risk or in assessing how much premium should be paid for undertaking the risk. Since a misrepresentation is material if it affects insurability or the amount of premium paid for the benefit contracted for, it is necessary to look at the policy in question.

A life insurance claim denied after the insurer claimed there was no coverage but continued to collect life insurance premiums. Pitts v. American Sec. Life Ins. Co., 931 F.2d 351 (5th Cir. 1991).

In this case, the plaintiff was insured under a group health policy purchased by his employer that required each group to have at least ten members. Due to business difficulties, employees left the company, eventually leaving only the plaintiff insured under the group health policy. The plaintiff had since incurred a serious illness, which resulted in significant medical expenses that the defendant paid, even after it had discovered that the size of the group had shrunk below the threshold required by the policy. The court stated that waiver is the voluntary or intentional relinquishment of a known right. The court held that by accepting premiums and paying medical expenses after it had learned of the diminished group size, the insurer waived its right to assert the breach of the policy condition as a defense to coverage.

The insurer denied an AD&D claim by stating that the insured’s death was not direct and independent of other causes.  Quesinberry v. Life Insurance Company of N. America, 987 F.2d 1017 (4th Cir. 1993)(en banc).

In Quesinberry, the decedent suffered a toxic reaction to a drug administered for diagnostic purposes. Within three days she was dead. The policy language required that the injury result directly and independently of all other causes. The beneficiary under the accidental death insurance policy brought suit challenging the denial of his claim, asserting that his wife had suffered an accidental death as a result of a toxic reaction to the drug. The insurance company had denied the claim based on the assertion that a preexisting condition caused the decedent’s toxic reaction to the drug. The Fourth Circuit, affirming the judgment, held that the decedent’s death was covered by the accidental policy, as the district court did not find that the preexisting condition substantially contributed to the loss; rather, the lower court had found a mere relationship of undetermined degree between the decedent’s preexisting condition and the lethal toxic reaction. The court Quesinberry crafted a two-step test to determine whether the decedent’s death was covered by the accidental death policy: First, whether there is a pre-existing disease, disposition, or susceptibility to injuries; and second, whether this pre-existing condition, pre-disposition, or susceptibility substantially contributed to the disability or loss.