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Angela Johnson v. American United Life Insurance Company, No. 12-1381

Decided May 24, 2013

The Fourth Circuit reversed the district court’s denial of accidental death and dismemberment (“AD & D”) benefits to the insured’s widow through group policies issued by American United Life Insurance Company (“AUL”). By construing the policy language against the drafting party, AUL, the court found that the insured’s drunk-driving death could be considered an “accident” under the policy and, therefore, awarded such benefits to the insured’s widow under the Employee Retirement Income Security Act (“ERISA”).

The insured, Richard Johnson (“Richard”) participated in an employee welfare benefit plan (“the Plan”) that provided him a standard AD & D and life insurance benefits of $25,000 through a policy paid for by Richard’s employer, and a voluntary AD & D and life insurance benefits of $100,000 through a policy paid for by Richard. When Richard died in a drunk-driving accident, his widow Angela Johnson (“Johnson”) received life insurance benefits, but AUL refused to pay AD & D benefits, concluding that Richard’s death was not the result of an “accident” under the Plan. Under the AD & D provision in the policies, AUL pays benefits “[i]f a Person has an accident while insured under the policy which results in a [covered] loss.” The policies do not explicitly define the term “accident,” however; the AD & D provision contains a limitations clause expressly excluding the payment of benefits in various circumstances. Drunk driving is not listed as a specific circumstance for such exclusion. However, drunk driving is expressly set forth as a limitation to the Seat Belt benefit under the employee-paid policy. In any event, AUL concluded that Richard’s drunk-driving death was not accidental due to the fact that he should have foreseen the widely known consequences of drinking excessive amounts of alcohol. As such, AUL issued a denial letter from which Johnson appealed under ERISA.

The Fourth Circuit sought to determine whether Richard’s crash qualified as an “accident” under the AUL policies. The court analyzed the policies as ERISA plans and, as a result, according to contract principles. Where a contract is ambiguous, the rule of contra proferentum requires strict construction of such terms in favor of the insured and in accordance with his or her reasonable expectations. Richard’s policy was ambiguous because the term “accident” was not defined and drunk-driving was not specifically listed in the limitations clause. Therefore, the court chose to construe the policy against the drafter, AUL, who had the ability to eliminate the ambiguity, but failed to do so. The court also addressed the issue of using North Carolina state law to define “accident.” The North Carolina statute defines an accident in terms of an accidental result rather than accidental means. Therefore, an accident can still occur where the insured intentionally acted, yet did not intend the injury that resulted from that act. In this case, the court found that although the insured became voluntarily intoxicated, he did not necessarily intend the car crash. Specifically, the court found that driving with a BAC of .289 is not substantially certain to result in death or severe injury. Therefore, according to principles of construction and the governing statute, the court found Richard’s death to be an “accident” and that AUL owed benefits under the AD & D provisions.

Full Opinion

– Sarah Bishop