ERISA-Fifth Circuit Upholds The Insurer’s Decision To Deny Death Benefits Due Policy’s Voluntary Ingestion Exclusion

In Smith v. Life Insurance Company of North America, No. 11-30540 (5th Cir. 2012), the defendant, Life Insurance Company of North America (“LINA”), was appealing the district court’s grant of summary judgment in favor of the plaintiff, Stephen Smith (“Smith”). Smith was the beneficiary of an ERISA-governed life insurance policy (the “Policy”) covering his deceased wife, Stephanie Smith. Stephanie had died of a drug overdose, under questionable circumstances. After she died, Smith had submitted a claim to LINA seeking to recover accidental death benefits under the Policy, which was issued and administered by LINA. LINA denied Smith’s claim for the death benefits based on multiple policy exclusions, including exclusions for death caused by: (1) suicide; (2) sickness or disease (including mental infirmity); and (3) the voluntary ingestion (the “voluntary ingestion exclusion”) of any drug unless taken in accordance with a physician’s instructions. This suit ensued.

In analyzing the case, the Fifth Circuit Court of Appeals (the “Court”) first said that LINA’s decision to deny the accidental death benefits is entitled to a deferential review, overturned only upon an abuse of discretion, since the language of the Policy gave LINA the right to interpret the Policy and determine eligibility for benefits. Next, the Court said that eligibility for benefits under the Policy is governed by the plain meaning of the Policy language. In this case, due to the deferential review, the doctrine of contra proferentum-which provides that ambiguous terms are construed in favor of the insured-is inapplicable.

The Court then said that the evidence in the case and LINA’s reasonable interpretation of the Policy’s terms indicates that LINA, and not Mr. Smith, was entitled to summary judgment as a matter of law. The evidence undisputably shows that Mrs. Smith unilaterally ingested prescription drugs in a manner that greatly exceeded their prescribed dosages. Mrs. Smith also consumed two drugs, hydrocodone and tramadol, that had not been recently prescribed by a physician. It was reasonable, and within LINA’s discretion, to conclude that a death caused by the unilateral misuse of powerful narcotic drugs-irrespective of the intent or lack thereof underlying the misuse (i.e. suicide, recreational enjoyment, remedying ailments, or accidental hallucination)-fell within the Policy’s voluntary ingestion exclusion.

As such, the Court reversed the district court’s summary judgment, and entered judgment in favor of LINA.

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