Published by The Pellegrin Firm August 7, 2019

Life insurance disputes are complicated, and beneficiaries will often find that insurance companies will try to find any excuse not to pay what the policy requires. However, life insurance companies must follow strict procedural rules, or they could find themselves having to pay the policy amount plus attorneys’ fees in court.            

On June 13, 2018, the U.S. Court of Appeals for the Fifth Circuit in New Orleans ruled on the appeal of a woman seeking payment on her husband’s life insurance policy. The couple was driving in Arkansas when the plaintiff’s husband failed to negotiate a curve, causing the car to cross three lanes of traffic including the center line. The car collided head-on with an oncoming eighteen-wheeler truck, and the accident caused injuries that would later kill the husband. His life insurance policy, of which his wife was the beneficiary, contained exclusions if the death is “caused”, at least in part, either by “intoxication” as defined by Arkansas law, or by the “voluntary ingestion” of any narcotic or drug that is not prescribed.

The accident report noted that it was “unknown” whether the husband was impaired at the time of the accident. At the hospital, the husband tested negative for alcohol, but there was a presence of a variety of controlled substances in his system. When he died a few days later from a stroke, the coroner listed the “underlying cause(s)” of death to be “multiple trauma,” “cocaine abuse,” and “amphetamine abuse.”

The insurance company hired a toxicologist to review the plaintiff’s claim and comment on any impairment the husband would have been experiencing at the time of the crash. The toxicologist noted that it was impossible to estimate the level of intoxication and therefore the level of impairment. The trial court ruled in favor of the insurance company holding that there was “substantial evidence” in the record to support that the husband’s intoxication or drug abuse at least partly caused his own death. The wife appealed this decision.

The court of appeal reviewed the insurance company’s denial of benefits for abuse of discretion. The Court used four considerations to conclude abuse of discretion in denying benefits: (A) financial conflict of interest on the part of the insurance company; (B) failure to address the toxicologist’s report in any of its denial correspondence; (C) withholding of the toxicologist’s report; and (D) the closeness of the evidence to support determination that intoxication or drug abuse caused the death. The insurance company did not release the report of their hired toxicologist to the plaintiff which amounted to “procedural unreasonableness.” With the closeness of the evidence, and the lack of a full and fair review, the court overturned the district court and found for the plaintiff. This case is sure to give life insurance beneficiaries hope in challenging denials within the Fifth Circuit. The case is White v. Life Ins. Co. of N. Am., 892 F.3d 762 (5th Cir. 2018).