Employees in Chicago and the rest of Illinois are often perplexed when submitting a claim for accidental death insurance benefits, or long term disability insurance under an employer sponsored plan to see the claim denied because the insurer says an exclusion applies. This can come at a shock especially when the exclusion would not seem to apply in the given situation, or it is vaguely written and being applied rather broadly. Luckily for the participants in ERISA governed benefit plans, there are a few protections concerning exclusions.
First, while the claimant bears the burden of demonstrating an entitlement to benefits (e.g., via death, accidental death, or disability), the administrator or insurer bears the burden of establishing an exclusion to coverage applies. Second, most courts take the position that even when an administrator has discretion to interpret the terms of the policy or plan, exclusions to coverage must be construed narrowly. These principles played in important role in the outcome of an ERISA § 502(a) claim for accidental death insurance benefits.
In Locklear v. Sun Life Assurance Co. of Canada, No. 14-cv-401, 2015 U.S. Dist. LEXIS 57276 (M.D. Pa. May 1, 2015), Sun Life denied accidental death insurance benefits to a widow of a plan participant who died in a car accident which involved him passing a car in a no-passing zone. The insurer asserted the “criminal act” exclusion, determining that it was a crime for the participant to have passed a car in a no-passing zone, so no benefits were payable. The judge, however, disagreed, reasoning that the minor traffic offense was not punishable by any potential imprisonment—the hallmark of a “crime.” The insurer also tried to invoke the “reckless endangerment” exclusion, but never asserted it until litigation. Though this issue had never been decided by the United States Court of Appeals for the Third Circuit—under whose jurisdiction the district court fell—the judge declined to consider new arguments raised by the insurer due to ERISA’s requirement that administrators communicate to participants in adverse benefit determinations the reasons for a denial and the plan provisions upon which a denial is based.