PAPOTTO v. HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY
Filing
24
OPINION. Signed by Judge Renee Marie Bumb on 12/30/2011. (tf, )
NOT FOR PUBLICATION
[Docket Nos. 18, 21]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
LISA PAPOTTO,
Plaintiff,
Civil No. 10-4722 RMB/AMD
v.
OPINION
HARTFORD LIFE AND ACCIDENT
INSURANCE COMPANY,
Defendant.
Benjamin Goldstein
Drinkwater & Goldstein
277 White Horse Pike, Suite 200
Atco, NJ 08004
Attorneys for Plaintiff
Maria A. Feeley
Pepper Hamilton LLP
301 Carnegie Center, Suite 400
Princeton, NJ 08543-5276
Brian P. Downey
Pepper Hamilton LLP
100 Market Street
P.O. Box 1181, Suite 200
Harrisburg, PA 17108-1181
Attorneys for Defendant
BUMB, United States District Judge:
1
Plaintiff is the widow of Frank Papotto Jr (“Mr. Papotto”)
She claims that, under the Employee Retirement Income Security
Act of 1974 (“ERISA”), the Defendant wrongfully denied
accidental death and dismemberment (“AD&D”) benefits owed to her
as the result of her husband’s death.
for summary judgment.
Both parties have moved
For the reasons that follow, both motions
are DENIED and the case is REMANDED to the claim administrator
for further evaluation consistent with the Court’s opinion.
I.
Background
Mr. Papotto was employed by TD Banknorth and participated
in an ERISA-qualified group benefit plan, which provided Mr.
Pappoto with an AD&D policy (the “Policy”).
The Policy gave
Defendant “full discretion and authority to determine
eligibility for benefits and to construe and interpret all terms
and provisions of The Policy.”
The Policy excluded from its
coverage “any loss caused or contributed to by . . . Injury
sustained while intoxicated.”
The Policy defines intoxicated as
when “blood alcohol content” or “the result of other means of
testing blood alcohol level . . . meet or exceed the legal
presumption of intoxication, or under the influence, under the
law of the state where the accident occurred.”
On August 7, 2009, after playing golf and consuming alcohol
in Willingboro, New Jersey, Mr. Papotto fell out of a golf cart
while reaching for a cell phone he had dropped, struck his head,
2
and died five hours later.
A subsequent toxicology report,
conducted on August 12, 2009, showed Mr. Papotto as having a
blood alcohol level of .115 grams per decileter.
Following Mr. Papotto’s death, Plaintiff, Mr. Papotto’s
beneficiary under the Policy, filed a claim under the Policy.
That claim was denied by Defendant based on its exclusion of
injuries that occur while intoxicated and Mr. Papotto’s blood
alcohol level exceeding New Jersey’s standard for driving while
intoxicated: 0.08 grams per decileter.
At the time of the denial, Plaintiff was advised that she
had the right to appeal the decision and was asked to submit any
information to Defendant that would assist Defendant in
evaluating the claim.
Plaintiff appealed on three bases: (1)
that the New Jersey standard for intoxication was inapplicable
because Mr. Papotto was not operating a motor vehicle at the
time of his death; (2) Defendant could not rely on the
toxicology report to establish intoxication at the time of the
accident without an expert opinion; and (3) that the Policy’s
intoxication exclusion must be read to include a causation
requirement, such that the intoxication must play a role in
causing the injuries at issue.
Defendant affirmed its decision.
Plaintiff instituted this proceeding to challenge the decision.
II.
Standard
3
Summary judgment should only be granted if “there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a).
“An issue is genuine only if there is a sufficient evidentiary
basis on which a reasonable jury could find for the non-moving
party, and a factual dispute is material only if it might affect
the outcome of the suit under governing law.”
Mollo v. Passaic
Valley Sewerage Commissioners, 406 F. App’x 664, (3d Cir.
2011)(quotation and citation omitted).
be no facts in dispute.
Here, there appears to
Instead, the parties dispute the
propriety of Defendant’s construction of the Policy.
Because the benefit plan at issue granted the plan
administrator full discretion and authority to determine
eligibility for benefits and construe the terms of the plan,
this Court reviews the administrator’s constructions under an
arbitrary and capricious standard.
Smathers v. Multi-Tool,
Inc., 298 F.3d 191, 194 (3d Cir. 2002).
However, because
Defendant has, as both the administrator and payer of any
claims, a structural conflict of interest, that conflict is
considered a factor in the Court’s review of the administrator’s
decision.
Id. at 197.
If “a court finds that an administrator has acted
arbitrarily and capriciously in denying a claim for
benefits, the court can either remand the case to the
4
administrator for a renewed evaluation of the
claimant's case, or it can award a retroactive reinstatement
of benefits.”
Kaelin, M.D. v. Tenet Employee Benefit Plan, No.
04-2871, 2006 WL 2382005, at *3 (E.D.Pa. Aug. 16,
2006)(quotation and citation omitted).
Remand is the
appropriate remedy where “the plan administrator has
misconstrued the Plan and applied an incorrect standard to a
benefits determination.” Id. at 4 (quotation and citation
omitted).
III. Analysis
In this action, Plaintiff renews the same three arguments
she raised in her appeal of Defendant’s initial denial of
benefits.
On all three claims, the Court subjects the
administrator’s interpretation to a heightened abuse of
discretion standard in light of the Defendant’s conflict of
interest.
Smathers, 298 F.3d at 199 (applying a “somewhat
heightened” arbitrary and capricious review, in light of the
real, but “not extraordinary,” conflict of interest).
A.
The Administrator’s Reliance On The New Jersey DWI
Statute Was Reasonable.
The Court rejects Plaintiff’s first argument.
It was
reasonable, not arbitrary and capricious, in light of the
language of the Policy and the fact that the accident at issue
occurred in New Jersey, for the administrator to look to a New
5
Jersey statute for driving while intoxicated to measure whether
Mr. Papotto met or exceeded “the legal presumption of
intoxication, or under the influence, under the law of the state
where the accident occurred.”
Graham v. W. Kentucky Navigation,
Inc., No. 99-5708, 2000 WL 1234319, at *3 (6th Cir. Aug. 23
2000)(rejecting a similar argument).
Because a reasonable
interpretation is sufficient under the deferential standard of
review applicable here, the Court will not disturb Defendant’s
decision on this basis.
Bauer v. Reliance Sd. Life Ins. Co.,
421 F. App’x 226, 227 (3d Cir. 2011)(holding that, where the
administrator’s interpretation of the plan was reasonable, it
should not be disturbed).
B.
The Administrator’s Reliance On The Toxicology Report,
Without An Expert Opinion, Was Reasonable.
The Court also rejects Plaintiff’s second argument. It is
generally reasonable for an administrator to rely on a
toxicology report to establish intoxication.
See Bickel v.
Sunbelt Rentals, Inc., No. 09-2735, 2010 WL 3938348, at *1
(D.Md. Oct. 6, 2010).
And Plaintiff submitted no evidence to
the administrator suggesting that it would be unreasonable to
conclude that the report, though based on a sample collected
several days after Mr. Papotto’s death, could reliably establish
intoxication at the time of the injury.
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Because this Court’s review of an administrator’s decision
is limited to the information placed before the arbitrator
(Smathers, 298 F.3d at 199-200) and there was no information
before the arbitrator suggesting that it would be unreasonable
to rely on the toxicology report, this Court finds that the
administrator’s reliance on the toxicology report was
reasonable.
C.
The Administrator’s Interpretation Of The Intoxication
Exclusion Was Unreasonable.
The parties have centered their analysis, with respect to
the administrator’s construction of the exclusion at issue, on
the New Jersey Supreme Court’s decision in Aviation Charters,
Inc. v. Avemco Ins. Co., 784 A.2d 712 (N.J. 2001).
Presumably
they are under the impression that New Jersey law applies to the
interpretation of the Policy.
It does not.
This Court applies
federal common law in its interpretation of ERISA benefit plan
provisions.
Nally v. Life Ins. Co. of N. Am., 299 F. App’x 125,
128 n.2 (3d Cir. 2008)( “[F]ederal common law-not state lawgoverns the interpretation of a benefit plan in an ERISA
suit.”).
That law is “informed both by general principles of
contract law and by ERISA’s purposes as manifested in its
specific provisions.”
Feifer v. Prudential Ins. Co. of Am., 306
F.3d 1202, 1210 (2d Cir. 2002).
Because the Third Circuit has
not yet addressed this issue, this Court is guided both by other
7
courts’ interpretations of similar exclusions generally, as well
as in the specific ERISA context.
Courts are divided generally on whether it is appropriate
to impose a causation requirement in an intoxication insurance
exclusion that is status based and does not, on its face,
require causation.
Compare Bishop v. Nat’l Health Ins. Co., 344
F.3d 305, 310 (2d Cir. 2003)(refusing to read in causation in
intoxication exclusion under Connecticut law, though noting that
the plaintiff had, in any event, admitted that the injured
party’s intoxication had contributed to his injury); Sobczak v.
JC Penny Life Ins. Co., No. Civ. A. 96-3924, 1997 WL 83749, at
*3 (E.D.Pa. Feb. 18, 1997)(applying a similar exclusion, without
evidence of causation, but without addressing any argument that
causation was an implied requirement); Brown v. J.C. Penny Life
Ins. Co., 861 S.W.2d 834, 837 (Tenn.App. 1992)(rejecting
implying a causation requirement to a status based intoxication
exclusion); Jefferson Pilot Life Ins. Co. v. Clark, 202 Ga.App.
385, 387 (Ga.App. 1992)(rejecting an implied causation
requirement in a status based intoxication exclusion for
operating motor vehicles); with Hastie v. J.C. Penny Life Ins.
Co., 115 F.3d 895, 897 (11th Cir. 1997)(implying a causation
requirement into a status based intoxication exclusion under
Florida law); Chmiel v. JC Penney Life Ins. Co., 158 F.3d 966,
969 (7th Cir. 1998)(noting that “[i]t is reasonable to suggest
8
that where no conceivable causal connection exists between the
decedent's blood-alcohol level and his death, the exclusion
should not be enforced.
Reading such an implied term into a
contract is nothing new.”); Highlands Ins. Co. v. Koetje, 651 F.
Supp. 346, 349-50 (W.D.Wash. 1987)(discussing Riordan v.
Commercial Travelers Mutual Ins. Co., 11 Wash.App. 707, 525 P.2d
804, which found the same); Freeman v. Crown Life Ins. Co., 580
S.W.2d 897, 901 (Tex.App. 1979)(holding the same under Texas
law).
Courts have also disagreed, in the specific ERISA context,
on whether an administrator’s interpretation of such an
exclusion, which does not impose a causation requirement, is
reasonable.
Compare Graham, 2000 WL 1234319, at *2-3 (upholding
administrator’s application of exclusion based on intoxicated
status); Bickel, 2010 WL 3938348, at *4 (finding that
administrator’s interpretation of exclusion based on intoxicated
status was reasonable and that no causation requirement was
necessary, though noting that causation was established there
regardless); The Canada Life Assurance Co. v. Piercy, No. Civ. A
00-0373, 2000 WL 1566535, at *4 (S.D.Ala. Sept. 29,
2000)(finding the same, guided by Alabama law, in the context of
a driving while intoxicated exclusion) with Jenkins v.
Montgomery Indus., Inc., 77 F.3d 740, 744 (4th Cir.
1996)(affirming the District Court’s finding that the
9
administrator improperly failed to read in a causation
requirement into a status based intoxication exclusion).
This Court agrees with the reasoning of those Courts that
have found it proper to imply a causation requirement to a
status based intoxication exclusion and therefore finds,
particularly in light of the Defendant’s inherent conflict of
interest, that the administrator’s interpretation was
unreasonable.
The unreasonableness of Defendant’s
interpretation is best demonstrated by the following
hypothetical: under Defendant’s interpretation, an intoxicated
individual fatally struck by lightning while safely relaxing in
the comfort of his home would be denied coverage.
be.
This cannot
Hastie, 115 F.3d at 897 (“Language in contracts, drawn by
reasonable men, should not be given an unreasonable
construction.”).
Nor is Defendant’s interpretation consistent with the
reasonable expectations doctrine, a doctrine applicable to
interpretation of ERISA-governed insurance contracts, and which
may apply even where, like here, those expectations are
inconsistent with the policy’s express language.1
1
Saltarelli v.
The Third Circuit has held that application of the reasonable
expectations doctrine “would require as a predicate fact that the contract be
ambiguous.” Early v. U.S. Life Ins. Co. in the City of New York, No. 054696, 2007 WL 852363, at *2 (3d Cir. March 22, 2007)(citing Pirkheim v. First
Unum Life Ins., 229 F.3d 1008, 1011 (10th Cir. 200) in support of this
proposition). That holding does not conflict with the rule that the
insured’s reasonable expectations can trump the express language of the
policy. Rather, it is properly viewed as an admonition that it would be
10
Bob Baker Group Med. Trust, 35 F.3d 382 at 386 (9th Cir.
1994)(adopting the reasonable expectations doctrine in the ERISA
context); Tran v. Metropolitan Life Ins. Co., 408 F.3d 130, 136
(3d Cir. 2005)(recognizing that “in certain situations the
insured's reasonable expectations will be allowed to defeat the
express language of an insurance policy.”)(quotation and
citation omitted).
That doctrine “protect[s] the reasonable
expectations of applicants, insured, and intended beneficiaries
regarding the coverage afforded by insurance carriers even
though a careful examination of the policy provisions indicates
that such expectations are contrary to the expressed intention
of the insurer.”
“[A]n
Saltarelli, 35 F.3d at 386 (citation omitted).
insurer wishing to avoid liability on a policy purporting
to give general or comprehensive coverage must make exclusionary
clauses conspicuous, plain, and clear, placing them in such a
fashion as to make obvious their relationship to other policy
terms, and must bring such provisions to the attention of the
insured.” Id. (citation omitted).
It was the insurer’s burden, and it failed, to make obvious
the scope of the intoxication exclusion, so that the insured
unreasonable for the insured to have expectations contrary to the express
terms of the policy where those terms are made obvious, plain, and
unambiguous to the insured. See Pirkheim, 229 F.3d at 1011 (restating the
rule that the insured’s reasonable expectations may be contrary to the
express terms of the policy but noting that application of the reasonable
expectations doctrine is improper “[w]here the . . . exclusionary provision
is conspicuous, clear, and unequivocal”). That is not the case here.
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would reasonably expect the intoxication exclusion to be status
based.
Instead, the insured would reasonably expect that the
provision is causation based for two reasons.
First, the
provision’s phrasing, which links exclusions to loss “caused or
contributed to by” various events, would prompt a causal nexus
focus in the insured’s mind.
Second, as a general matter, but
particularly because of that prompting, the insured is likely to
interpret the provision in light of its own expectations of what
risk the insurer intends to protect against and make the same
assumption.
It would reasonably view the exclusion of injuries
that are coincident with, but not the result of, generally
higher risk activities as arbitrary and therefore outside the
contemplation of the insurer.2
It would instead view the
exclusion as the insurer’s reasonable mechanism to protect the
insurer against injuries resulting from higher risk activities.
Highlands, 651 F. Supp. at 349 (discussing Riordan’s finding
that that a similar status based intoxication exclusion clause
would be regarded by an average man as “an arbitrary provision”
and that, to avoid that result, would be viewed by the average
man as designed “to protect the insurer if the insured chooses
2
The insured is likely to see little point in insuring against random
accidents that simply happen to occur while an insured is intoxicated. The
Court notes that, because of the difficulty and/or cost of demonstrating a
causal link between injuries and intoxication, and the high probability that
there is such a link, the provision might, in fact, be a reasonable attempt
by the insured to disclaim this extra burden. It would, however, be
unreasonable to expect the insured to be aware of this potential
consideration.
12
to engage in proscribed high risk conduct and injures himself
because of the greater risk.”).
This conclusion is also supported by the ease with which
Defendant could have written the policy to ensure that there was
no confusion on the scope of the exclusion.
Defendant’s burden
to make clear the scope of the exclusion could have been readily
satisfied with plain language indicating that the intoxication
exclusion operates regardless of whether the insured’s
intoxication played a role or caused the injury.
lacked such language.
The Policy
It is unlikely that the insured, with the
appropriate language, would agree to such a policy.
That such
plain language was not included here, despite the ease of doing
so and the frequency with which this issue is litigated,
supports this Court’s analysis of the insured’s reasonable
expectations.
To the extent other courts have affirmed Defendant’s
interpretation of substantively identical provisions, this Court
disagrees and declines to follow such cases.
The provision at
issue here is, however, distinguishable from driving while
intoxicated exclusions that courts have upheld.
In those
exclusions, the linkage between the risk of driving while
intoxicated is far more obvious than the general risk of
intoxication.
The provision here is also distinguishable from
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the provision at issue in Aviation Charters3.
In that case, the
contours of the specific exclusion at issue were specifically
negotiated, precluding any argument by the insured that there
was a lack of notice, or that the terms were contrary to its
reasonable expectations. 784 A.2d at 79 (“The Court’s focus . .
. on the expectation of the parties when the policy was written
has no application to the present issue before us.”).
no evidence of any such negotiation here.
There is
Moreover, the
provision there operated to exclude a whole class of higher-risk
individuals from coverage, rather than exclude potentially
higher-risk behavior from coverage.
Id. at 78-79.
The former
is a more obvious exclusion, and less likely to cause an insured
to assume a causation requirement, than the latter.
Having determined that the Defendant’s interpretation would
upset the reasonable expectations of the insured, the Court
considers, as it is required, whether there is any conflict
between a rule requiring a causal link and ERISA.
none.
Jenkins, 77 F.3d at 745.
There is
In light of these findings,
and considering the heightened review applicable here, this
Court finds that the administrator’s decision was unreasonable
and that it should have read into the Policy a causation
requirement.
3
The Court makes special note of the case because of the parties’
emphasis on it and because it serves as a useful contrast to the provision at
issue, not because it has any greater or lesser weight on this Court’s
decision.
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IV.
Conclusion
Because the Court concludes that the administrator applied
an unreasonable and incorrect construction of the Policy, the
parties’ summary judgment motions are DENIED, and this Court
REMANDS the case to the administrator for further evaluation
consistent with this Opinion.
On remand, because it is the
insurer’s responsibility to show facts that bring a loss within
an exclusionary clause, Defendant will bear the burden of
demonstrating that intoxication caused Mr. Papotto’s injury.
Smathers, 298 F.3d at 200 (holding, in the context of an
intoxication exclusion provision with a causation requirement,
that it was the insurer’s burden to demonstrate facts that bring
a loss within an exclusionary clause).
The administrator’s decision as to whether intoxication
caused Mr. Papotto’s injury will necessarily implicate whether
Mr. Papotto was, in fact, intoxicated at the time of his injury
and, if so, the level of his intoxication. Therefore, while it
was appropriate for the administrator to rely on the toxicology
report on the facts previously before it, Plaintiff is free to
submit new evidence, if she desires, in support of her
contention that it was inappropriate to rely on the toxicology
report or that Mr. Papotto was not legally intoxicated at the
time of his injury.
See Cornish v. U.S. Life Ins. Co. of City
of New York, No. 3:06CV-344-DW, 2009 WL 3231351, at *13 (W.D.Ky.
15
Sept. 30, 2009)(noting that the court had been presented with
scholarly literature suggesting that blood alcohol content could
significantly rise post-mortem); American Dredging Co. v.
Lambert, 153 F.3d 1292, 1296 (11th Cir. 1998)(noting that a
party had presented evidence that blood alcohol content could
rise post-mortem).
An appropriate order will follow this Opinion.
Dated: December 30, 2011
s/Renée Marie Bumb
RENÉE MARIE BUMB
United States District Judge
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