Life Insurance Owed Family of Motorcycle Driver

Around noon on October 27, 2007, Anthony McClelland was involved in a tragic motorcycle crash on Highway 169 near Baldwin, Minnesota. At the time of the accident, Mr. McClelland was not wearing a helmet and witnesses estimated that he was traveling at approximately 90 miles per hour with two other vehicles. Mr. McClelland was unable to negotiate a curve in the highway and lost control of his vehicle. Toxicology reports indicated that Mr. McClelland had a blood alcohol content of approximately .203 although multiple witnesses who had seen Mr. McClelland a half hour before the accident stated that he did not show any signs of intoxication. Mr. McClelland passed away the following day from head trauma he sustained in the crash.

Following the accident, Dawn McClelland, Mr. McClelland’s widow, submitted a claim for benefits under a Group Accident Insurance Policy issued by Life Insurance Company of North America (“LINA”) through Mr. McClelland’s employer. LINA denied the claim, asserting that because Decedent was intoxicated at the time of the motorcycle crash his death was not a “covered accident” under the Policy because his death was not “unforeseeable.” In reaching this conclusion, LINA deprived Mrs. McClelland of the benefits expected of an accident policy and disregarded the federal common law applied in ERISA claims. Faced with the decision to relinquish those benefits or engage in litigation, Mrs. McClelland brought suit challenging LINA’s denial of benefits under federal ERISA law with the guidance of Lommen Abdo.

On cross-motions before the United States District Court for the District of Minnesota, the District Court remanded the matter to LINA finding that LINA had applied an unreasonable definition of “accident” in denying Mrs. McClelland’s claim for coverage. The District Court ordered LINA to apply the definition of “accident” set forth in Wickman v. Northwestern Nat’l Ins. Co., 908 F.2d 1077 (1st Cir. 1990). On remand, LINA again determined that Mr. McClelland’s death was not a covered accident because it was foreseeable. Mrs. McClelland again appealed that determination to the District Court. Upon a second round of cross-motions for summary judgment, the District Court concluded that LINA abused its discretion in applying an unreasonable definition of “accident” as required by Wickman. The District Court further found that LINA did not reasonably analyze Mr. McClelland’s subjective expectations regarding his activity on October 27th and concluded that his death was a covered accident. The District Court awarded Mrs. McClelland the policy benefits as well as fees, costs and prejudgument interest under ERISA law.

LINA subsequently appealed that decision to the Eighth Circuit Court of Appeals arguing its determination was not an abuse of discretion. The Court of Appeals disagreed. In affirming the District Court’s award of benefits, the Court explained that LINA was required to evaluate Mr. McClelland’s subjective expectation under the Wickman standard, but abused its discretion in failing to do so. The Court also found that the objective facts in the case were not supportive of LINA’s conclusion that Mr. McClelland’s death was foreseeable stating “we cannot escape the conclusion that [Mr. McClelland’s] fatal motorcycle accident was just that, an accident.” The Court of Appeals awarded Mrs. McClelland full benefits under the Policy and remanded to the District Court for an award of attorney’s fees consistent with its Opinion. On October 9, 2012, nearly five years after Mr. McClelland’s tragic accident occurred, Mrs. McClelland’s judgment against LINA was satisfied.

Read the decision of the Eighth Circuit Court of Appeals.