Todd v. AIG Life Ins. Co.

• Decision Date: 29 March 1995
• Docket Number: E-SYSTEM,No. 94-10420,INC,94-10420
• Citation: 47 F.3d 1448
• Parties: , Pens. Plan Guide P 23909U Nancy J. TODD, Plaintiff-Appellee, Cross-Appellant, v. AIG LIFE INSURANCE COMPANY, et al., Defendants-Appellants, Cross-Appellee. Nancy J. TODD, Plaintiff-Appellee, Cross-Appellant, v. GROUP ACCIDENT INSURANCE PLAN FOR EMPLOYEES OF, et al., Defendants-Appellants, Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1448

47 F.3d 1448

63 USLW 2617, Pens. Plan Guide P 23909U

Nancy J. TODD, Plaintiff-Appellee, Cross-Appellant, v. AIG LIFE INSURANCE COMPANY, et al., Defendants-Appellants,

Cross-Appellee.

Nancy J. TODD, Plaintiff-Appellee, Cross-Appellant, v. GROUP ACCIDENT INSURANCE PLAN FOR EMPLOYEES OF E-SYSTEMS, INC., et al., Defendants-Appellants, Cross-Appellee.

No. 94-10420.

United States Court of Appeals,

Fifth Circuit.

March 29, 1995.

Frank W. Morgan, B.D. Griffin, The Woodlands, TX, for appellants.

Gary. E. Smith, R. Spencer, Graham, Bright & Smith, Dallas, TX, for appellee.

Appeals from the United States District Court for the Northern District of Texas.

Before WHITE, Associate Justice (Ret.), ^* BARKSDALE and PARKER, Circuit Judges.

WHITE, Associate Justice (Ret.):

This case, a suit for recovery of benefits under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1001 et seq., involves the construction of an accidental death insurance policy and arises from the unfortunate death by asphyxiation of appellee's husband. The insurer refused to pay the policy's benefits after concluding that the death was not accidental. The district court granted summary judgment in appellee's favor, finding that the loss resulted from an accident within the terms of the policy, holding that liability extended beyond the insurer to the employee welfare benefit plan and its administrator, and awarding attorneys' fees. The defendants appealed. We affirm the district court's judgment regarding policy coverage but reverse on the extended liability issue and remand for a proper determination of attorneys' fees.

I.

Richard A. Todd was found dead at his home in Rockwall, Texas, on April 25, 1991. The cause of death was determined to be autoerotic asphyxiation, the practice of limiting the flow of oxygen to the brain during masturbation in an attempt to heighten sexual pleasure. When found, Todd was lying on his bed with a studded dog collar around his neck; the collar, in turn, was attached to two leather leashes of differing lengths, one of which passed over Todd's back and attached to an ankle. Apparently, Todd gradually tightened the collar around his neck by pulling on the leashes, thereby reducing the supply of oxygen reaching his brain. Instead of simply restricting the flow of oxygen enough to increase his sexual gratification, however, Todd tightened the collar to the point at which he passed out. Todd apparently designed the system of leashes to loosen the ligature in the event he became unconscious; unfortunately, the collar failed to release and ultimately terminated the flow of oxygen permanently. The autopsy report listed the cause of death as "asphyxia due to ligature strangulation," ruling the manner of death "accidental."

At the time of his death, Todd was covered by an "Accidental Death and Dismemberment Insurance" policy provided by his employer, E-Systems, Inc., as part of an employee welfare benefit plan falling within the ambit of ERISA. AIG Life Insurance Company issued the E-Systems policy, which was administered by the Group Accident Insurance Plan ("GAI"), with David V. Roberts serving as the plan administrator.

Appellee, Nancy J. Todd, was the decedent's wife and his beneficiary under the policy. Shortly after her husband's death, appellee presented her claim for benefits to the E-Systems employee welfare benefit plan and AIG through a claims processing organization, the American International Adjustment Company ("AIAC"). In an October 1991 letter written on behalf of AIG, an AIAC claims examiner denied appellee's claim, finding that "[t]he circumstances of [Todd's] death point to the fact that he was risking his life by his actions" and explaining that "[a] death [cannot] be considered accidental ... [i]f from the viewpoint of the Insured, his conduct was such that he should have anticipated that in all reasonable probability he would be killed."

After the ERISA Appeals Review Committee upheld the claims examiner's decision, appellee filed suit against AIG and AIAC in Texas state court, alleging various state common law and statutory claims. The case was removed to the United States District Court for the Northern District of Texas based upon the applicability of ERISA. Faced with the contention that all of her state law claims were preempted by that statute, 29 U.S.C. Sec. 1144(a); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), appellee amended her complaint to allege a claim for failure to pay benefits under the insurance policy pursuant to ERISA, 29 U.S.C. Sec. 1132(a)(1)(B). She also joined as parties the GAI Plan and its administrator, alleging that these defendants breached their fiduciary duties under ERISA, 29 U.S.C. Secs. 1104(a) and 1109(a). Cross-motions for summary judgment were filed. The district court observed that "the parties are in agreement on the underlying facts," and that the case posed strictly the legal question whether the policy covered Todd's death. Memo. Op. 1. The court filed an opinion and entered final judgment in favor of appellee on all issues.

Appellants present three issues on appeal: whether Todd's death was covered by the AIG accidental death insurance policy, whether the ERISA employee welfare benefit plan and its administrator can be held liable for the benefits owed by the insurer, and whether the district court's calculation of attorneys' fees was proper. We consider each in turn.

II.

Summary judgment is appropriate if the record discloses "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We review a district court's grant of summary judgment de novo and must evaluate the facts in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). In the ERISA context, in turn, "a denial of benefits challenged under Sec. 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956, 103 L.Ed.2d 80 (1989). See also Schultz v. Metropolitan Life Ins. Co., 872 F.2d 676, 678 (5th Cir.1989). No such grant of authority was included in the E-Systems policy, so we accord no deference to the administrator's ultimate determination. Cf. Pierre v. Connecticut General Life Ins. Co., 932 F.2d 1552, 1553 (5th Cir.) (concluding that a plan administrator's findings concerning facts underlying the claim for benefits should be reviewed for abuse of discretion), cert. denied, 502 U.S. 973, 112 S.Ct. 453, 116 L.Ed.2d 470 (1991).

A.

The first issue in this case is whether, on the facts before it, the district court erred in ruling the death to be accidental within the meaning of the policy insuring the plan. Preliminarily, we note that it is undisputed that federal law governs this issue, including the construction of the policy provisions. Congress, in adopting ERISA, expected that "a federal common law of rights and obligations under ERISA-regulated plans would develop." Pilot Life, 481 U.S. at 56, 107 S.Ct. at 1558; see also Firestone, 489 U.S. at 110, 109 S.Ct. at 954. In ascertaining the applicable federal common law, this court has explained, we may " 'draw guidance from analogous state law.' " Brandon v. Travelers Ins. Co., 18 F.3d 1321, 1325 (5th Cir.1994) (quoting McMillan v. Parrott, 913 F.2d 310, 311 (6th Cir.1990)). We must nevertheless bear in mind that, "[i]n so doing, [we] may use state common law as a basis for new federal common law ... only to the extent that state law is not inconsistent with congressional policy concerns." Thomason v. Aetna Life Ins. Co., 9 F.3d 645, 647 (7th Cir.1993); see also Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1257 n. 8 (3rd Cir.1993); Jamail, Inc. v. Carpenters District Council of Houston Pension & Welfare Trusts, 954 F.2d 299, 304 (5th Cir.1992).

We also note that the district court held that, in construing the language of ERISA plans, federal law must follow the rule of contra proferentem, which directs that when plan terms remain ambiguous after applying ordinary principles of contract interpretation, courts are to construe them strictly in favor of the insured. ¹ This ruling comports with this court's holdings in ERISA cases. Ramsey v. Colonial Life Ins. Co. of America, 12 F.3d 472, 479 (5th Cir.1994); Hansen v. Continental Ins. Co., 940 F.2d 971, 982 (5th Cir.1991). Other circuits also apply the rule in ERISA cases where construction of insurance documents is involved, e.g., Heasley, 2 F.3d at 1257-58; McNeilly v. Bankers United Life Assurance Co., 999 F.2d 1199, 1201 (7th Cir.1993); Delk v. Durham Life Ins. Co., 959 F.2d 104, 106 (8th Cir.1992); ² Kunin v. Benefit Trust Life Ins. Co., 910 F.2d 534, 539-40 (9th Cir.), cert. denied, 498 U.S. 1013, 111 S.Ct. 581, 112 L.Ed.2d 587 (1990); see also Glocker v. W.R. Grace & Co., 974 F.2d 540, 544 (4th Cir.1992). ³

At long last, we turn to the relevant provisions of the insurance policy involved here. First, the policy defines "injury" as "bodily injury caused by an accident occurring while this policy is in force as to the Insured Person and resulting directly and independently of all other causes in loss covered by this policy." Second is a schedule of benefits payable:

Accidental Death and Dismemberment Indemnity: When injury results in any of the following losses to an Insured Person within 365 days of the date of the accident, the Company will pay in one sum the indicated percentage of the Principal Sum....

This provision is followed by a list of possible losses and corresponding benefits; death of the insured entitles the beneficiary to payment of the entire value of the policy. The...