James v. Metropolitan Life Ins. Co.

• Citation: 896 F. Supp. 1006
• Decision Date: 20 June 1995
• Docket Number: No. CV-N-94-197-ECR.,CV-N-94-197-ECR.
• Parties: Paula A. JAMES, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Nevada

896 F. Supp. 1006

Paula A. JAMES, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.

No. CV-N-94-197-ECR.

United States District Court, D. Nevada.

June 8, 1995.

As Amended June 20, 1995.

Joseph S. Bradley of Bradley & Drendel, Ltd., Reno, NV, for plaintiff.

Gordon R. Muir of Hawkins, Folsom, Muir & Kelly, Reno, NV, David C. Zuckerbrot, Law Department of Metropolitan Life Ins., New York City, for defendant.

ORDER

EDWARD C. REED, Jr., District Judge.

On the morning of March 25, 1993, Ronald James was involved in a high-speed automobile chase along a desert highway in western Nevada, in the course of which he fired several rounds from a handgun at the car he was pursuing. The chase ended when James's car rear-ended other vehicle and both went out of control. When the Nevada Highway Patrol arrived, James was dead of a gunshot wound to the chest. The wound was self-inflicted, but whether it was inflicted intentionally or accidentally is unclear.

James was a federal employee when he died and carried a Federal Employees' Group Life Insurance ("FEGLI") policy. Doc. # 9 Exh. A. The master FEGLI policy is issued to the Office of Personnel Management (OPM) by the Metropolitan Life Insurance Company (MetLife), pursuant to the Federal Employees' Group Life Insurance Act ("FEGLIA"), 5 U.S.C. §§ 8701-16, and the regulations promulgated thereunder by OPM. See 5 C.F.R. Parts 870-74. The policy, whose terms preempt inconsistent state and local group life insurance laws, see 5 U.S.C. § 8709(d)(1), provided basic life insurance, and double indemnity if James died "solely through violent, external and accidental means...." Doc. # 9 Exh. A at § 5(b). There is, however, no definition of "accidental means" in the policy itself, or in the statute or the regulations, which provide only that benefits for accidental death shall be included in the policy. See 5 U.S.C. § 8709; 5 C.F.R. § 870.101.

MetLife paid James's widow and beneficiary, Paula, the basic policy amount (about $78,000), but refuses to pay additional "accidental death" benefits, on the ground that James's death was, if not a suicide, then at least the reasonably foreseeable result of his voluntary actions, and therefore not caused solely by "accidental means." Paula James has sued for the accidental death benefits. MetLife has moved for summary judgment. The motion will be denied.

I. Jurisdiction

The case is here under diversity jurisdiction; there is no federal question presented. That is so even though the case turns on the definition of a term contained in an insurance policy issued pursuant to federal law and subject to federal regulation. See Virgin Islands Housing Auth. v. Coastal Gen. Const., 27 F.3d 911, 916 (3d Cir.1994); 1610 Corp. v. Kemp, 753 F.Supp. 1026, 1030 (D.Mass.1991) (that a contract "involves a preprinted form prescribed by a government agency does not signify that a controversy over its terms arises under federal law").

II. State Law Controls

This case, as noted above, turns on the meaning given to the term "accidental means" in the FEGLI policy, and this, in turn, depends (or at least the parties believe it depends—we are not sure it makes a difference) on whether state law or federal common law provides the rule of decision.

James argues that Nevada law applies. Nevada does not recognize the "technical distinction" between the terms "accidental death" and "death by accidental means." Rather,

where an insured dies as the result of an intentional or expected act or event, but did not intend or expect death to result, the death is "accidental" within the contemplation of that term....

Catania v. State Farm Life Ins. Co., 95 Nev. 532, 598 P.2d 631, 633 (1979).

MetLife, on the other hand, argues that a federal common law rule ought to govern here, because Congress's intent in establishing the FEGLI program was to provide, with the "utmost economy," "low-cost group life insurance to federal employees," Doc. # 9 at 6, and this "necessitates a uniform federal law rather than a panoply of potentially conflicting laws of the different states." Id. "Absent displacement of state law," MetLife warns us, it

would be required to determine, in each instance, the import of each state's accidental means death benefits law, thereby placing undue administrative burdens and costs on this federal program. Furthermore, if state law were to govern, federal employees would be denied the protection of a uniform law, resulting in unequal benefit levels for employees who live in different states.

Id. at 7. And the federal common law rule MetLife believes applicable is one that, unlike Nevada precedent, recognizes the distinction between "accidental death" and "death by accidental means." For a comprehensive survey of the voluminous law and literature concerning this distinction in insurance policies, see the majority and (especially) the dissenting opinions in Weil v. Federal Kemper Life Assurance Co., 7 Cal.4th 125, 866 P.2d 774 (1994). For present purposes, it suffices to observe that the distinction matters to MetLife for this reason: under Nevada law, double indemnity must be paid so long as James neither intended nor expected to die as a result of his actions. But the FEGLI policy speaks of death by "accidental means," and under a federal common law rule recognizing that term as one of art, MetLife could argue that it need not pay double indemnity because, whether or not James intended or expected to die as a result of his actions, those actions were the "means" of his death and, as they were voluntary and intentional, they could not have been "accidental."¹

It is often said that, in a diversity case, a federal court must apply the law of the forum state. Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); State Farm Fire & Cas. Co. v. Smith, 743 F.Supp. 1379, 1380 (D.Nev.1989). That statement is true but incomplete. For example, in a case in which jurisdiction is based on the existence of a federal question, a federal court would apply the law of the forum state to pendent claims based on state law, despite the absence of diversity.² More generally,

whether state law or federal law controls on matters not covered by the Constitution or an Act of Congress is a very complicated question, one that does not yield to any simple answer in terms of the parties to the suit, the basis of subject-matter jurisdiction, or the source of the right that is to be enforced.

19 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4514, at 221-23 (1982). Whether a federal common law rule is properly implied will depend upon whether the issue requires a nationally uniform body of law, whether application of state law would frustrate specific objectives of the federal program, and whether application of a federal rule would disrupt commercial relationships predicated on state law. United States v. Kimbell Foods, 440 U.S. 715, 728-29, 99 S.Ct. 1448, 1458-59 (1979); see also O'Melveny & Myers v. FDIC, ___ U.S. ____, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994).

We hold that state law, and not federal common law, applies to this case. State law applies simply because contracts are normally interpreted according to state law, and there is no good reason to depart from the practice in this case. For one thing, the United States is not a party to the contract, which would compel the application of federal law, see Grosinsky v. United States, 947 F.2d 417, 419 (9th Cir.1991): when it buys insurance from MetLife on behalf of federal employees, the federal government acts as a procuring agent and not as an insurer. See Brinson v. Brinson, 334 F.2d 155, 158 (4th Cir.1964) (citing Railsback v. United States, 181 F.Supp. 765 (D.Neb.1960)). The FEGLI policy, in short, was a contract between James himself and MetLife, and in a dispute between private parties over a contractual term, the fact that the contract was entered into pursuant to authority conferred by a federal statute does not require that federal common law supply the rule of decision. On the contrary, just as that fact is insufficient to create a federal question, so too there is no reason to think that state law should not govern, as it normally does in a diversity case where a contractual term is at issue. See Lindy v. Lynn, 501 F.2d 1367, 1369 (3d Cir.1974) ("the fact that a contract is subject to federal regulation does not, in itself, demonstrate that Congress meant that all aspects of its performance or nonperformance are to be governed by federal law rather than by state law applicable to similar contracts in businesses not under federal regulation"); see also American Invs-Co Countryside v. Riverdale Bank, 596 F.2d 211, 217 (7th Cir. 1979) (citing cases). And, as noted above, the FEGLI policy's terms preempt conflicting state laws governing insurance, but preemption is irrelevant here, for the problem is not that there is a conflict between a term in the policy and state law, but, rather, that a term in the policy has been left undefined. The question, to reiterate, is whether it should be construed with reference to state law or to federal common law.

MetLife's argument that federal common law should be applied for the sake of uniformity is unpersuasive. As the Supreme Court recently noted, uniformity is the "most generic (and lightly invoked) of alleged federal interests." O'Melveny, ___ U.S. at ____, 114 S.Ct. at 2055. The uniform federal common law rule MetLife seeks to establish might well facilitate its litigation of this type of suit, "eliminating state-by-state research and reducing uncertainty—but if the avoidance of those ordinary consequences qualified as an identifiable federal interest, we would be awash in `federal common-law' rules." Id. (citing United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500, 504 n. 13 (1966)).

More specifically, while the FEGLI policy is a "government plan" and not subject to ERISA, what the Ninth Circuit...