Criminal-Act exclusion does not apply without sufficient causal nexus

We get many calls involving claims denied based upon exclusions for losses or disabilities resulting from certain excluded conditions. Common excluded losses are those resulting from pre-existing conditions, suicide or attempted suicide, acts of war, or criminal acts.

In a recent case out of Kansas, a federal court was faced with determining whether there was a sufficient causal nexus to deny a claim based upon a criminal-act exclusion. The Plaintiff in this case sought accidental death benefits against an ERISA plan administered by Sun Life. The Plaintiff’s decedent was killed in an auto accident when another vehicle improperly crossed the center line. The Plaintiff’s decedent was not at fault in the accident in any way but was driving on a suspended license. Sun Life denied the claim based upon an exclusion for losses resulting from a “…criminal act”.

There was no question that, in Kansas, driving on a suspended license is a criminal act. However, the court found that even though the decedent may have been guilty of a criminal act Sun Life still abused its discretion since that criminal act did not sufficiently contribute to the death so as to invoke the exclusion.

Sun Life argued its position using a test commonly used to determine actual causation. According to Sun Life, “but for” the fact that the decedent was driving at all when she should not have been that she would not have died.

As the court explained, the criminal-act exclusion would apply only if the decedent’s death was “due to or resulted from” her criminal act. A review of the accident report revealed that the decedent was free of fault in the crash that caused her death. Moreover, the status of her driver’s license did not increase the risk that she would die in an accident.

Sun Life defended its decision arguing that “but for [decedent’s] criminal act of driving while suspended, [she] might not have been on the highway when the westbound vehicle crossed the center line; but for her position on the highway when the westbound vehicle crossed the center line, the westbound vehicle would not have collided with [decedent’s] car; but for the collision, [decedent] would not have suffered injuries; and but for her injuries, [decedent] would not have died.”

The court found that, Tenth Circuit precedent required a more direct causal relationship to trigger the policy exclusion.

After reviewing the relevant case law, it became clear that the Tenth Circuit has foreclosed the use of “but for” causation to link otherwise insurable harms with ERISA-plan exclusion triggers.

Ultimately, Sun Life was found to have abused its discretion for its “legally erroneous” plan interpretation.

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