Sloppy policy language costs insurer $200,000 in medical bills

Brian Anderson

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I would imagine Companion Life has reworded the language in their policies as a result of this case in Michigan:

Drunken game of dirt-bike 'chicken:' Insurer owes $200K medical bill in crash

LOWELL, MI - When Beau Heimer crashed his dirt bike while drunk, incurring nearly $200,000 in medical costs, his insurance company denied benefits: the policy excluded injury resulting from "illegal use of alcohol."

U.S. District Judge Janet Neff said those key words - "illegal use of alcohol" - didn't absolve Companion Life Insurance Co. of responsibility for the medical bills.

Heimer was 22, legally allowed to drink, when the crash occurred in 2013. His illegal act wasn't drinking, rather it was riding the dirt bike while intoxicated before he crashed head-on into a friend's motorcycle.

"He did illegally drive an off-road vehicle," Neff wrote in her opinion. "The question is whether that is an illegal use of alcohol. Under the unambiguous language of the (insurance plan), the Court cannot so conclude."

The Sixth Circuit Court of Appeals in Cincinnati upheld Neff's decision this week.

It found that Neff "read 'illegal use of alcohol' to disclaim coverage only for the illegal consumption of alcohol, and not for Heimer's illegal post-consumption conduct of operating a motorbike while under the influence of alcohol. The district court's reading is consistent with the ordinary meaning of 'use' and best gives effect to the contract as a whole."

Heimer and his buddies were drinking beer in April 2013 on a field off of Two Mile Road NE in Lowell when he and his friend collided head-on while playing a game of "chicken," court records said.

They were riding at each other to see who would "chicken out," court records showed.

He suffered "catastrophic" injuries with medical bills exceeding $197,000.

Heimer had a blood-alcohol level of 0.152 percent, or nearly twice the state's definition of intoxication, 0.08 percent. He pleaded guilty to a misdemeanor charge of operating an off-road vehicle while intoxicated.

The appeal was decided by Chief Judge R. Guy Cole, and judges David McKeague and Jane Branstetter Stranch.

Cole, who wrote the opinion, said: "What was illegal about Heimer's behavior was his use of a motor vehicle, not of alcohol. And if there were any doubts, the district court explained, the contract should be construed against the insurance company as the drafter."

McKeague concurred in the ruling but issued a dissenting opinion. He disputed that the insurance policy's exclusion was unambiguous.

"Let's consider the context. Beau Darrell Heimer and some friends decided to over-indulge in alcoholic beverages to work up the nerve to hurtle themselves toward each other at high speed on dirt bikes - after nightfall in a farm field - to see who might 'chicken out' at the last second. No one plays this game sober. The alcohol they deliberately ingested emboldened them to play a reckless game of chicken, leading to predictably tragic results when neither Heimer nor his contestant 'blinked' and they collided head-on."

McKeague said that the insurance company "surely did not intend its policy to cover injuries arising from drunken participation in a reckless game of chicken. Reading 'illegal use of alcohol' so narrowly leaves one seeing double. But ultimately, in this case, the insurer must bear the consequences of its sloppy drafting."

Drunken game of dirt-bike 'chicken:' Insurer owes $200K medical bill in crash
 
I would say the judge did not read "illegal use of alcohol" narrowly but read it exactly as the company wrote it. To accomplish what the company intended, all they would have to have done was state, "injuries incurred while intoxicated are not covered" and then give a definition of intoxication. Companies know that any ambiguity will be decided in the favor of the insured so I find it hard to feel sorry for them when they have a lazy legal department.
 
I would say the judge did not read "illegal use of alcohol" narrowly but read it exactly as the company wrote it. To accomplish what the company intended, all they would have to have done was state, "injuries incurred while intoxicated are not covered" and then give a definition of intoxication. Companies know that any ambiguity will be decided in the favor of the insured so I find it hard to feel sorry for them when they have a lazy legal department.

I suspect they are not allowed to exclude that and hoped to accomplish it with the language used. JMO.
 
I suspect they are not allowed to exclude that and hoped to accomplish it with the language used. JMO.
Washington National's accident policy reads it does not cover loses from "
being legally intoxicated or so intoxicated that mental or physical abilities
are seriously impaired; being under the influence of any illegal
drugs or being under the influence of any narcotic, unless such
narcotic is taken under the direction of a physician" However, that does not apply to SD so it does depend upon the jurisdiction.
 
Now, the word 'legal'. With more states passing different Marijuana laws that may be contrary to federal law. Which law governs? For insurance my guess is State law.
 
I was looking at this last week. I'm writing a book right now with the working title "When Words Collide: Resolving Insurance Coverage and Claims Disputes." I'm supposed to have the first draft to the publisher by March 1, hopefully with publication by May. It examines various doctrines, principles, and practices used to determine coverage in litigation and how to apply them before resorting to litigation.

Over the years, I've seen a lot of ambiguities arise from carriers who lack the skill and knowledge to write their own policies. That's one thing that ISO is very good about. Anyone interested in this subject should consider buying "How to Draft and Interpret Insurance Policies," originally written by the late Ken Wollner and now published by IRMI. (Or wait from my book and learn how I've helped get thousands of initially denied claims paid. :-)

Another issue in this particular case is the fact that an insurance department allowed an exclusion like this in a filed policy form. Most auto-type liability policies in the admitted marketplace have VERY broad liability coverage because the purpose is to protect the public. The ISO PAP and BAP have no exclusions for DUI, speeding, etc. Increasingly, beginning with the nonstandard market, regulators have allowed very inferior policy forms in the marketplace. Given that virtually all consumers think the only difference between these policies is price, there are a lot of people who are not adequately covered but think they are. Worse, the people they injure will have little recourse.
 
Another issue in this particular case is the fact that an insurance department allowed an exclusion like this in a filed policy form. Most auto-type liability policies in the admitted marketplace have VERY broad liability coverage because the purpose is to protect the public. The ISO PAP and BAP have no exclusions for DUI, speeding, etc. Increasingly, beginning with the nonstandard market, regulators have allowed very inferior policy forms in the marketplace. Given that virtually all consumers think the only difference between these policies is price, there are a lot of people who are not adequately covered but think they are. Worse, the people they injure will have little recourse.

What kind of policy is it? I haven't been able to determine from the articles I have read about it. I haven't gone looking for the actual decision.
 
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