Steele, Laura v. Life Insur Co

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-1331
LAURA STEELE,
Plaintiff-Appellant,
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Central District of Illinois.
No. 04 C 2260—Michael P. McCuskey, Chief Judge.
____________
ARGUED JANUARY 10, 2007—DECIDED NOVEMBER 7, 2007
____________
Before POSNER, MANION, and SYKES, Circuit Judges.
SYKES, Circuit Judge. William Steele died after crash-
ing his car while under the influence of alcohol. His widow,
Laura Steele, filed a claim for benefits with Life Insurance
Company of North America (“LINA”), the underwriter
of William’s accidental death and dismemberment policy.
LINA denied the claim because William’s death resulted
from his commission of a felony, which is a class of con-
duct the insurance policy excludes from coverage. Litiga-
tion ensued. The district court granted LINA’s motion
for summary judgment, and Mrs. Steele appealed.
We affirm. William’s fatal drunk-driving accident was
his third driving-under-the-influence (“DUI”) offense,
2 No. 06-1331
and Illinois punishes third-offense DUI as a felony.
Mrs. Steele argues that a third episode of drunk driving
becomes a felony only upon conviction. But a conviction
is not a prerequisite for the policy’s felony exclusion to
apply. William’s conduct was punishable as a felony
and resulted in his death, which is the loss for which
coverage is claimed; that is all the felony exclusion re-
quires.
I. Background
William Steele worked for CSX Corporation as a rail-
road maintenance worker up until his death. CSX offered
its employees enrollment in the “CSX Corporation Optional
Personal Accident Insurance Plan,” made available
through a Group Accident Policy issued to CSX by CIGNA
Corporation and underwritten by LINA. In October 2000
William enrolled in the policy and paid 100% of the
premiums through payroll deductions. The policy pro-
vided a death benefit of $500,000, which William’s wife,
Laura Steele, would receive in the event of his “accidental
death.” The policy stated:
We agree to insure those Eligible Person [sic] who are
within the covered classes listed in the Organization’s
application (each herein called the Insured) for
whom the required premium is paid and an applica-
tion made. We will insure the dependent(s) of an
Insured provided the correct premium is paid and the
eligibility requirements are met. We agree to pay
benefits for loss from bodily injuries:
(a) caused by an accident which happens while
an insured is covered by this policy; and
(b) which, directly and from no other causes, result
in a covered loss. (See the Description of Cover-
age.)
No. 06-1331 3
We will not pay benefits if the loss was caused by:
(a) sickness, disease, or bodily infirmity; or
(b) any of the Exclusions listed on page 2.
One of the listed exclusions states: “No benefits will be
paid for loss resulting from: . . . commission of a felony
by the Insured.”
In November 2002 the Steeles attended a wedding
reception in Georgetown, Illinois. William consumed too
much alcohol and then got into his car to drive home.
While he was en route, a Vermillion County Sheriff ’s
Deputy pursued his vehicle for speeding. William sped up
in an effort to evade the police and struck the rear of a
pick-up truck. He was taken to the hospital and died
shortly thereafter. Both the police and toxicology re-
ports pertaining to the accident indicate William’s blood-
alcohol level was .255 (more than three times the legal
limit), and Mrs. Steele does not dispute that her husband
was legally intoxicated. This was not William’s first
episode of driving while under the influence of alcohol; he
previously was convicted of two misdemeanor DUI of-
fenses, one in Tennessee and one in Indiana.
In January 2003 Mrs. Steele filed a claim with LINA for
benefits under William’s accident policy. LINA denied her
claim based on the policy’s felony exclusion, stating that
“Mr. Steele was committing a felony at the time of his
death, namely driving while intoxicated, while on a
suspended license with two prior DUI’s. His driving
while intoxicated, coupled with driving at a high rate of
speed in order to avoid police intervention, resulted in the
accident that caused his death.” Under Illinois law, first
and second DUI offenses are misdemeanors, but a
third such offense is a felony.
Mrs. Steele sought review of the denial of her claim
pursuant to procedures set forth in the policy. When LINA
4 No. 06-1331
affirmed its denial, she filed suit in state court. LINA
removed the case to federal court based on both diversity
and federal question jurisdiction (the latter on the theory
that the policy was an Employee Retirement Income
Security Act (“ERISA”) plan). The district court con-
cluded the policy was indeed an ERISA plan and granted
LINA’s motion for summary judgment, holding that
LINA’s denial of benefits was neither arbitrary nor
capricious. The court noted, however, that had it re-
viewed LINA’s denial of benefits de novo, it would have
reached the same conclusion. Mrs. Steele appealed.
II. Analysis
We review the district court’s grant of summary judg-
ment de novo, “construing all facts, and drawing all
reasonable inferences from those facts” in favor of Steele.
Peele v. Country Mut. Ins. Co., 288 F.3d 319, 326 (7th Cir.
2002). Summary judgment is appropriate “if the pleadings,
depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show 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 initially address the district court’s conclusion that
the LINA policy was an ERISA plan. For purposes of
judicial review, two consequences flow from this conclu-
sion. First, a plaintiff seeking benefits under an ERISA
plan can avail himself of the federal courts based on
federal-question jurisdiction. See 28 U.S.C. § 1331;
29 U.S.C. § 1132(a)(1)(B) (ERISA civil enforcement provi-
sion); Brundage-Peterson v. Compcare Health Servs. Ins.
Corp., 877 F.2d 509, 510 (7th Cir. 1989). Second, a decision
denying benefits under an ERISA plan may be reviewed
under a highly deferential “arbitrary and capricious”
standard—so long as the plan confers discretionary power
No. 06-1331 5
on the plan administrator and provides adequate notice
to employees “that the plan administrator is to make a
judgment largely insulated from judicial review by rea-
son of being discretionary.” Herzberger v. Standard Ins.
Co., 205 F.3d 327, 332 (7th Cir. 2000); see Wilczynski v.
Kemper Nat’l Ins. Cos., 178 F.3d 933, 934 (7th Cir. 1999).
We need not decide whether the LINA policy is gov-
erned by ERISA because it is ultimately irrelevant to the
outcome of this case. There is an alterative basis for
jurisdiction given that the parties are diverse. 28 U.S.C.
§ 1332. And LINA does not attempt to take advantage of
the arbitrary-and-capricious standard of review. At oral
argument LINA’s counsel said de novo review applies, a
concession presumably prompted by our holding in
Schwartz v. Prudential Insurance Co. of America, 450 F.3d
697, 698 (7th Cir. 2006) (de novo review applies when
discretion-granting language is set forth in a summary
plan description but not in the group insurance policy).
So whether we treat this as a federal-question ERISA
matter or a contract case grounded in diversity is irrele-
vant; we are satisfied there is jurisdiction, and we apply
de novo review to LINA’s denial of benefits.
We thus proceed as though this is a state-law insur-
ance coverage dispute.1 The policy’s relevant exclusion
language states: “No benefits will be paid for loss result-
ing from: . . . commission of a felony by the Insured.”
Under Illinois law, which the parties agree controls our
interpretation of the policy’s felony exclusion, a driver’s
first and second DUI offenses are misdemeanors, 625
ILL. COMP. STAT. 5/11-501(b-2) (2002), but the third is a
1
If we were interpreting an ERISA plan, we would apply the
federal common-law rules of contract interpretation. Ruttenberg
v. U.S. Life Ins. Co. of N.Y., 413 F.3d 652, 659 (7th Cir. 2005).
The result is the same under either body of law.
6 No. 06-1331
felony, id. 5/11-501(d)(1)(A). Specifically, the DUI statute
states that “[e]xcept as provided under paragraphs (c-3),
(c-4), and (d) of this Section, every person convicted of
violating this Section . . . shall be guilty of a Class A
misdemeanor.” 5/11-501(c). Paragraph (d) states that
“[e]very person convicted of committing a violation of this
Section shall be guilty of aggravated driving under the
influence of alcohol . . . if: (A) the person committed a
violation of this Section, or a similar provision of a law of
another state . . . when the cause of action is the same as
or substantially similar to this Section, for a third or
subsequent time.” (Emphasis added.) Aggravated driving
under the influence of alcohol is a Class 4 felony.
5/11-501(d).
Mrs. Steele argues that because her husband was not
convicted of a third DUI, the policy exclusion is inapplica-
ble. She focuses on the language of the penalty enhance-
ment in paragraph (d), which states that “[e]very person
convicted of committing a violation of this Section shall
be guilty of aggravated driving under the influence of
alcohol,” which is a felony. (Emphasis added.) To sup-
port her position, she submitted an affidavit from an
Illinois prosecutor saying he would not have charged
William with a felony.
It goes without saying that for criminal punishment to
result—of either the misdemeanor or felony level of
severity—a conviction is a prerequisite. But Mrs. Steele’s
emphasis on the absence of a conviction is misplaced.
Under Illinois law, “[t]he term ‘felony’ denotes an action
that renders one liable to a certain amount of punish-
ment. . . . Illinois does not define ‘felony’ with any refer-
ence to whether there has been a ‘conviction.’ ” Berg v. Bd.
of Trs., Local 705 Int’l Bhd. of Teamsters Health & Wel-
fare Fund, 725 F.2d 68, 70 (7th Cir. 1984) (interpreting
insurance coverage exclusion for “the commission of a
felony” under Illinois law). Berg involved an injury bene-
No. 06-1331 7
fits claim (not a death benefits claim, as here), but the
opinion posed a hypothetical that mirrors the facts of
this case: We noted that an insured who dies while com-
mitting a felony has committed a felony as a factual matter
but obviously cannot be prosecuted. If an insurance
policy’s felony exclusion were interpreted to require a
conviction, it would not apply in this situation—not
because the insured did not commit a felony but because
it is impossible to prosecute a dead man. Id. We con-
cluded in Berg that “[a] ‘felony’ occurs upon commission of
the proscribed acts regardless of whether there later is a
successful prosecution.” Id.Mrs. Steele’s reliance on the prosecutor’s affidavit is
also misplaced. Whether a prosecutor would charge or
seek to convict William of a felony is not relevant;
William’s death occurred during his commission of an act
that is punishable as a felony, which is all the policy
exclusion requires. Moreover, insurers “should not be
dependent upon the state’s decision to prosecute” in
enforcing their policy language excluding claims arising
out of the criminal conduct of their insureds. Id. at 70. The
interpretation urged by Mrs. Steele would mean that
conduct punishable as a felony would not come within the
felony exclusion if a prosecutor struck a deal to reduce the
felony offense to a misdemeanor. But a misdemeanor
conviction based on a plea negotiation does not neces-
sarily mean the defendant’s conduct does not qualify as a
felony. Plea bargaining sometimes proceeds from changed
facts, but more often it rests on expedience. If the in-
sured’s conduct is punishable as a felony, the insured’s
commission of that conduct is enough to come within the
language of the policy’s felony exclusion regardless of
whether a felony conviction is actually sought or obtained.
See Tourdot v. Rockford Health Plans, Inc., 439 F.3d 351,
354 (7th Cir. 2006) (that the insured was ticketed for a
minor traffic offense instead of drunk driving does not take
8 No. 06-1331
his conduct outside the insurance policy’s “illegal act”
exclusion).
In an effort to distinguish this case from Berg, Mrs.
Steele notes that the insured’s conduct in Berg—con-
structing a pipe bomb—is always punishable as a felony,
whereas the underlying act here, driving under the
influence, is only a felony the third time it is committed.
This argument misses the mark. Graduated sentencing
schemes for repeat offenses are common; identical con-
duct is often classified and punished differently based on
the offender’s prior record. The exclusion in question
focuses on how the insured’s conduct is penalized, and
Illinois has decided that a driver’s third DUI is punish-
able as a felony. That like conduct by a first-time offender
would be punishable as a misdemeanor is irrelevant.
Finally, Mrs. Steele argues there is insufficient evidence
to establish that driving under the influence caused
William’s death. She claims the medical records do not
contain legible test results for his blood-alcohol level.
However, the record contains a Laboratory-Toxicology
report that states in legible print “Ethyl Alcohol 0.255,”
and Mrs. Steele nowhere denies or refutes that William’s
blood-alcohol level reached that level. She also argues
William’s death certificate does not indicate alcohol
intoxication caused his death,2 but this is unremarkable
in the circumstances of this case. He did not die of al-
cohol poisoning or disease associated with alcohol abuse,
he died in an automobile crash caused by his driving
while intoxicated, and the evidence of his intoxication is
unrefuted.
In Sisters of the Third Order of St. Francis v.
SwedishAmerican Group Health Benefit Trust, 901 F.2d
2
The certificate indicates that Mr. Steele died of “multiple blunt
force trauma” due to an “auto vs. pick-up mishap.”
No. 06-1331 9
1369 (7th Cir. 1990), the insured was driving under the
influence and crashed into a tree. We held there was no
genuine factual dispute that his injuries resulted from
his drunk driving because no evidence was presented
suggesting an alternative cause. Id. at 1371. The same
is true here; no alternative explanation for William’s
fatal injuries has been suggested.
Because William’s death resulted from his third-offense
DUI, and because a third DUI is punishable as a felony
under Illinois law, Mrs. Steele’s claim for insurance
benefits fell within the policy’s felony exclusion. The
district court’s order granting summary judgment for
LINA is AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-7-07