Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-01218/USCOURTS-casd-3_12-cv-01218-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PAMELLA CIBERAY,

Plaintiff,

v.

L-3 COMMUNICATIONS

CORPORATION MASTER LIFE

AND ACCIDENTAL DEATH AND

DISMEMBERMENT INSURANCE

PLANS et al.,

Defendants.

 

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Case No. 3:12-cv-1218-GPC-MDD

ORDER REVERSING

DEFENDANT L-3

COMMUNICATIONS

CORPORATION MASTER LIFE

AND ACCIDENTAL DEATH AND

DISMEMBERMENT

INSURANCE PLANS’ DENIAL

OF BENEFITS

(ECF NOS. 21, 22)

INTRODUCTION

In this ERISA case, Plaintiff seeks review of a decision to deny her claim for

benefits under her now deceased husband’s accidental death and dismemberment

insurance policy. Plaintiff’s husband, Mr. Ciberay, died nine days after sustaining

pelvic fractures incurred as a result of falling down a set of stairs while intoxicated. 

The core issue is whether Defendant, through its delegees, abused its discretion in

denying Plaintiff’s claim for benefits pursuant to the policy’s intoxication exclusion.

The review of Defendant’s decision to deny benefits comes before the Court via

the parties’ cross-motionsfor summary judgment. TheCourt findsthe motionssuitable

for disposition without oral argument. SeeCivLR7.1.d.1; see also Duncan v. Hartford

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Life &Accident Ins. Co., 2013 WL 506465, at *1 (E.D. Cal. Feb. 8, 2013) (finding oral

argument unnecessarywhere decision in ERISAcase based on review of administrative

record). 

After a careful review ofthe parties’ briefs, administrative record, and applicable

law, the Court will DENY Defendant’s Motion for Summary Judgment and GRANT

Plaintiff’s Motion for Summary Judgment. The Court will thus REVERSE

Defendant’s denial and require payment of Plaintiff’s claim.

BACKGROUND

I. The Plan & Policy

Through his employer, Plaintiff’s husband enrolled in the defendant L-3

Communications Corporation Master Life and Accidental Death and Dismemberment

Insurance Plan (“Plan” or “Defendant”). The Plan is an employee welfare general plan

governed by the Employee Retirement Income Security Act (“ERISA”). The Plan is

funded by an insurance policy (“Policy”), which American International Life

Assurance Company of New York (“AIG”) issued to L-3 Communications

Corporation, the Plan Sponsor and Administrator. Plaintiff’s claim for benefits was

processed by AIG through its agent Chartis Claims, Inc. (“Chartis”). Notwithstanding

this chain of entities, Defendant agrees it is fully responsible for the decision to deny

Plaintiff’s claim for benefits.

The Plan provides that the Plan Administrator, L-3 Communications

Corporation, has delegated to AIG the full and complete discretionary authority and

responsibility to decide all questions of eligibility for benefits under the Plan. The Plan

further provides that AIG’s decisions (in this case, through Chartis) are final and

binding on all persons to the full extent permitted by law.

The Policy provides that, “[i]f injury to the insured person results in death

within 365 days of the dates of the accident that caused the Injury, the Company will

pay 100% of the Principal Sum” of benefits. “Injury” is defined as a “bodily injury

caused by an accident occurring while this Policy is in force as to the person whose

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injury is the basis of claim and resulting directly and independently of all other causes

in a covered loss.” The Policy contains an exclusion whereby the Policy “does not

cover any loss caused in whole or in part by, or resulting in whole or in part from the

following . . . (5) the Insured Person being under the influence of drugs or intoxicants,

unless taken under the advice of a Physician.”

The Plan provides, “In general, ERISA preempts state law. However, ERISA

does not preemptstate laws that regulate insurance. The Plan will always be construed

to comply with applicable federal and state law.” Similarly, the Policy provides, “This

Policy is governed by the laws of the state in which it is delivered.” The Policy further

provides, “Conformity with State Statutes. Any provision of this Policy which, on its

effective date, is in conflict with the statutes of the state in which this Policy is

delivered is hereby amended to conform to the minimum requirements of those

statutes.”

The Policy was in full force and effect at the time Plaintiff’s husband died. All

premiums had been paid, and any conditionsrequired for issuance of benefits under the

Policy had been fulfilled. Plaintiff is named as the primary beneficiary of the Policy,

which provides $620,000 in accidental death benefits.

II. The Accident & Medical Care

On February 7, 2010, Mr. Ciberay fell down ten or fourteen stairs at his and

Plaintiff’s home in Escondido, California. Plaintiff did not see her husband fall but

later told an interviewer that her husband was carrying a plate and drinking glasses

down the stairs and that he told her after the fall that he had missed the first or second

step. Prior to his fall, Mr. Ciberay had been playing with his grandson in an upstairs

room.

When paramedics arrived, Mr. Ciberay was examined and found to be “Alert and

Oriented X4, with no loss of consciousness.” His neuro exam revealed his pupils were

equal and reactive to light and that he was able to move all four extremities on

command. He was further noted to have a normal respiratory rate of 20 breaths per

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minute. He complained of pain on standing, mostly in his left pelvic region. He

admitted he had been drinking heavily related to the Super Bowl football game that

day.

Plaintiff’s husband wastransported to the hospital where his chief complaint was

described as “alcohol fall” and where his blood alcohol level was measured at .422

mg/dL or .422%. He was admitted with a diagnosis of a left superior and inferior pubic

ramusfracture with pain on standing, mostly in the left pelvic region. Hospital records

note Plaintiff’s husband had a history of alcohol dependence and that his hospital

admission was also for alcohol withdrawal concerns. On the day of his admission, a

physician determined he was cognitively intact, was not a surgical candidate for repair

of his pelvic fractures, and that “most of [his] admission wasfor alcohol withdrawals,”

as Plaintiff’s husband was reported to drink vodka intermittently on top of 2 to 3 beers

a day. 

On February 10, 2010, while hospitalized, Plaintiff’s husband developed a fever

that rose to 104 degrees. He was noted to be delirious only on that day. He was found

to have bacterial infections that, up until the day of his death, responded well to

antibiotic treatment. Indeed, on February 14, 2010, Plaintiff’s husband was

downgraded from ICU to IMC, with a plan to discharge him to “rehab” after a few days

of monitoring out of the ICU.

On February 16, 2010, however, Plaintiff’s husband was returned to the ICU

when he experienced a lapse of consciousness or possible seizure after standing up. 

Persistent efforts were made to stabilize his cardiac condition, but he continued to

deteriorate through the morning. After coding twice, Plaintiff’s husband died on

February 16, 2010, at 12:02 p.m.

Themedical examiner issued an initial external examination report following the

Mr. Ciberay’s death. Initially, the cause of death was listed as hypertensive

cardiovascular disease, with the following other significant conditions: alcohol abuse,

pelvic fractures, obesity, and diabetes mellitus. The manner of death was listed as an

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accident. The medical examiner later issued an amended external examination report

to correct the time of death and to amend the cause of death to be complications

following pelvic fractures,with the following othersignificant conditions: hypertensive

cardiovascular disease, alcohol abuse, obesity, and diabetes mellitus. The manner of

death remained an accident.

III. Claim Process

Following her husband’s death, Plaintiff timely submitted a claim for payment

of the accidental death benefit under the Policy. The claim listed the cause of death as

“complications following pelvic fractures.” As noted above, Chartis (AIG’s claims

administrator) received and handled Plaintiff’s claim. Chartis acknowledged receipt

of Plaintiff’s claim by letter dated June 30, 2010. Plaintiff thereafter complied with all

requests for information and documentation.

The claim memo contains a summary and notes dated July 26, 2010, indicating

the Policy excludeslosses due to intoxication and stating that the reserve would remain

at $1.00.

The claim memo contains a note dated November 4, 2010, stating in part, “Clmt

fell and broke his pelvis. It was determined that he was intoxicated at the time of the

fall. Clmt later died and the coroner related the death to the fall.” 

The claim memo contains a final general note dated November 18, 2010, which

sets forth the information that Chartis reviewed in handling Plaintiff’s claim. 

Regarding the hospital discharge summary, the final general note states:

Records indicate decedent was intoxicated and fell down the stairs. He

was found to have a pelvic fracture and was doing well. Indicated most

of his admission for alcohol concerns. He was found to be delirious on

2/12/10 but was never intubated. He was thought to have cirrhosis. 

Abdominal ultrasound 2/12/10 showed fatty liver disease but nomoderate

or severe cirrhosis. He started to improve. He was found to have staph

aurreus and E. coli and was started on Keflex. He had a lapse of

consciousness or possible seizure after completing a bowelmovement and

getting up. His abdomen was very distended with feculent drainage

removed fromthe stomach. Testing suggested a large massive pulmonary

embolism and clot in right atrium. He coded on 2/16/10, and they could

not revive him. Time of death 12:02 02/16/10.

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The November 18, 2010 final general note makes the following recommendation:

Recommend denial of accidental death benefits. 60 year old male fell

down the stairs and fractured pelvis on 2/7/10. It was determined from

blood testing that Clmt had a BAC of 422 mg/dL or .422%. BAC at this

level can cause ataxia, tremors, disorientation, disturbed equilibrium and

up to unconsciousness, depressed respiration, and even death. . . . Cause

of death was determined to be complications of pelvic fracture. There is

no sickness exclusion. There is an intoxication exclusion on the policy. 

Based on review of the available records, this loss was caused in whole

or in part by being under the influence of intoxicants.

The claim memo contains a further note dated December 3, 2010, in which

Chartisindicated it “could only identify the intoxication exclusion under this policy as

far as applicable exclusions for this loss.”

By letter dated December 3, 2010, Chartis notified Plaintiff that her claim was

denied. The denial letter states: “The records we reviewed indicate that your spouse

died as a result of complications of a pelvic fracture with other significant conditions

causing death listed to be hypertensive cardiovascular disease, alcohol abuse, obesity,

and diabetes mellitus on February 16, 2010.”

The denial letter further states:

The medical records and fire department report indicate that your spouse

fell down some stairs and sustained a pelvis fracture as a result of the fall

on February 7, 2010 and passed away on February 16, 2010. His blood

alcohol level was determined to be 422 mg/dL, or .422% when tested at

the hospital. He admitted to drinking heavily that day. A BAC level of

.422% has the following typical effects: ataxia, tremors, disorientation,

disturbed equilibrium, and can even lead to unconsciousness, depressed

respiration, and death.

After quoting relevant Policy language, the denial letter provides:

Based on our review of the available records, we determined that your

spouse’s death was not the direct result of a bodily injury caused by an

accident resulting directly and independently from all other causes, but

was caused in whole or in part by, or resulting in whole or in part from

your spouse being under the influence of intoxicants. Therefore, we must

respectfully deny your claim for Accidental Death Benefits.

By letter dated February 28, 2011, Plaintiff timely appealed the denial of her

claim. In her February 28, 2011 letter, Plaintiff stated in part:

I am not in agreement at this time with the denial of benefits – yes my

husband was intoxicated at the time of his fall, but he did not die due to

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intoxication. His immediate cause of death was a pulmonary embolism

that was due to the pelvic fracture. He was not intoxicated at the time of

his death so I would appreciate further clarification on this.

The letter I received stated that there is a section in the policy that states

you will not pay out if the individual is under the influence of alcohol. 

My husband had insurance through two other insurance companies and

after reviewing their policies, I find the same exclusion, yet they paid their

portion of the accidental claim.

By letter dated March 14, 2011, Chartis acknowledged receipt of Plaintiff’s

request to appeal the prior decision. In the same letter, Chartis further indicated it had

determined a medical review by a forensic pathologist was necessary.

On or about March 14, 2011, Chartis paid a forensic pathologist $1,100 to

review the claim file and to answer the following questions:

• Can you provide a detailed account of how the sequence of events

in this incident resulted in Mr. Ciberay’s death?

• Please describe all factors contributing to Mr. Ciberay’s Death.

• Was Mr. Ciberay’s death directly related to a fall he experienced on

February 7, 2010? If so, please explain.

• Was Mr. Ciberay’s fall caused in whole or in part by his level of

intoxication at the time?

• Did Mr. Ciberay’s death result in whole or in part from his level of

intoxication at the time of the fall?

• Is there any information as to what contributed to Mr. Ciberay’s

Death? Please explain.

In response to the above questions, the forensic pathologist sent a letter dated

March 17, 2011, to Chartis, stating:

In essence, Mr. Ciberay came to medical attention because, while he was

intoxicated, he fell down the stairs and fractured his pelvis. Most of his

hospital course, at least as documented in the records sent for my review,

centered on managing his acute alcohol withdrawal and complication of

his chronic alcoholism. Some of his complications (such as the apparent

small bowel obstruction) could certainly have been related to the

management of his pain. He also apparently developed aspiration

pneumonia and eventually respiratory failure. He appeared to be

improving, albeit slowly, up until the day of his death. An

echocardiogram performed just before death reportedly showed findings

very suggestive of a massive pulmonary embolism. Since a complete

autopsy was not performed, this was not confirmed.

The pre-hospital factors that played a role in Mr. Ciberay’s death were

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pelvic fractures from the fall, acute alcohol intoxication, chronic

alcoholism, diabetes, and hypertension. Complicating factors that

developed in the hospital were aspiration pneumonia, small bowel

obstruction, and renal failure (of note, his creatinine already appeared

slightly elevated at admission). Based on the echocardiogram, it appears

that the complication most closely linked to causing his death was a

massive pulmonary embolism.

I would agree with the amended death certificate that the complications

of the pelvic fractures from the fall were the direct cause of Mr.

Ciberay’s death. Though autopsy confirmation would have been

desirable, the apparent presence of a massive pulmonary embolismwould

most likely have been a result of the decreased mobility that occurred as

a result of the fractures. Mr. Ciberay’s alcoholism was clearly a very

significant factor in causing his death. His very high blood alcohol at the

time of admission would have to be regarded as playing a role in causing

his fall. His chronic alcoholismvery clearly and significantly complicated

the medical management of his fractures—so much so that his

discharge/death summary stated, “most of his admission was for alcohol

withdrawal concerns.”

Based on all the information provided for my review, I would have

certified the cause of death as cardiorespiratory complications of

decreased mobility due to pelvic fractures due to fall. Acute alcohol

intoxication at the time of injury; complication of chronic alcoholism,

in withdrawal; diabetes; and hypertension would be listed as other

significant conditions. The manner of death would be accident.

After March 17, 2011, the claim memo does not mention the substance of the

forensic pathologist’s report. The reserve, however, was raised from $1 to $310,000

pending review and decision on appeal. The claim file was sent to the ERISA Appeal

Committee, which thereafter voted to deny the claim for the same reasons outlined in

the original December 3, 2010 denial letter. Plaintiff thereafter timely filed this suit.

DISCUSSION

I. Legal Standard

A. Summary Judgment

Normally, summary judgment is appropriate if the evidence presented “show[s]

that there is no genuine issue as to any material fact and that the moving party is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); Leisek v. Brightwood

Corp., 278 F.3d 895, 898 (9th Cir.2002). In the Ninth Circuit, however, “where the

abuse of discretion standard applies in an ERISA benefits denial case, a motion for

summary judgment is merely the conduit to bring the legal question before the district

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court and the usual tests of summary judgment, such as whether a genuine dispute of

material fact exists, do not apply.” Nolan v. Heald College, 551 F.3d 1148, 1154 (9th

Cir. 2009) (internal quotation marks omitted).

B. Abuse of Discretion

1. General Standard

“Where an ERISA plan confers discretionary authority upon a plan administrator

to determine eligibility for benefits, [courts] generally review the administrator’s

decision to deny benefits for an abuse of discretion.” Nolan, 551 F.3d at 1153 (internal

quotation marks omitted) (citing Metro. Life Ins. Co. v. Glenn (“MetLife”), 554 U.S.

105, 111 (2008)). “The abuse of discretion standard requires reversal of the findings

of the Plan Administrator if they are found to be arbitrary and capricious.” Shikore v.

BankAmerica Supplemental Ret. Plan, 269 F.3d 956, 960 (9th Cir. 2001).

An ERISA administrator abusesits discretion if it “(1) renders a decision without

explanation, (2) construes provisions of the plan in a way that conflicts with the plain

language of the plan, or (3) relies on clearly erroneous findings of fact.” Boyd v. Bert

Bell/Pete Rozelle NFL Players Retirement Plan, 410 F.3d 1173, 1178 (9th Cir. 2005). 

A plan administrator’s error of law also constitutes an abuse of discretion. Shikore,

269 F.3d at 960-61.

The decision of an ERISA plan administrator should be upheld “if it is based

upon a reasonable interpretation of the plan’s terms and was made in good faith.” 

Estate of Shockley v. Alyeska Pipeline Serv. Co., 130 F.3d 403, 405 (9th Cir. 1997); see

also Clark v. Washington Teamsters Welfare Trust, 8 F.3d 1429, 1432 (9th Cir. 1993)

(“Our inquiry is not into whose interpretation is more persuasive, but whether the Plan

administrator’s interpretation is unreasonable.”) (quoting MacDonald v. Pan Am.

World Airways, Inc., 859 F.2d 742, 744 (9th Cir. 1988)).

Here, there is no dispute that the Plan confers discretionary authority on the Plan

Administrator to determine eligibility for benefits; that the Plan Administrator

delegated its discretionary authority to AIG; and that AIG evaluated and denied

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Plaintiff’s claimthrough its claims administrator, Chartis. Thus, an abuse of discretion

standard applies to Defendant’s decision to deny Plaintiff’s claim for benefits.

2. Contours of Standard

Where a plan administrator operates under a conflict of interest, a court must

weigh the conflict “as a factor in determining whether there is an abuse of discretion.”

Firestone Tire &Rubber Co. v. Bruch, 489 U.S. 101, 115 (1988). A conflict of interest

exists where “a plan administrator both evaluates claims for benefits and pays benefits

claims.” MetLife, 554 U.S. at 112; see also Montour v. Hartford Life & Acc. Ins. Co.,

588 F.3d 623, 629-30 (9th Cir. 2009). Where such a bias exists, the abuse of discretion

standard should be “tempered with skepticism.” Nolan, 551 F.3d at 1155. 

Such a conflict “should prove more important (perhaps of great importance)

where circumstances suggest a higher likelihood that it affected the benefits decision,

including but not limited to, cases where an insurance company administrator has a

history of biased claims administration.” MetLife, 554 U.S. at 117. Indeed, 

a court also may weigh a conflict more heavily if: the administrator

provides inconsistent reasons for denial; fails to investigate a claim

adequately or ask the plaintiff for necessary evidence; fails to credit a

claimant’s reliable evidence; has repeatedly denied benefits to deserving

participants by interpreting plan terms incorrectly; or by making decisions

against the weight of evidence in the record.

Lavino v. Metro. Life Ins. Co., 779 F. Supp. 2d 1095, 1105 (C.D. Cal. 2011) (citing

Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 968-69 (9th Cir. 2006)).

Such a conflict “should prove less important (perhaps to the vanishing point)

where the administrator has taken active steps to reduce its potential bias and to

promote accuracy, for example by walling off claims administrators from those

interested in firmfinances, or by imposing management checksthat penalize inaccurate

decision making irrespective of whom the inaccuracy benefits.” MetLife, 554 U.S. at

117.

Still, “conflicts are but one factor among many that a reviewing judge must take

into account.” Id. at 116. “[W]hen judges review the lawfulness of a benefit denial,

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they will often take account of several different considerations of which a conflict of

interest is one.” Id. at 117. “[A]ny one factor will act as a tiebreaker when the other

factors are closely balanced, the degree of closeness necessary depending upon the

tiebreaking factor’s inherent or case-specific importance.” Id.

Here, the record reflects that, in denying Plaintiff’s claim, Defendant (through

its delegees) operated under an inherent structural conflict of interest because it had

complete authority to both evaluate and pay claims.

Defendant asserts the record is devoid of any evidence of a history of biased

claims administration, inconsistent reasons for denying Plaintiff’s claim, or a failure

to investigate Plaintiff’s claim.

Plaintiff contends the record demonstrates Defendant never intended to

investigate Plaintiff’s claim or consider payment of it at any time during the claims

process. In support, Plaintiff assertsthat, “fromthe outset, Defendant’s representatives

repeatedly referenced or quoted the intoxication exclusion,” and “shortly after the claim

submission, Chartis set its claim reserve at a mere $1.00 – a sum that was raised to half

the policy amount after the appeal was filed.” Plaintiff also asserts “there is no

indication in the [a]dministrative record that the Plan Administrator ever consulted or

researched California law at any point during the claims or appeal process to determine

if the intoxication exclusion was enforceable.” Plaintiff similarly asserts there is no

indication in the record that Defendant ever sought to discover the cause of Mr.

Ciberay’s fall. Plaintiff asserts Defendant ignored evidence that Mr. Ciberay was alert

and oriented when paramedics arrived, instead relying exclusively on his blood alcohol

level at the time of his fall, along with a chart detailing the effects of a blood alcohol

level similar to that of Mr. Ciberay’s.

Here, the Court finds that, while there is no evidence of a history of biased

claims administration or inconsistent reasons for denying Plaintiff’s claim, there is

some indication that Defendant failed to fully investigate relevant aspects of Plaintiff’s

claim. The Court agrees with Plaintiff that the record lacks any indication that

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Defendant researched or applied applicable state laws regulating insurance. 

1

On the other hand, the Court agrees with Defendant that the record demonstrates

Defendant thoroughly examined Mr. Ciberay’s medical file, including obtaining an

“independent medical opinion.” Though, other than relying on Mr. Ciberay’s blood

alcohol level and a list of typical effects associated with such a blood alcohol level,

there is no indication that Defendant fully investigated the cause of Mr. Ciberay’s fall,

which–according to Defendant–is of paramount importance in this case. 

2

Considering the foregoing, the Court concludes Defendant’s failure to fully

investigate Plaintiff’s claim requires the Court to accord moderate weight to

Defendant’s inherent structural conflict of interest in reviewing Defendant’s decision

to deny Plaintiff’s claim.

II. Analysis

Plaintiff contends the denial of her claim was an abuse of discretion because:

(1) defendant relied on an unenforceable exclusion in the Policy which

violated California’s substantive Insurance Law, (2) defendant ignored

controlling federal ERISA law, California law and the Plan’s and the

Policy’s express provisions; (3) decedent’s intoxication at the time of his

fall was not “the” cause of his death 9 days later, (4) defendant ignored

the Medical Examiner’s findings as to “the” cause of death, and (5)

defendant ignored its own forensic pathologist’s finding that decedent’s

intoxication was not “the” cause of death.

Defendant asserts there is no evidence in the record as to where the Policy was delivered, thus 1

implying there is no way to determine which state’s insurance laws might apply. Rather than excusing

Defendant from considering relevant state law, however, the Court finds this is an example of

Defendant’s failure to fully investigate Plaintiff’s claim. Where a state’s insurance laws are required

to be considered when interpreting a policy such as the one here, the Court finds it unreasonable to,

not only fail to ascertain which state’s insurance laws might apply, but to also fail to consider how

those laws affect the interpretation of the policy. See Booton v. Lockheed Med. Ben. Plan, 110 F.3d

1461, 1464 (9th Cir. 1997) (holding that denial of claim without obtaining relevant information was

an abuse of discretion).

The record lacks any clear indication that Mr. Ciberayexhibited anyof the purportedlytypical 2

effects associated with a blood alcohol level of .422%, which, according to Defendant, include: ataxia,

tremors, disorientation, disturbed equilibrium, depressed respiration, unconsciousness, and death. To

the contrary, the record indicates Mr. Ciberay was able to move all four extremities on command, was

alert and oriented, experienced pain on standing (implying he was able to stand), was breathing

normally, was conscious, and was alive. Moreover, prior to his fall, Mr. Ciberay had been playing

with his grandson in an upstairs room. Thus, given the apparent contradiction of its generic list of

typical effects with Mr. Ciberay’s actual state at the time of his fall, the Court finds it was

unreasonable for Defendant not to further investigate the cause of Mr. Ciberay’s fall. See Booton, 110

F.3d at 1464.

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Defendant asserts its decision was based upon a reasonable interpretation of the

facts, applicable Policy terms, and on substantial evidence in the administrative record. 

More specifically, Defendant contends “Plaintiff can in no way establish an abuse of

discretion by the Plan, namely that it: 1) rendered a decision without explanation, 2)

construed provisions of the Plan in a way that conflicts with the plain language of the

Plan, or 3) relied on clearly erroneous findings of fact.”

A. Applicability of State Law

Plaintiff asserts Defendant was legally and contractually bound to consult with

and apply California insurance law, but failed to do so. Specifically, Plaintiff asserts

California Insurance Code Section 10369.12, which sets forth a standard intoxication

exclusion provision, supplants the Policy’s intoxication exclusion. And that, under the

statutory provision, Defendant should have approved Plaintiff’s claim despite Mr.

Ciberay’s intoxication at the time of his fall.

Defendant asserts “Plaintiff’s argument is flawed because even if the Insurance

Code’s language applies, the medical evidence within the Administrative Record

reasonably supports that Mr. Ciberay’s death was in consequence of his intoxication.”

Thus, Defendant does not deny that itshould have considered the California Insurance

Code in assessing Plaintiff’s claim. Defendant asserts only that, even if considered, the

Insurance Code does not compel a different result. Defendant further asserts that,

“even if the Insurance Code is read into the Policy, the interpretation of that language

in a policy forming part of plan governed by ERISA is a matter to be decided under

federal law, not state law or state decisions.”

ERISA generally preempts state laws “insofar as they may now or hereafter

relate to any employee benefit plan.” 29 U.S.C. § 1144(a). Saved from preemption is

“any law of any State which regulates insurance.” Id. § 1144(b)(2)(A). This concept

isreflected in the Plan’s language, which providesthat “ERISA does not pre-emptstate

laws that regulate insurance.”

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Additionally, the Policy provides that it “is governed by the laws of the state in

which it is delivered.” While Defendant correctly notes there is no specific reference

to where the Policy was delivered, the Court is willing to infer–based on the fact that

Plaintiff lived and worked in California–that the Policy was also delivered in

California. The Court isfurther willing to make thisinference because Defendant does

not deny that it should have considered the California Insurance Code in assessing

Plaintiff’s claim. Thus, the Court concludes the Policy is governed, and must be

construed in accordance with, California laws that regulate insurance.

B. California Insurance Code

There is no dispute that California Insurance Code Sections 10369.1 through

1369.12 regulate insurance, or that the Policy is subject to those provisions. See

Heighley v. J.C. Penney Life Ins. Co., 257 F. Supp. 2d 1241, 1249 (C.D. Cal. 2003)

(“Accidental death policies. . . fall within the definition of ‘disability insurance’ under

the Insurance Code.”) (citing, inter alia, Cal. Ins. Code § 106). 

Section 10369.1 provides in relevant part:

no disability policy delivered or issued for delivery to any person in this

State shall contain provisions respecting the matters set forth in Sections

10369.2 to 10369.12, inclusive, unless such provisions are in the words

in which the same appear in such sections; provided however, that the

insurer may, at its option, use in lieu of any such provision a

corresponding provision of different working approved by the

commissioner, which is not less favorable in any respect to the insured or

the beneficiary.

(Emphasis added.) 

Section 10369.12 is thus one of eleven standard provisions that must be directly

inserted into insurance policies delivered in California unlessthe insurer gets approval

from California’s insurance commissioner to use alternate, though not less favorable,

wording. Section 10369.12 provides:

Intoxicants and controlled substances: The insurer shall not be liable for

any loss sustained or contracted in consequence of the insured’s being

intoxicated or under the influence of any controlled substance unless

administered on the advice of a physician.

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(Emphasis added.)

Applying Section 10369.1, the Court concludes the language of Section

10369.12 differs from the Policy’s intoxication exclusion because, while Section

10369.12 excludes “any loss sustained or contracted in consequence of the insured’s

being intoxicated,” the Policy’s excludes “any loss caused in whole or in part by, or

resulting in whole or in part from, . . . The Insured Person being under the influence of

drugs or intoxicants.”

Thus, the next issue under Section 10369.1 becomes whether the Policy’s

intoxication exclusion islessfavorable than the language set forth in Section 10369.12. 

If the Policy’s exclusion is less favorable than the language provided in Section

10369.12, then the statutory language should be substituted in place of the Policy

language. See Smith v. Stonebridge Life Ins. Co., 582 F. Supp. 2d 1209, 1220 (N.D.

Cal. 2008) (“[T]he statutory language controls if the Policy’s language is ‘less

favorable’ to insureds.”) (citing Olson v. American Bankers Ins. Co., 30 Cal. App. 4th

816, 828 (1994)).

The answer to whether the Policy language is less favorable than the statutory

language is clear. A loss that is caused/resulting “in whole or in part” from the

insured’s being intoxicated is more expansive than a loss that is “in consequence of”

the insured’s being intoxicated. Accordingly, under the Policy’s language, Defendant

is able to deny more claims than it would be able to under the statutory language. 

Thus, the Court will replace the Policy’s intoxication exclusion with the statutory

language of Section 10369.12. This conclusion alone dictates a finding that Defendant

abused its discretion by failing to consider the appropriate standard in considering

Plaintiff’s claim. Given Defendant’s assertion that this failure was harmless error,

however, the Court will go on to apply the language of Section 10369.12 to the facts

set forth in the record.

The next question thus becomes how the Court should interpret Section

10369.12’s “in consequence of” term. While Plaintiff would resort to California case

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law, Defendant would not. Instead, relying on Evans v. Safeco, 916 F.2d 1437 (9th Cir.

1990), Defendant asserts that, once read into the Policy, the term must be interpreted

according to “uniform federal common law.” 

TheCourt rejects Defendant’s assertion because, in Evans, the NinthCircuit was

tasked with interpreting the word “children” in an insurance policy. Holding that

interpretation of an ERISA insurance policy is governed by a uniform body of federal

common law, the Ninth Circuit interpreted the word “children” to exclude a former

spouse’s child. Nowhere in Evans, however, did the Ninth Circuit address the

interpretation of a California statute regulating insurance that must be read into an

ERISA insurance policy. How, then, should this Court interpret the “in consequence

of” term?

In Cisneros v. UNUM Life Insurance Company of America, the Ninth Circuit

declined to formulate a rule of federal common law based on a state law regulating

insurance because “the federal common law [courts] are directed to formulate must

follow from preemption, not from a conclusion that the law issaved from preemption.”

134 F.3d 939, 947 (9th Cir. 1998), cert denied, 526 U.S. 1086. Here, the “in

consequence of” term is derived from a law that is “saved from preemption.” Thus, in

the Court’s view, this militates against interpreting the “in consequence of” term

according to federal common law as Defendant would have the Court do and, instead,

suggeststhat the statutory term should be interpreted according to California case law. 

See Anderson v. Continental Casualty Co., 258 F. Supp. 2d 1127, 1131 (E.D. Cal.

2003) (resorting to California case law to determine whether a California common law

rule regulates insurance) (citing Willden v. Washington Nat’l Ins. Co., 18 Cal. 3d 631,

635 (1976)). The Court thus turns to California law to interpret the “in consequence

of” term.

In Olson, supra, the insured drowned face down in her home bath tub, after

which an autopsy revealed a .14 mg/dL blood alcohol level with therapeutic amounts

of Diazepam, commonly sold under the trade name Valium. 30 Cal. App. 4th 816. The

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insurer denied a claim for benefits under the policy’s intoxication exclusion, and a jury

trial followed. The trial court instructed the jury that the statutory language of Section

10369.12 applied and that itshould interpret the term“in consequence of” to mean “the

proximate cause.” The California Court of Appeal approved the trial court’s

interpretation. Id. at 830-31. In so doing, the court relied on Garvey v. State Farm

Fire & Casualty Co., 48 Cal. 3d 395 (1989), in which the California Supreme Court

“noted that, in previously characterizing the ‘but for’ clause of [another statute

regulating insurance], it had impliedly recognized that ‘coverage would not exist if .

. . an excluded risk was the efficient proximate cause (meaning predominant) cause of

the loss.’” Olson, 30 Cal. App. 4th at 830 (quoting Garvey, 48 Cal. 3d at 402-03). 

Thus, in applying the language of Section 10369.12, the Court will interpret the “in

consequence of” term to require the insured’s intoxication to be the “efficient

proximate cause” of the loss in order for the loss to be excluded.

3, 4

TheCalifornia Supreme Court has explained that the “efficient proximate cause”

is the cause “that sets the others in motion.” Sabella v. Wisler, 59 Cal.2d 21, 31-32

(1963). It is the “cause to which the loss is to be attributed, though the other causes

may follow it, and operate more immediately in producing the disaster.” Id. Thus,

“where there is a concurrence of different causes, the efficient cause—the one thatsets

the othersin motion—isthe cause to which the lossisto be attributed, though the other

To the extent necessary, the Court adopts this interpretation as a rule of uniform federal 3

common law. See Saltarelli v. Bob Baker Group Medical Trust, 35 F.3d 382, 386 (9th Cir. 1994)

(“ERISA preemption does not mean that general principles of state law are irrelevant to interpretation

of ERISA-governed insurance contracts. On the contrary, the courts are directed to formulate a

nationally uniform federal common law to supplement the explicit provisions and general policies set

out in ERISA, referring to and guided by principles of state law when appropriate, but governed by

federal policies at issue.” (internal quotation marks omitted)).

Courts interpreting statutes and policies containing intoxication exclusion with the “in 4

consequence of” language have reached similar conclusions. See, e.g.,Cabernoch v. Union Labor Life

Ins. Co., 2009 WL 928998, at *5 (N.D. Ill Apr. 6, 2009) (interpreting “in consequence of” under

Illinois law to require a showing that “intoxication was the sole proximate cause of the injury” to

justify excluding coverage); Rivers v. Conger Life Ins. Co., 229 So. 2d 625, 627-28 (Fla. Dist. Ct. App.

1969) (“The words ‘in consequence of being intoxicated’ mean that a causative connection between

intoxication and death must be shown if coverage is to be denied.”); Interstate Life & Accident Ins.

Co. v. Gammons, 56 Tenn. App. 441, 446 (1966) (“insurer excepted from liability only if it proves

insured’s intoxication was ‘the’, not ‘a’, proximate cause of death”).

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causes may follow it, and operate more immediately in producing the disaster.” Id.

Still, “the fact that an excluded risk contributed to the loss would not preclude coverage

if such a risk was a remote cause of the loss.” Garvey, 48 Cal. 3d at 402-03.

C. Federal Causation Cases

Other federal courts have interpreted policy exclusions to require proof of a

causative connection between an insured’s excluded state (e.g., intoxication, illness,

etc.) and the insured’s loss. The Court finds these cases instructive with regard to the

degree of causation required in deciding whether Mr. Ciberay’s intoxication was the

efficient proximate cause of his death.

In Hastie v. J.C. Penney Life Insurance Company, the insured died after

colliding with a vehicle that had switched into his lane. 115 F.3d 895, 896 (11th Cir.

1997). The death certificate listed “multiple blunt traumatic injuries” asthe immediate

cause of death, “motorcycle-motor vehicle accident” asthe “underlying cause of death”

and “acute alcohol intoxication” as a “significant condition contributing to death but

not resulting in the underlying cause,” as the insured’s blood alcohol level was

measured at .254 at the time of his autopsy.

The insurer denied a claim for accidental death benefits by the insured’s wife

under two insurance policies pursuant to the policies’ intoxication exclusions. One

exclusion provided, “[n]o benefit shall be paid for Loss caused by or resulting from

. . . an Injury occurring while the Covered Person is intoxicated . . . .” The other

exclusion provided “[n]o benefit shall be paid for any loss . . . which is caused by or

results from . . . an Injury occurring while the Covered Person is intoxicated.” The

insurer argued that the insured’s status as intoxicated triggered the exclusions. The

Eleventh Circuit rejected the insurer’s argument as unreasonable, finding the case was

similar to a Florida case, in which the Florida Supreme Court required some proof of

a causal connection between an insured’s intoxication and his death.

In Kellogg v. Metropolitan Life Insurance Company, the insured crashed into a

tree and later died at the hospital. 549 F.3d 818 (10th Cir. 2008). A witness who

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observed the accident stated she noticed the driver appeared to be having a seizure

before veering into the tree. The medical examiner concluded the insured suffered a

“subarachnoid hemorrhage” and a “basilar skull fracture” from a “solo motor vehicle

accident.” The autopsy further revealed that the insured had Bupropion in his

bloodstream at the time of his death and that this drug had a reported risk factor of

seizures.

The insurer denied a claim for accidental death benefits pursuant to the policy’s 

physical illness exclusion. In deciding whether the insured’s death was “caused” by

his apparent seizure, the Tenth Circuit concluded “the car crash—not the

seizure—caused the loss at issue, i.e., [the insured’s] death.” The court thus concluded

that the exclusionary clause of the policy did not apply. 549 F.3d at 829. In reaching

its conclusion, the court relied on Vickers v. Boston Mutual Life Insurance Co., 135

F.3d 179 (1st Cir. 1998).

In Vickers, the insured had a heart attack while driving and died after crashing

into a tree. The insurer denied coverage under the policy’s illness exclusion, even

though the death certificate listed the cause of death as “[m]ultiple blunt force

traumatic injuries secondary to motor vehicle accident precipitated by acute coronary

insufficiency.” In reversing the denial of benefits, the Court concluded that while the

heart attack caused the crash, the crash was the sole cause of death. 135 F.3d at 181-

82.

Similarly, in Johnson v. Life Investors’ Insurance Co., 98 Fed. Appx. 814 (10th

Cir. 2004), the insured (who had muscular dystrophy and a history of falls) fell down

a set of stairs and broke his neck. After admission to the hospital, the insured

developed pneumonia and died. The insured’s immediate cause of death was

“pneumonia due to, or as a consequence of, a cervical spine fracture, and the

underlying cause of death [w]as myotonic dystrophy.” The insurer denied coverage

under the policy’s physical illness exclusion. In reversing the denial of coverage, the

Tenth Circuit concluded “it is undisputed that the immediate cause of [the insured]’s

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loss was a fall, it is irrelevant under the terms of the this policy whether the fall was

caused by his myopic [sic] dystrophy.” Id. at 818.

D. Application of Intoxication Exclusion

Here, the Court first notes that it views Defendant’s denial of benefits with a

moderate amount of skepticism per its inherent structural conflict of interest, as set

forth in Discussion Section I(B)(2), above.

Considering the facts of this case, along with the statutory language of Section

10369.12, the Court concludes the record containsinsufficient evidence for Defendant

to have reasonably concluded that Mr. Ciberay’s death was “in consequence” of his

intoxication. In the first instance, there isinsufficient evidence to reasonably conclude

that Mr. Ciberay’s intoxication caused his fall. But, even assuming there were

sufficient evidence to reach that conclusion, Mr. Ciberay’s intoxication wastoo remote

from his death to reasonably conclude his intoxication was the efficient proximate

cause of his death.

The medical examiner’s amended report, along with the opinion of Defendant’s

independent forensic pathologist, makes clear that Mr. Ciberay very likely died of a

pulmonary embolism. The pulmonary embolism was very likely due to Mr. Ciberay’s

decreased mobility. Mr. Ciberay’s decreased mobility was due to his pelvic fractures. 

Mr. Ciberay’s pelvic fractures were due to his fall. And while one may argue, as

Defendant does here, that Mr. Ciberay’s intoxication wasthe efficient proximate cause

of his death because it began the chain of events leading to his death, there is simply

insufficient evidence to reasonably conclude Mr. Ciberay’s intoxication caused him to

fall.

Other than a generic list of the typical effects associated with a blood alcohol

level similar to that of Mr. Ciberay’s at the time of his fall—which, importantly,

appears to be entirely contradicted by Mr. Ciberay’s activity before falling and by his

disposition when paramedics arrived as set forth in Footnote 2 above—one may only

speculate as to what actually caused Mr. Ciberay to fall. The fall may have been, as

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Plaintiff posits, related to the type of footwear Mr. Ciberay was wearing (if any), the

type of flooring on the stairs, the fact that Mr. Ciberay was carrying dishes, or any

combination of these and other factors. In short, Defendant relies on the fact that Mr.

Ciberay was intoxicated without sufficiently tying Mr. Ciberay’s intoxication to his

death.

Furthermore, the Court finds the facts of this case analogous to those in Hastie,

Kellogg, Vickers, and Johnson. That is, given the medical examiner’s conclusion that

Mr. Ciberay’s death was caused by “complicationsfollowing pelvic fractures” with his

“alcohol abuse” (not intoxication) being only a contributing factor to his death, the

Court concludes Defendant could not have reasonably decided Mr. Ciberay’s

intoxication wasthe efficient proximate cause of his death. Therefore, the intoxication

exclusion does not apply.

CONCLUSION

For the foregoing reasons, the Court must reverse Defendant’s denial and enter

summary judgment in favor Plaintiff. Accordingly, IT IS HEREBY ORDERED that

Defendant’s Motion for Summary Judgment is DENIED, and Plaintiff’s Motion for

Summary Judgment is GRANTED. Defendant’s denial of Plaintiff’s claimfor benefits

under the Policy istherefore REVERSED. The Clerk of Court isthus directed to enter

judgment in favor of Plaintiff in the amount of $620,000.

DATED: June 10, 2013

HON. GONZALO P. CURIEL

United States District Judge

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