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 crashing 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 conduct the insurance policy excludes from coverage. Litigation 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 requires.

I. Background

William Steele worked for CSX Corporation as a railroad 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 provided 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 application 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 Coverage.)
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 reports pertaining to the accident indicate William’s bloodalcohol 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 offenses, 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 concluded 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 reviewed 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 judgment 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 conclusion. 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 provision); 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

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.

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 reason 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 governed 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 irrelevant; 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 insurance coverage dispute.1

 The policy’s relevant exclusion

language states: “No benefits will be paid for loss resulting 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
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 inapplicable. She focuses on the language of the penalty enhancement 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 support 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 punishment. . . . Illinois does not define ‘felony’ with any reference to whether there has been a ‘conviction.’ ” Berg v. Bd.

of Trs., Local 705 Int’l Bhd. of Teamsters Health & Welfare 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 committing 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 concluded 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 necessarily 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 insured’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

2 The certificate indicates that Mr. Steele died of “multiple blunt

force trauma” due to an “auto vs. pick-up mishap.”

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—constructing 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 conduct 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 punishable 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 alcohol 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
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