Court Upholds Felony Exclusion Application in DUI Case

November 8, 2007 ( - The administrator of an accidental death benefit plan with a felony exclusion has been cleared of wrongdoing in denying benefits to the widow of a participant who died in a drunk-driving crash.

The 7 th U.S. Circuit Court of Appeals said Life Insurance Co. of North America (LINA) was within its rights in enforcing the felony exclusion in a case involving participant William Steele and his widow Laura Steele.

Circuit Judge Diane S. Sykes, writing for the court, found that a felony conviction was not a prerequisite for the exclusion to kick in. All that was required for the exclusion was that the conduct was punishable as a felony and resulted in a covered loss.

The Facts

According to the opinion, William Steele died after crashing his car while under the influence of alcohol. His widow’s death benefit application to LINA was denied under the exclusion because a third conviction for driving under the influence (DUI) is a felony in Illinois where the car crash took place.

Laura Steele challenged the determination in a lawsuit, whichChief U.S. District Judge Michael P. McCuskey of the U.S.District Court for the Central District of Illinois later threw out after determining that the LINA decision was neither arbitrary nor capricious.

The Ruling

In approving McCaskey’s ruling, the three-judge appellate panel rejected Laura Steele’s argument that the exclusion was inapplicable because her husband was not actually convicted of a third DUI, due to his untimely demise. The 7 th Circuit said that conviction is only a prerequisite for criminal punishment to result, not for the plan exclusion to apply. The Illinois DUI statute did not define felony with any reference to whether there had been a conviction, the court added.

The appellate court also rejected Steele’s argument that because a prosecutor said in an affidavit that he would not have charged William Steele with a felony, the plan exclusion was inapplicable – an assertion the appellate judges rejected. The appellate judges said insurers should not have to depend on a state’s decision to prosecute in enforcing their plan exclusions.

“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,” the 7 th Circuit said.

The opinion in Steele v. Life Insurance Co. of North America, 7th Cir. No. 06-1331, 11/7/07 is  here .