Injury Resulting From Medical Treatment Is Not An "Accident" Under AD&D Policy

Posted on December 14, 2010 by Michael Rigney

SELLERS v. ZURICH AMERICAN INSURANCE CO. (December 3, 2010)

On September 15, 2005, Time Warner Cable employee Anthony Sellers suffered a torn tendon in his knee while at work. His surgeon, Dr. Schultz, repaired the tear and inserted a metal wire in the knee to facilitate Sellers' recovery. The wire was originally scheduled to be removed after several months. Dr. Schultz decided to leave it in, however, because Sellers was experiencing no pain. He eventually removed the wire on November 16, 2006, after Sellers complained of swelling and x-rays showed that the wire had broken into three pieces. Tragically, Sellers died nine days later from acute pulmonary embolism. Anthony's widow Audrey Sellers made a benefits claim under Sellers' accidental death and dismemberment policy, a part of Time Warner's employee welfare benefit plan. The plan provided for accidental death benefits if an "injury" results in death within a year of the "accident." Zurich American Insurance Company, which issued the policy, denied benefits. Its position was that the death occurred more than one year after the accident. It rejected Sellers' position that the wire breakage was an "injury." Sellers brought suit under ERISA. The district court remanded for more expansive findings and rationale on whether the wire breakage was an injury. Zurich again denied the claim. Its rationale was that an accident is an "unexpected event" and that, as evidenced by the Schultz's notes, the wire breakage was expected. On the renewal of the cross-motions for summary judgment, Judge Adelman (E.D. Wis.) granted summary judgment to Zurich. Sellers appeals.

In their opinion, Seventh Circuit Judges Flaum, Manion, and Tinder affirmed. The Court first noted that it was applying an arbitrary and capricious standard of review, because Time Warner's benefit plan gives Zurich discretion to construe policy terms and Zurich based its decision on a construction of the plan's terms. On the merits, the Court found Zurich's construction of the plan arbitrary and capricious because it applied its definition of accident through the eyes of a doctor instead of a person of average intelligence and experience. Nevertheless, the Court affirmed the denial of benefits based upon its decision in Senkier. In that case, the court held that a death that is the result of complications of a standard medical treatment is the result of the underlying cause for the treatment. Here, the wire breakage was not an accident because it was an expected risk of the original surgery. Thus, the accident is the original tear and Sellers' death did not occur within a year.

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Under Illinois Law, An Accident Occurs Where All The Factors Come Together To Produce A Force That Inflicts Injury

Posted on April 21, 2010 by Michael Rigney

ACE AMERICAN INSURANCE CO. v. RC2 CORP. (April 5, 2010)

RC2 produces and markets children's toys. In 2007, it recalled some of its wooden train sets that had been manufactured in China and sold in the United States. The recalled trains contained lead. A number of class-action suits were filed. RC2 looked to its insurers. It first filed a claim with its domestic insurer. That insurer denied coverage because its policies expressly excluded damages caused by lead paint. RC2 turned to its international insurer, ACE American Insurance Co. ACE denied coverage as well, on the grounds that its policies excluded damages from occurrences that took place in the United States. ACE sought a declaration that it had no duty to indemnify or defend – RC2 counterclaimed for declaratory relief and damages. The district court granted summary judgment to RC2 and awarded $1.6 million in defense costs. ACE appeals.

In their opinion, Judges Posner, Manion, and Hamilton reversed and remanded. The Court first looked at the language of the policies to determine if any ambiguity existed, giving the words their ordinary meaning. The policies cover bodily injury and property damage caused by an "occurrence" that takes place in the “covered territory" (which is defined as anywhere in the world other than the United States). "Occurrence" is further defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Court found that this language, particularly the connection between the accident and the exposure, supported ACE’s position that the occurrence took place in the United States. Nevertheless, it concluded that the use of the word "accident" in the policy itself might be considered ambiguous. An otherwise ambiguous term in the policy, however, can be rendered unambiguous when considered against the interpretation of that term by the courts over the years. Applying that principle, the Court concluded that Illinois and most other courts take a consistent approach -- that it is the location of the injury, not the location of some precipitating negligent act, the determines the location of an accident for insurance purposes. The Court rejected RC2's position that Illinois' adoption of the "cause theory" is dispositive. The "cause theory" is relevant only to a determination of the number of occurrences, not the location of occurrence. Therefore, the accident occurred were all the factors combined to create the force that inflicted the injury – and that is the United States.  

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