Appeals Court Holds That Insurer's Benefits Determination Was "De Novo" Wrong

The United States Court of Appeals for the Eleventh Circuit (which hears and decides appeals of decisions from the federal courts in Florida, Alabama and Georgia) held yesterday that Aetna Life Insurance Co. violated ERISA by failing to properly investigate a benefits plan participant's benefits claim. See Capone v. Aetna Life Insurance (11th Cir 01/05/2009) (http://case.lawmemo.com/11/capone.pdf).

By way of background, the participant/claimant suffered a spinal injury diving into the ocean after consuming alcohol. The conflicted plan administrator (acting as both evaluator and payor of claims) denied the claim under the insurance policy's alcohol exclusion provisions. The participant sued the plan administrator for violation of ERISA alleging wrongful denial of benefits. The trial court granted the plan administrator's motion for summary judgment. The 11th Circuit reversed.

On appeal, the 11th Circuit resolved the case applying the "de novo standard" of review and determined that the plan administrator's decision was "wrong," and reasonable grounds did not support the denial. Applying Georgia's "accidental means" test to the circumstances of the participant's accident, the Court of Appeals determined that the participant had established a prima facie case that an unforeseen wave had created a shallowness in the ocean that had not otherwise existed (i.e., the accident was an actual accident and not the result of the participant's intoxication). Because the Court of Appeals determined that the plan administrator had not properly investigated the participant's claim, the Court concluded that the denial of benefits without a proper investigation was "de novo wrong." Furthermore, the court found that the record did not sufficiently connect the participant's decision to dive with his state of intoxication - thus, the denial of benefits based upon the alcohol exclusion of the policy without more was "de novo wrong."