In Dowdy v. Metro. Life Ins. Co., 16-15824, 2018 U.S. App. Lexis 12648 (9th Cir. May 16, 2018), the Ninth Circuit ruled that an accident plan that covers “accidental injury that is the Direct and Sole Cause of a Covered Loss” really covers many losses that have causes other than the accidental injury. And the court held that an illness does not “contribute to” a loss unless it is a “substantial cause” of the loss. In so holding, the Court: relied on some Congressional policies underlying ERISA while ignoring others; and read language into a Plan that was not there.

Mr. Dowdy was in a car accident, resulting in a “semi-amputated left ankle.” After several months of treatment, in which the ankle did not heal and was persistently infected, he underwent a below-the-knee amputation. There was no dispute that Mr. Dowdy was diabetic, and his surgeon opined that he “had wound issues, which were complicated by his diabetes. The wound healing as well as his fracture itself was slow to heal[.]”  The surgeon identified other issues related to the accident, and he stated that the amputation was “[d]ue to his multiple comorbidities as well as nonhealing wounds to his left leg and osteomyelitis[.]”

Mr. Dowdy was covered under an AD&D plan with the following coverage language:

If You or a Dependent sustain an accidental injury that is the Direct and Sole Cause of a Covered Loss described in the SCHEDULE OF BENEFITS, Proof of the accidental injury and Covered Loss must be sent to Us. …

Direct and Sole Cause means that the Covered Loss occurs within 12 months of the date of the accidental injury and was a direct result of the accidental injury, independent of other causes.

The Plan also contained an exclusion “for any loss caused or contributed to by . . . physical . . . illness or infirmity, or the diagnosis or treatment of such illness or infirmity[.]”

Mr. Dowdy submitted a claim, and MetLife denied it, finding that the accident was not the “direct and sole” cause of the amputation “independent of other causes” and that, even if it were, the exclusion applied because diabetes “caused or contributed to” the loss.

Mr. Dowdy sued, and the district court upheld MetLife’s determination, holding that the diabetes  was a substantial cause of the loss and that it “clearly contributed to the loss.” The Ninth Circuit reversed, finding clear error.

The Ninth Circuit began by stating that federal common law applies to the question of the scope of the plan, and that federal common law should adopt rules that “best comport[] with the interests served by ERISA’s regulatory scheme. The court stated: “Congress specifically stated that it is ‘the policy of [ERISA] to protect . . . the interests of participants in employee benefit plans and their beneficiaries’ and to ‘increase the likelihood that participants and beneficiaries . . . receive their full benefits.’ 29 U.S.C. §§ 1001(b), 1001b(c)(3).

To be sure, the “full benefits” that Congress wanted participants and beneficiaries to receive are the  “contractually defined benefits[;]” that is, the benefits that the Plan provides. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989). And Congress also specifically declared that it is the “policy of [ERISA] “to encourage the maintenance and growth” of plans and “to maintain the premium costs of such system at a reasonable level[.]” 29 U.S.C. § 1001b(c). See Locher v. UNUM Life Ins. Co. of Am., 389 F.3d 288, 295 (2d Cir. 2004). But Dowdy did not mention any of that.

Dowdy then held that “Direct and Sole Cause” as used in the Plan, did not really mean “independent of other causes” as defined in the Plan. Rather, its meaning depended on whether the language was “conspicuous or inconspicuous” in the Plan. If it was conspicuous, then “Direct and Sole” meant “independent of other substantial cause.” If the language was inconspicuous, then “Direct and Sole” meant “independent of other predominant or proximate cause.” The court held that it was not necessary to decide whether the language in the Plan was conspicuous or inconspicuous, because MetLife failed to satisfy even the less stringent “substantial cause” test.

The court gave a detailed, but not very illuminating, discussion of what “substantial cause” meant. It stated that it required a cause that was “more than merely a contributing factor,” and something beyond a “relationship of undetermined degree.” Citing to the Restatement (Second) of Torts, it further explained that “’substantial’ is used to denote … such an effect in producing the harm as to lead reasonable men to regard it as a cause[.]” The Restatement distinguished it from the “philosophic sense” of the word “cause,” “which includes every one of the great number of events without which any happening would not have occurred.” Dowdy went on to say that a “substantial cause” required “some evidence of a significant magnitude of causation,” and that it must be “more than merely related to the injury, and was instead a substantial catalyst.” Clear, right?

However one interprets “substantial” (after deciding to read that word into the Plan), it would appear clear that diabetes has a substantial impact on the failure of a serious wound to heal, especially when the treating doctor expressly noted it as one of the complicating factors in the failure to heal that led to the amputation.

But the Ninth Circuit held that it was clear error for the district court to find that diabetes was a substantial cause of the loss. The court reached that conclusion because the treating doctor “did not elaborate, even generally, on how much of a role that complicating factor [of diabetes] played in Mr. Dowdy’s failure to recover[,]” and he also identified “a host” of other contributing factors. The court held: “Based upon the evidence presented in the administrative record, Mr. Dowdy’s diabetes was a complicating factor, but it was not identified as a substantial contributor to the ultimate loss.”

Having so interpreted the coverage provision in the Plan, the court then turned to the exclusion. The district court had held that the exclusion applied, because Mr. Dowdy’s diabetes “caused or contributed to” the loss. Because it had just found that “diabetes was a complicating factor” in the amputation, one might assume that the Ninth Circuit would have to agree that the diabetes at least “contributed to” the loss. That assumption would be wrong.

The Ninth Circuit held that the exclusion – even though it used different language – meant exactly the same thing as the coverage provision:

We hold, for the same reasons discussed above, that the substantial contribution standard applies in interpreting the concepts of cause and contribution in this exclusion.  The Illness or Infirmity Exclusion serves the same purpose as the threshold limitation on coverage to accidental injury that is the “direct and sole cause” of a covered loss. Accordingly, to satisfy the Exclusion, any cause or contribution by an illness or infirmity must be substantial.

So, in the Ninth Circuit, “direct and sole” cause in an accident plan does not mean that the accident needs to be the “direct and sole” cause of the loss. Instead, there can be numerous other causes, as long as none of them rise to the level of “substantial.” And an illness or disease will be found to “contribute to” an accidental loss only if it is a “substantial cause” of that loss. In other words, “contribute to” means the same thing as “cause,” and “cause” means “substantial cause,” no matter what different adjectives the plan might use.