Often times the silliest of facts patterns illustrate the important principles of plan administration. Take the case of McDonough v. Federal Insurance, a recent case out of Massachusetts where the fight was over accidental death benefits for an employee who died of a cocaine overdose. The plan denied the claim under its "Intentional Injury" exclusion as "self-inflicted," which meant there was no coverage for the claim.
The Court disagreed. The Court went straight to the language of the policy exclusion and determined that because the language did not specifically exclude drug-related deaths as "intentional," the insurance company had to rely on it's definition of accident. It could not reasonably be said that the decedent intended to die from ingesting cocaine, so the denial of the claim as "intentional" was overturned. But the Court did not grant recovery in favor of the estate. Instead, the Court held the matter open for more briefing over the definition of "accident" in the policy. See, one of the key terms defining accident in the plan is that the death has to be "unexpected." So the case will now turn on how much cocaine was consumed that lead to the overdose and whether one would have expected to die from ingesting that amount.
While the facts sound a little crazy, the concepts are clearly relevant to plan administrators. As much as facts and circumstances are relevant to court cases, the starting point of every analysis is always the language of the plan. You always look first to what the plan says. So it is important for plan sponsors to make sure their plans clearly say what they mean for them to say. Definitions should be clear, consistent and free of ambiguities. Exclusions should likewise be specific and plan sponsors should not assume "catch-all" phrases will be sufficient. Even with discretion to interpret the plan, poorly worded documents or unclear definitions lead to disputes and litigation.