Attorneys: Guolee, Terrence F.
In Steele v. Life Insurance Company of North America, 507 F.3d 593 (7th Cir. November 7, 2007), rehearing denied, 2007 U.S. App. LEXIS 29089 (7th Cir. December 5, 2007), the U.S. Court of Appeals for the Seventh Circuit, applying Illinois law, held that the felony exclusion under an employee benefit accidental death policy applied where the death resulted from an act punishable as a felony, even though there was no felony conviction.
While driving under the influence of alcohol, William Steele died in a car accident. There was no dispute that Steele was legally intoxicated. Indeed, the record reflected he had two previous driving under the influence (DUI) offenses and, in Illinois, while the first two DUIs are treated as misdemeanors, a third DUI is a felony. 625 ILCS 5/11-501(b-2) (2002) and 625 ILCS 5/11- 501(d)(1)(A).
After the accident, Steele's widow sought benefits from an accidental death policy. The policy's underwriter, Life Insurance Company of North America, denied the claim under the policy's felony exclusion. According to the policy, losses were excluded if they resulted from the "commission of a felony by the insured." The policy stated:
... We agree to pay benefits for loss from bodily injuries:
caused by an accident which happens while an insured is covered by this policy; and
which, directly and from no other causes, result in a covered loss. (See the Description of Coverage.)
We will not pay benefits if the loss was caused by:
sickness, disease, or bodily infirmity; or
any of the Exclusions listed on page 2.
One of the listed exclusions on "page 2" stated:
No benefits will be paid for loss resulting from:...commission of a felony by the Insured.
The plaintiff, William Steele's widow, argued that there had to be a third DUI conviction in order to be classified as a felony and submitted an affidavit from an Illinois prosecutor attesting that he would not have charged her husband with a felony.
However, reviewing previous decisions on the inability to prosecute a dead person, the court found that the felony exclusion applied to the "commission of a felony" and that the decedent died while committing an act punishable as a felony. Therefore, an actual conviction was not necessary.
In reasoning that there was no need for an actual conviction to apply the felony exclusion, the court noted that for criminal punishment to result - of either the misdemeanor or felony level of severity - a conviction is a prerequisite. However, in an insurance coverage context, the court found that plaintiff's emphasis on the absence of a conviction was misplaced, noting that Illinois law does not define 'felony' with any reference to whether there has been a 'conviction.'" Citing, Berg v. Bd. of Trs., Local 705 Int'l Bhd. of Teamsters Health & Welfare Fund, 725 F.2d 68, 70 (7th Cir. 1984) (interpreting insurance coverage exclusion for "the commission of a felony" under Illinois law).
Likewise, the court found plaintiff's reliance on the prosecutor's affidavit was also misplaced, finding that whether a prosecutor would charge or seek to convict Steele for a felony is not relevant; as his death occurred during his commission of an act that is punishable as a felony, which is all the policy exclusion requires. Moreover, the court held that insurers "should not be dependent upon the state's decision to prosecute" in enforcing their policy language excluding claims arising out of the criminal conduct of their insureds.
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