California Code Does Not Exclude Coverage for Accidental Prescription Overdose Death
Insurance Law Update
U.S. District Court for the Northern District of California
For the first time in a published opinion, a court has interpreted California Insurance Code section 10369.12, holding that the statutory exclusion applies to both individual and group life and disability policies, but that the exclusion does not bar coverage for an accidental death resulting from an overdose of prescribed medication.
In Smith v. Stonebridge Life Ins. Co., ___F.Supp.2d ___, 2008 WL 4531818 (N.D. Cal. October 7, 2008), the insured was found dead next to a bottle of a narcotic pain killer prescribed by her physician. The toxicology report revealed the presence of the narcotic “on the low end of potentially toxic,” and the insured’s death was classified as accidental. Nonetheless, defendant denied benefits under an accidental death policy based upon a policy exclusion for deaths resulting from the use of a narcotic unless used “as prescribed by a physician.” The court held the policy exclusion was more restrictive than California’s statutory exclusion for deaths resulting from the use of a “controlled substance unless administered on the advice of a physician,” and therefore substituted section 10369.12 for the policy exclusion.
Defendant Stonebridge argued that section 10369.12 does not apply to individual policies, only group policies, and that it excludes coverage for deaths resulting from an overdose of prescription medication. The court held that section 10270, the structure and organization of the code, regulations, and court decisions supported the application of section 10369.12 to individual as well as group policies. The court further held that section 10369.12 did not exclude coverage for accidental deaths resulting from an overdose of a prescribed drug because the purpose of the statute is to exclude losses resulting from the illegal use of drugs as opposed to the use of a drug prescribed by a physician.
Stonebridget further contended that if section 10369.12 is not applied when an insured takes medication inconsistent with the prescription, then insurers will be unprotected from the risk of an intentional overdose. The court disagreed because beneficiaries still have the burden of proving that the insured’s death was “accidental” and, in California, a death is not considered “accidental” if the decedent “designed, anticipated” or “virtually intended” her death.