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"Sane or Insane" Suicide Exclusion Limits Liability to Return of Premiums

"Sane or Insane" Suicide Exclusion Limits Liability to Return of Premiums

Robinson v. American General Life Ins. Co., 2014 WL 3385162 (D.S.C. July 10, 2014)

ERISA and Life Insurance News
(May 12, 2015)

In February 2011, Mitchell was issued a life insurance policy by American General, providing a death benefit of $800,000.  The policy included the following exclusion:

In the event of the suicide of the insured, while sane or insane, within two years from the Date of Issue, [the insurer's] liability will be limited to the premiums paid.

Mitchell designated his wife Meredith Mitchell as the sole beneficiary of the policy, and he paid all premiums on time.

In September 2012, Mitchell died of a self-inflicted gunshot wound to the head. His wife claimed the death benefit under the policy.  American General sent a check to Ms. Mitchell as a refund of the premiums paid under the policy.  Ms. Mitchell returned the check and demanded the full death benefit of $800,000.  She later filed suit, and American General removed the case to federal court and filed a motion for judgment on the pleadings.

Before his death, Mitchell had been receiving treatment for depression at Three Rivers Center for Behavioral Health, and, according to the complaint, he "did not want to die."  The complaint included three expert witness affidavits asserting that Three Rivers provided care that fell below the relevant standard of care.  Ms. Mitchell argued that because of her husband's mental illness, his death was not an intentional self-killing, and therefore, it was not a suicide.

The court determined that the real legal question was whether insanity may be used to avoid a suicide exclusion in a life insurance policy – not whether the insured killed himself intentionally.  The clear language of the exclusion provided that insanity could not be used to avoid the policy's suicide exclusion.

Next, Ms. Mitchell argued that her husband's death was "caused by the negligence of third parties," alleging that Three Rivers was guilty of medical malpractice, and that the death therefore was not intentional.

S.C. Code § 38–63–225(A) provides: "If an individual life insurance policy contains a suicide provision, it may not limit payment of benefits for a period more than two years from the date of issue of the policy and it must provide for at least the return of premiums paid on the policy." The court relied on an unpublished decision construing South Carolina law in which the Fourth Circuit held: "[W]here it is already established that the policyholder committed suicide ... [the insurer] need only establish that it has complied with the above two restrictions" to avoid liability – except for the return of premiums paid. McKinnon v. Lincoln Benefit Life Co., 162 F. App'x 223, 227 (4th Cir. 2006).

The court found that Mitchell's policy clearly complied with § 38-63-225(A), because it provided for the return of premiums, and it limited nonpayment of the full death benefit to a two-year term.  Mitchell committed suicide about 19 months after the policy's date of issue – well within the two-year window described in the policy.  Moreover, American General complied with the policy by attempting to refund the premiums to Ms. Mitchell.

Because the complaint and expert affidavits plainly alleged and admitted that Mitchell died from suicide, the question of his mental health – sanity or insanity – was irrelevant.

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H. Sanders Carter
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Andrea K. Cataland
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Kenton J. Coppage
T (404) 962-1065
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