AIG’s denial of accidental death benefits to Continental employee’s children reeks of hypocrisy

July 10, 2:48 PMHouston U.S. District Court ExaminerFrank Taylor

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American International Group, Inc., (AIG) recently won another round in a court battle over the denial of accidental death benefits to the minor children of a Continental Airlines employee who died in the crash of private airplane near Cleveland, Texas. A three-judge panel of the United States Court of Appeals for the Fifth Circuit concluded that AIG did not act arbitrarily or capriciously in deciding that Istvan Macsai, the employee, was intoxicated at the time of the crash. Against the backdrop of a government bailout, the facts and history of Dutka v. AIG Life Insurance Company demonstrate that AIG holds its insureds to a higher standard of responsibility than it holds itself.

The panel’s written opinion and other court documents reveal that, on September 15, 2005, Mr. Macsai was piloting the plane at low altitude while on a reconnaissance flight of deer hunting sites and that the failure to maintain adequate air speed resulted in a stall or spin from which there was not time to recover. The crash killed both Mr. Macsai and the two passengers in the plane.

Mr. Macsai had enrolled in an accidental death benefit plan through Continental and designated his two minor children as the beneficiaries of the policy. The Employee Retirement Income Security Act of 1974 (ERISA) governed the benefit plan. Following the crash, Mr. Macsai’s former wife, Nora Dutka, submitted a claim to AIG, the insurer, for accidental death insurance benefits on behalf of the children. AIG denied the claim, and its ERISA Appeals Committee upheld the denial.

Although a post-mortem blood test was negative for cocaine and alcohol, it did detect the prescription drug propoxyphene in Mr. Macsai’s blood. A toxicology report disclosed that both cocaine and propoxyphene were present in Mr. Macsai’s urine. The benefit plan excluded coverage for losses that resulted from being under the influence of drugs or intoxicants.

An expert for AIG opined that Mr. Macsai “had recently illegally used cocaine, had used alcohol, and had taken the prescription drug Propoxyphene within a few hours of his death.” AIG based the denial of the claim on the expert’s opinion and the exclusion in the benefit plan.

Ms. Dutka filed a complaint in the United States District Court for the Southern District of Texas (case number 4:07-cv-04316) to challenge the denial of benefits. District Judge Keith Ellison granted summary judgment to AIG based upon his conclusion that, although there was no proof that the drugs in Mr. Macsai’s system were a cause of the fatal crash, the denial of benefits was not unreasonable. In his written order, Judge Ellison lamented that, “[a]lthough denying benefits to minors is never easy,” the uncontroverted evidence left him with no alternative.

On appeal, the Fifth Circuit panel questioned the logic of AIG’s expert. The panel wrote:

It betrays logic to jump from inability to rule out cocaine use to opining to “a reasonable degree of medical certainty” that the decedent “used cocaine . . . within a few hours of his death.”

Although the panel conceded that there were “weaknesses in the evidence,” it nevertheless determined that, under the applicable standard, “the plan administrator did not abuse its discretion in finding that the crash was caused by the pilot’s intoxication.”

The President of the United States, Barack Obama, has remarked that AIG “is a corporation that finds itself in financial distress due to recklessness and greed.” No one could plausibly deny that reckless business decisions caused or at least contributed to the financial problems of AIG. Is it not hypocritical for AIG to deny benefits to Mr. Macsai’s children without more substantial proof that drugs caused their father's fatal accident?

For more info: 
Website of the National Transportation Safety Board
Search for accident number DFW05FA240 at NTSB's Aviation Accident Database & Synopses