In Dowdy v. Metropolitan Life Ins. Co., ____ F.3d ___ (9th Cir. May 16, 2018), the Ninth Circuit Court of Appeals reversed a district court’s denial of a motion for judgment pursuant to Federal Rule of Civil Procedure 52 filed by Metropolitan Life Insurance Company (“MetLife”), arguing that the claim of insured Tommy Dowdy (“Dowdy”) for amputation of his leg following a motor vehicle accident was not covered under an accidental death and dismemberment policy governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).

In September 2014, Dowdy suffered serious injuries in a motor vehicle accident, including a “semi-amputated left ankle”. His injury failed to improve, and he re-entered the hospital in early 2015 for treatment of persistent infection issues, ultimately leading to amputation of his left leg below the knee in February 2015.

Dowdy’s wife had purchased accidental death and dismemberment insurance from MetLife. The policy was governed by ERISA and contained the following coverage provision:

If You or a Dependent sustain an accidental injury that is the Direct and Sole Cause of a Covered Loss described in the SCHEDULE OF BENEFITS, Proof of the accidental injury and Covered Loss must be sent to Us. When We receive such Proof We will review the claim and, if We approve it, will pay the insurance in effect on the date of the injury.

Direct and Sole Cause means that the Covered Loss occurs within 12 months of the date of the accidental injury and was a direct result of the accidental injury, independent of other causes.

The policy also included an “illness or infirmity” exclusion which provided that MetLife would not issue benefits “‘for any loss caused or contributed to by . . . physical . . . illness or infirmity, or the diagnosis or treatment of such illness or infirmity’.”

The Dowdys initially submitted a request for benefits shortly prior to the amputation of Dowdy’s leg, which MetLife denied. Post-amputation, the Dowdy’s submitted another request for benefits, which was again denied by MetLife. In denying coverage, the insurer relied on a letter from Dowdy’s surgeon, Dr. Christopher Coufal, in which he stated that Dowdy had

sustained significant injuries to his left lower extremity with an open grade III B pilon fracture. He had significant multiple other comorbidities and traumatic injuries. . . . He had wound issues, which were complicated by his diabetes. The wound healing as well as his fracture itself was slow to heal and never had any significant healing in spite of being stabilized with the external fixator. He ended up developing deep infection . . . consistent with osteomyelitis and sequestrum, which was related to original injury. Eventually, due to his comorbidities as well as type of injury he ended up proceeding to an amputation. On 2/13/15, he underwent elective left below-the-knee amputation for treatment of this infected nonunion of the left pilon fracture.

Similarly, Dr. Coufal’s surgical report stated that

[o]ver the past several months, [Mr. Dowdy] has had very poor signs of healing . . . . Attempts at soft tissue coverage have been unsuccessful. Due to his multiple comorbidities as well as nonhealing wounds to his left leg and osteomyelitis, it was elected to undergo a left below-the-knee amputation.

MetLife denied the claim on grounds that the illness and infirmity exclusion applied, citing Dr. Coufal’s report as indicating that the amputation was contributed to and complicated by Dowdy’s diabetes. After MetLife’s coverage determination was upheld on administrative appeal, the Dowdys sought judicial review in federal court. In ruling on cross-motions for judgment under Federal Rule of Civil Procedure 52, the district court affirmed the denial of benefits, declining to consider extrinsic evidence and finding that Dowdy’s diabetes caused or contributed to the need for amputation.

On appeal, the Ninth Circuit reversed, finding that the claim fell within the coverage provision of the policy and that such coverage was not excluded by the illness and infirmity exclusion. First, the Court of Appeals found no error in the district court excluding extrinsic evidence, citing the rule that “[r]eview of a benefits denial is generally limited to the factual record presented to the plan administrator.” Moreover, only one of the four pieces of evidence excluded by the district court (Dowdy’s medical chart) was relevant, and the district court had correctly concluded that the chart did not support Dowdy’s claim.

The Ninth Circuit then determined that the motor vehicle accident was the “direct and sole cause” of the amputation within the meaning of the coverage provision of policy, even if the more stringent “substantially contributed” standard required for conspicuous policy provisions applied.

In McClure v. Life Ins. Co. of N. Am., 84 F.3d 1129 (9th Cir. 1996), we determined that where the applicable plan language is less than obvious (“inconspicuous”), the “policy holder reasonably would expect coverage if the accident were the predominant or proximate cause of the disability.” Id. at 1135-36. If, however, the applicable language is conspicuous, recovery could be barred if a preexisting condition substantially contributed to the loss, “even though the claimed injury was the predominant or proximate cause of the disability.” Id. at 1136.

Here, we need not determine whether the applicable policy language is conspicuous or inconspicuous, because even under the more demanding substantial contribution standard, the Dowdys are entitled to recovery. In affirming the plan administrator’s denial of coverage, the district court concluded that diabetes “caused or contributed to the need for amputation.” We agree that the record establishes that diabetes was a factor in the injury. Nonetheless, the factual record does not support a finding that diabetes substantially contributed to Mr. Dowdy’s loss.

The Court of Appeals noted that “[ i ]n order to be considered a substantial contributing factor for the purpose of a provision restricting coverage to ‘direct and sole causes’ of injury, a pre-existing condition must be more than merely a contributing factor,” and referred to the definition of “substantial cause” in the Restatement (Second) of Torts:

The word “substantial” is used to denote the fact that the defendant’s conduct has such an effect in producing the harm as to lead reasonable men to regard it as a cause, using that word in the popular sense, in which there always lurks the idea of responsibility, rather than in the so-called “philosophic sense,” which includes every one of the great number of events without which any happening would not have occurred. Each of these events is a cause in the so-called “philosophic sense,” yet the effect of many of them is so insignificant that no ordinary mind would think of them as causes.

Restatement (Second) of Torts § 431 cmt. a (Am. Law Inst. 1965).

For a court to distinguish between a responsible cause and a “philosophic,” insignificant cause, there must be some evidence of a significant magnitude of causation. Such evidence need not be presented with mathematical precision, but must nonetheless demonstrate that a causal or contributing factor was more than merely related to the injury, and was instead a substantial catalyst.

The Ninth Circuit then concluded that the record failed to show that Dowdy’s diabetes was a substantial contributing factor to the amputation:

The record here falls short of showing that diabetes was a substantial contributing factor. Dr. Coufal opined that Mr. Dowdy’s “wound issues” post-surgery were “complicated by his diabetes.” He did not elaborate, even generally, on how much of a role that complicating factor played in Mr. Dowdy’s failure to recover. Dr. Coufal identified a host of contributors, including the original, “significant . . . pilon facture,” “potential bony sequestrum indicating osteomyelitis” related to the initial injury, and a resulting “deep infection.” In summarizing the grounds for surgery, Dr. Coufal faulted both “comorbidities” and the “type of injury.”

The district court concluded that coverage is barred because, as the Plan “dictates,” no physical or mental illness can “’cause or contribute'” to the loss, and “Mr. Dowdy’s diabetes clearly contributed to his loss.” The court also found “that the complications of Mr. Dowdy’s diabetes substantially contributed to the need for amputation.” Although the district court cited the substantial contribution standard, its application of that standard was clear error, as it was overly strict and not consistent with the requirement that the contributing factor be, in fact, substantial.

The Ninth Circuit then turned to the illness or infirmity exclusion, finding that the same “substantial cause” standard applied such that “to satisfy the Exclusion, any cause or contribution by an illness or infirmity must be substantial.” Consequently, for the same reasons cited previously, the record failed to show that Dowdy’s diabetes substantially caused or contributed to the loss and the exclusion did not apply.

Again, the record with respect to the role of diabetes in Mr. Dowdy’s recovery is notably thin. The car accident resulted in a severe injury that came close to amputating his lower leg. Dr. Coufal opined that when attempts were made properly to correct the lower leg, subsequent wound issues were complicated by diabetes, and the fracture itself was slow to heal. Ultimately, however, Mr. Dowdy suffered a deep infection that Dr. Coufal considered “related to the original injury.” In light of this evidence, and giving the Exclusion the required strict reading, MetLife cannot meet its burden of showing that diabetes substantially caused or contributed to the loss.

The Ninth Circuit remanded the case to the district court for a determination of the amount of benefits owed to the Dowdys.