Virginia Lawyers Weekly

Roderick A. Bailey lost control of his motorcycle in July 2005 in Buchanan County and incurred more than $100,000 in medical expenses from the single-vehicle crash.

Bailey sought coverage for the medical bills under his Anthem Individual KeyCare Plan, but Anthem Health Plans of Virginia Inc. denied coverage.

The reason? Bailey was charged originally with drunken driving and pleaded guilty to reckless driving in the crash.
A provision of the policy says it “does not cover any loss that results from the covered person committing or attempting to commit an illegal act.”

A Class 1 misdemeanor such as reckless driving is by definition an illegal act, so it was not obligated to pay Bailey’s medical expenses, the insurer contended.

Bailey filed a declaratory judgment action, but Buchanan Circuit Judge Henry A. Vanover ruled on cross motions for summary judgment that the illegal act of reckless driving barred coverage.

The Supreme Court of Virginia has granted Bailey’s appeal in Bailey v. Anthem Health Plans of Virginia Inc., Record No. 082014.
Bailey’s attorney, Daniel R. Bieger of Abingdon, said he had never before encountered such language in a healthcare policy, much less seen an effort to enforce it.

Anthem’s attorney, Richard E. Ladd Jr. of Bristol, said healthcare policies establish “finite, not infinite rights and responsibilities” and “these types of injuries are not covered under the plan.”

In his brief filed with the Supreme Court, Bieger emphasized that the term “illegal act” is not defined anywhere in the policy and is in a “General Provisions” section 20 pages removed from a section of the policy that lists exclusions in alphabetical order.

One of those exclusions, under “W,” rules out coverage “for injuries or sicknesses caused by any act of war, declared or undeclared, or by participating in a felony, riot or any other act of civil disobedience.”

The term “illegal act” is “a term so broad as to be reasonably defined to include every violation of any law which might result in injury or sickness,” Bieger wrote. “Plaintiff contends the intent of the parties to exclude coverage for ‘felon’ is, thus much narrower than this all-encompassing term ‘illegal act.’

“Additionally, because of the vast difference in the meaning of these terms, ‘illegal act’ should not have been construed so as to exclude coverage for the negligent, non-intentional misdemeanor of ‘reckless driving’ to which the Plaintiff pled guilty …,” Bieger said.

“[T]he trial court’s construction of the policy renders the promise of insurance illusory because, under it, coverage can be denied for even the most trivial and unintentional law violation,” Bieger added. “A slippery slope cannot exist in the language of an insurance policy.”

No slope exists, much less a slippery one, Ladd argued in his brief in opposition. “[T]he question of whether the illegal act exclusion would violate public policy as applied to a negligent, non-intentional act is immaterial to his case because Bailey’s conduct was intentional and reckless and endangered human life,” he said.

The attempt to create an ambiguity between the “illegal act” provision and the exclusion for a felony also failed, Ladd contended. Grouping “felony, riot or any other act of civil disobedience” under the same heading as war showed that felony was to be read in that context and has no relevance to the “illegal act” provision, Ladd argued.

“The two clauses are complementary, not contradictory,” he wrote, “The fact that there would be overlap does not make the meaning of the term ‘illegal act’ unclear.”

Owen Hunt, an attorney for Anthem based in Richmond, said the illegal acts provision is in the company’s individual plans but not in its group plans, in part because Virginia Code § 38.2-3504 specifically authorizes it for individual plans.

“It doesn’t come up that often” because the company does not scrutinize claims looking for injuries that might have been related to an illegal act, Hunt said.

But when medical records demonstrate that the injuries occurred during the commission of an illegal act, the company enforces the provision, he said.

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