Contract Law - Canons of Interpretation - Sixth Circuit Invokes Contra Proferentem as Default Rule for Resolving Ambiguous Contract Provisions

Harvard Law Review, December 2018 | Go to article overview

Contract Law - Canons of Interpretation - Sixth Circuit Invokes Contra Proferentem as Default Rule for Resolving Ambiguous Contract Provisions


CONTRACT LAW--CANONS OF INTERPRETATION--SIXTH CIRCUIT INVOKES CONTRA PROFERENTEM AS DEFAULT RULE FOR RESOLVING AMBIGUOUS CONTRACT PROVISIONS.--Heimer v. Companion Life Insurance Co., 879 F.3d 172 (6th Cir. 2018).

In Heimer v. Companion Life Insurance Co., (1) the Sixth Circuit purported to rule on the by-now venerable question of "whether a contract should mean what it says." (2) The panel majority answered this question in the affirmative by finding a disputed insurance policy provision unambiguous. (3) And yet, perhaps to assuage any possible doubt, the majority also deployed the canon of contra proferentem: even if the provision were ambiguous, the panel would still have been bound to construe it exactly as it did--against the drafter. (4) Heimer supports the position that contra proferentem is a penalty, rather than a majoritarian, default rule. (5) Although penalty defaults usually address inefficient bargaining between parties, the Sixth Circuit deployed contra proferentem to shift the costs of ambiguity away from itself and onto least cost avoiders. (6)

On the night of his accident, plaintiff Beau Heimer, age twenty-two, (7) was riding a dirt bike with his friends "after nightfall in a farm field." (8) Heimer and his friends had been drinking that night--Heimer's own blood alcohol content towered at 0.152, nearly twice the legal limit for the operation of a motor vehicle. (9) The group had collectively courted this acute state of inebriation to the end of playing a dangerous "game" with simple rules: two players would "hurtle themselves toward each other at high speed ... to see who might 'chicken out' at the last second." (10) The winner would be the rider who stayed his course, the loser the rider who swerved away. Unfortunately, when Heimer took his turn, neither he nor his opponent "chicken[ed] out." (11) He suffered "catastrophic injuries" in the resulting collision, treatment for which generated medical bills in excess of $197,333. (12)

Peter Heimer, plaintiff's father, submitted a medical claim form to defendant Companion Life Insurance, requesting reimbursement for plaintiff's medical treatment. (13) Defendant denied coverage "under the health benefit plan exclusion #43," which barred any compensation for "treatment of any injury or [s]ickness which occurred as a result of a [c]overed [p]erson's illegal use of alcohol." (14) Administrative appeal of this denial failed; defendant had determined that plaintiff's "use of alcohol directly contributed to his illegal act of operating an off road vehicle while impaired." (15) Plaintiff appealed the administrative judgment under the Employee Retirement Income Security Act of 1974 (16) (ERISA), arguing in the United States District Court for the Western District of Michigan that defendant had denied him coverage in breach of contract (17): Exclusion 43 did not apply because he had not illegally consumed alcohol on the night of the accident. (18)

The district court heard this case as a "narrow issue of policy construction" on the scope of Exclusion 43. (19) Judge Neff held for the plaintiff on the grounds that "constru[al of] the unambiguous terms of the policy ... as they are commonly understood" did not yield a reading of Exclusion 43 that covered any part of plaintiff's behavior on the night of the accident. (20) Plaintiff's consumption of alcohol was not, in any usual sense, "illegal," as he was drinking neither as a minor nor in violation of a court order. (21) Although plaintiff's operation of the dirt bike was illegal, the unambiguous meaning of the phrase "illegal use of alcohol" did not include any "illegal post-consumption conduct." (22) The court distinguished cases that defendant cited as evidence of alternative reasonable meanings by observing that such cases were based on different plan language and decided under deferential standards of review. (23) Finally, the court stated that even if the phrase were ambiguous, "any ambiguities in the language of the plan [must] be construed strictly against the drafter of the plan. …

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