Linda Edwards v. Employees Retirement System of Texas and Group Life and Health, a Division of Fort Dearborn Life Insurance Company

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-03-00737-CV

Linda Edwards, Appellant

v.

Employees Retirement System of Texas and Group Life and Health, A Division

of Fort Dearborn Life Insurance Company, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT

NO. GN203838, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

M E M O R A N D U M O P I N I O N

The Board of Trustees of the Employment Retirement System of Texas (the Board) (1)

denied Linda Edwards's claim for voluntary accidental death and dismemberment benefits citing an

exclusion in the policy for a death that was the "direct result" of the insured's being under the

influence of alcohol. The district court reviewed the record of the administrative proceedings and

affirmed the Board's order in its entirety. Linda Edwards contends that the district court erred

because the Board lacked the authority to make findings of fact contrary to those recommended by

the administrative law judge (ALJ), that the Board failed to interpret the language of the policy

exclusion in her favor, and that the Board erroneously changed the ALJ's conclusion of law that ERS

had met its burden of proof. We affirm the judgment of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

Linda Edwards made a claim with ERS seeking life insurance benefits through her

daughter's employment with the Texas Department of Criminal Justice. Linda Edwards's daughter

Yovette Edwards died in a single-car accident in the early morning hours of New Year's Day 1999.

She was survived by her mother and two minor children. Although Linda Edwards's issues focus

primarily on the legal standards relating to the Board's denial of her claim, a brief overview of the

record concerning the accident is useful.

Yovette Edwards attended two parties on the night of the accident with James

McClendon. McClendon followed Yovette Edwards in a separate car as they traveled from the first

party to the second. When the two left the second party, McClendon again followed Yovette

Edwards's car. McClendon was the only witness to the accident. He told police that, directly before

the accident, Yovette Edwards was driving too fast for him to follow, and that he had to drive 45-50

miles-per-hour in order to keep her in sight. He then saw her car spin around and, when he caught

up, the car was upside down. McClendon discovered that Yovette Edwards was not moving and ran

to a nearby house to call an ambulance. She was later pronounced dead at the scene. An autopsy

revealed that she had a blood alcohol content of .19 and a vitreous alcohol content of .13. Her death

was caused by blunt force injuries to her skull.

Yovette Edwards's car went off the road at a turn where the posted speed limit was

30 miles-per-hour. Police officers who investigated the scene concluded that Yovette Edwards's car

struck a mound of dirt by the side of the road causing it to roll over four or five times and eventually

land upside down on the roadway. It was drizzling with a light fog, and the pavement was wet,

slippery, and poorly lit.

The role of Yovette Edwards's intoxication in the accident was examined by several

sources. Deputy Medical Examiner Elizabeth Peacock explained in her deposition that consumption

of alcohol can lead to a variety of symptoms including: emotional instability, decreased inhibitions,

loss of critical judgment, impairment of memory and comprehension, decreased sensory response,

slower reaction time, muscular incoordination, disorientation, mental confusion, dizziness, and

double vision. She stated that a person driving with a blood alcohol content of .19 would be a danger

to herself and others. Dr. Peacock also concluded that in an accident involving damp road

conditions, poor visibility, and excessive speed, the driver's blood alcohol content of .19 would be

the most significant factor in causing the accident. Toxicologist J. Rod McCutchen gave deposition

testimony that similarly explained the effects of alcohol on a person and concluded that Yovette

Edwards's intoxication made the accident much more likely. Officer Jeff Donohue, who

investigated the accident, was also asked about the effects of alcohol in his deposition. He testified

as to the general impairments associated with intoxication and concluded that Yovette Edwards's

blood alcohol content of .19 contributed to her accident.

After a hearing and full briefing by the parties, the ALJ issued a Proposal for Decision

(PFD) granting Linda Edwards's appeal of the denial of her claim. The PFD interpreted the

exclusion in the insurance policy to apply only when the insured's intoxication was a proximate

cause of the loss. The PFD discredited the medical experts' conclusions that Yovette Edwards's

intoxication was the most significant factor in the accident on the grounds that those experts lacked

expertise in accident reconstruction and did not view the scene. Citing Officer Donohue's deposition

testimony, the ALJ found that:

the concurrent probable causes of the accident (each of which, if removed from the

chain of causation, would likely have resulted in no accident) were speeding, poor

visibility, and the odd terrain. An additional probable cause of her death was the

existence of the dirt mounds, in that the three causes of the accident, in a natural and

continuous sequence, coupled with encountering the dirt mounds, led to her car

flipping and killing her.

Although Donohue stated that Yovette Edwards's intoxication "contributed" to the accident, the ALJ

concluded that "an inference that intoxication was the most significant factor, and that its absence

would have avoided the accident, cannot be drawn from Officer Donohue's testimony."

The General Counsel of ERS submitted alternative proposed findings of fact and

conclusions of law to the Board. ERS's proposed findings modified the ALJ's findings of facts by

adding a finding that Yovette Edward's blood alcohol content was an additional factor, along with

her speed, the poor visibility, and the odd terrain, "without each of which the accident would not

have occurred." Citing title 34, section 67.91 of the administrative code, the proposed findings

contained an extensive discussion explaining that the addition was justified because the original

finding in the PFD was (1) against the intent, as determined by the board, of the intoxication

exclusion in the insurance policy; (2) was against the weight of the evidence; (3) was based on an

insufficient review of the evidence and was clearly erroneous and illogical; and (4) was not sufficient

to protect the public interest, the interest of the plans and programs for which the Board is trustee,

or the interests, as a group, of the participants covered by such plans and programs.

The proposed findings modified the ALJ's conclusions of law by eliminating a

paragraph that stated that ambiguities in the terms of the exclusion for intoxication--including the

term "direct result"--should be construed in favor of the insured. The Board changed the language

of the conclusions to reflect its determination that the exclusion for intoxication applied to Linda

Edwards's claim.

The Board adopted ERS's revised findings as submitted in an August 21, 2002 order

denying benefits to Linda Edwards. Linda Edwards filed suit in district court challenging the

Board's decision. The district court affirmed the Board's order in its entirety finding that it was

made in compliance with all applicable law, supported by substantial evidence, and not arbitrary and

capricious.

DISCUSSION

Linda Edwards challenges the Board's failure to defer to the ALJ's findings of

adjudicative fact and also contends that the Board failed to interpret the policy exclusion in her favor

when it defined "direct result" as synonymous with a proximate cause standard.

Deference to the ALJ's factual determinations

Linda Edwards contends in her first and third issues that the Board failed to accord

proper deference to the factual determinations of the ALJ, specifically to the findings that her

daughter's intoxication was not a "concurrent probable cause" of the accident, and that ERS failed

to meet its burden to prove that the intoxication exclusion applied to her claim. She argues that the

ALJ's findings regarding the role of alcohol in the accident and its ruling that ERS had not met its

burden of proof were findings of adjudicative fact that the Board was not authorized to modify. See

Flores v. Employees Retirement Sys. , 74 S.W.3d 532, 539 (Tex. App.--2002, pet. denied). Such a

change was thereby arbitrary and capricious and rendered the role of the ALJ meaningless. See id .

at 540 (citing Montgomery Indep. Sch. Dist. v. Davis , 34 S.W.3d 559, 564 (Tex. 2000)).

In Flores , this court discussed the concepts of adjudicative facts and legislative facts.

See id . We recognized that one of the purposes of the Administrative Procedure Act is to limit the

discretion of an agency in reviewing the recommendations of an ALJ in a contested case hearing.

Id . at 540. The ALJ is generally in a better position to determine questions of who, what, where,

when, how, and why (adjudicative facts) because the ALJ is a neutral decision maker who has

personally heard the evidence and has had the opportunity to observe the demeanor of the witnesses.

Id . at 539. By contrast, factual determinations that assist a tribunal decide issues of law and policy

(legislative facts) are better suited for the agency. Id .

In light of these principles, the legislature has limited the discretion of the Board

through section 815.511 of the government code. Although the code specifically grants the Board

the power to "modify, refuse to accept, or delete any proposed finding of fact and conclusion of law

contained in a proposal for decision submitted by an [ALJ]," the statute requires the Board to state

its reasoning for the changes in writing and allows the Board to adopt rules governing its review of

contested case hearings. Tex. Gov't Code Ann. § 815.511 (d) (West Supp. 2004). The Board's rules

adopted in compliance with the government code further guide the Board's discretion. See 34 Tex.

Admin. Code § 67.91 (b) (2004) (Employees Retirement Sys., Hearings on Disputed Claims). The

Rules permit the Board to:

modify or delete any proposed finding of fact or conclusion of law, or make

alternative findings of fact and conclusions of law, if it determines that the proposal

for decision submitted by the examiner, or a proposed finding of fact or conclusion

of law therein is:

clearly erroneous or illogical;

is against the weight of the evidence;

is based on misapplication of the rules of evidence or insufficient review

of the evidence;

is inconsistent with the terms or intent, determined by the board, of benefit

plan or insurance policy provisions; or

is not sufficient to protect the public interest, the interests of the plans and

programs for which the board is trustee, or the interests, as a group, of the

participants covered by such plans and programs.

Id . Under these rules, the Board may not modify, delete, or add findings of fact and conclusions of

law merely because the Board does not agree with the ALJ; the Board's changes must be justified

under the rule with its reasons stated in writing. See id .

Our review of the Board's findings of fact and conclusions of law focuses on whether

the Board's stated reasons for modifying the PFD were consistent with its discretion under section

815.511 of the government code and title 34, section 67.91 of the administrative code. An ALJ's

findings of fact, even adjudicative facts, are not completely isolated from review by the Board. The

Board's discretion to modify an ALJ's findings stems from the statute and its administrative rules.

Linda Edwards contends that the Board arbitrarily modified the ALJ's findings in her

case by improperly substituting its own view of the evidence after it had delegated that role to the

ALJ. See Davis , 34 S.W.3d at 564 ; Flores , 74 S.W.3d at 539 . Contrary to Linda Edwards's

argument, these cases do not generally prohibit an agency's modification of an ALJ's findings of

adjudicative fact; rather an agency's modification is arbitrary and capricious only when the

modification is contrary to the agency's statutory authority or the administrative proceeding is

otherwise lacking in procedural due process. In Davis , for example, the supreme court focused its

consideration on whether a school board's modification of findings was permitted by the specific

provision of the education code governing its authority to review the findings of an ALJ. See 34

S.W.3d at 564 . In Flores , this court also looked to the government code and the administrative code

provisions that prescribe the Board's authority to review findings in contested case hearings. See

74 S.W.3d at 541 ; see also Langford v. Employees Retirement Sys. , 73 S.W.3d 560, 566 (Tex.

App.--2002, pet. denied).

In this case, the Board gave proper notice to the parties, accepted briefing on the

issues and heard argument. The Board gave detailed justifications for its modification of the ALJ's

findings, citing the specific provisions of the government code and administrative code that

authorized the Board to make the changes. Although Linda Edwards contends that the Board

improperly cited policy grounds for its modification of the ALJ's fact findings regarding the role of

alcohol in the accident, the Board also stated that the ALJ's decision was against the weight of the

evidence. See 34 Tex. Admin. Code § 67.91 . (2)

In its written statement explaining why the ALJ's finding was against the weight of

the evidence, the Board cited the expert testimony of medical examiner Dr. Peacock and toxicologist

McCutchen--that a person with a blood alcohol content of .19 would be severely impaired,

dangerous, and much more likely to drive recklessly. Both Peacock and McCutchen concluded that

Yovette Edwards's intoxication was the most significant factor in causing her accident. The Board

discussed officer Donohue's testimony concerning the adverse effects of alcohol on a driver and his

conclusion that Yovette Edwards's intoxication was a "contributing factor" in the accident. The

Board also cited Linda Edwards's testimony that her daughter usually was a cautious driver and

would not normally have driven at an unsafe speed in adverse conditions like those at the time of the

accident.

The evidence in the agency record consistently points to Yovette Edwards's

intoxication as the primary reason for the accident. The PFD attributes the accident to Yovette

Edwards's excessive speed in poor conditions, but ignores the testimony of all of the witnesses who

attributed her loss of control of the car to her blood alcohol content, which was more than twice the

legal limit. We agree that the ALJ's findings of fact were against the weight of the evidence and it

was, therefore, within the Board's discretion to modify them. Likewise, we find nothing arbitrary

in the Board's modification of the conclusions of law to reflect its determination that intoxication

played an important role in the accident and that ERS met its burden to prove the exclusion applied.

Because the Board's actions were within its statutory authority, not arbitrary and capricious, we

overrule Linda Edwards's first and third issues.

Direct result

Linda Edwards also contends that the Board improperly interpreted the language of

the policy excluding coverage for a death that is the "direct result of the insured Employee being

under the influence of alcohol as evidenced by a blood alcohol content of at least .10 percent weight

by volume." She argues that the term "direct result" is ambiguous and should be construed in her

favor. Although she does not indicate what interpretation the Board should have adopted, the

arguments in her brief imply that she would have the exclusion apply only if alcohol was the sole

cause of the accident.

The ALJ, however, did construe the term "direct result" in favor of the insured and

determined that it meant proximate cause. Although the Board deleted the paragraph indicating that

the language of the exclusion be construed in favor of the insured, it retained the definition of "direct

result" as proximate cause. Even construing the meaning of "direct result" in favor of the insured,

we cannot conclude that the exclusion only applies when intoxication was the sole cause of an

accident.

The authority cited in support of this argument interprets language where the

insurance policy refers to a loss "resulting directly and independently of all other causes " from an

accident. See Stroberg v. Insuranc e Co. of No. Am. , 464 S.W.2d 827, 828 (Tex. 1971). The supreme

court in Stroberg , however, focused on the language "independently of all other causes" in

concluding that an insurance policy applied only when the accident was the sole proximate cause of

the loss. Id . at 829. The implication of Stroberg is that without the addition of the phrase

"independently of all other causes," the language "resulting directly" means proximate cause. See

also Flores , 74 S.W.3d at 548 ("Had the legislature intended a sole cause standard, it could have

given some indication, for example, by using 'solely results' or 'directly results independently of all

other causes.'"). (3)

We interpreted similar language in Flores in determining the language defining

occupational disability as a disability or disease that "directly results from a specific act or

occurrence . . . inherent in a duty that arises from . . . state employment." 74 S.W.3d at 537 . After

weighing various policy concerns we agreed with the Board that "directly results" meant "primary

cause," not proximate cause. See id . at 551.

Regardless of whether the proper interpretation of the language at issue is proximate

cause or primary cause, however, it simply would not make sense to interpret "direct result" to mean

sole cause. Limiting the exclusion to accidents solely caused by the insured's being under the

influence of alcohol would reserve its application to rare instances where the accident was unrelated

to impaired judgment or dulled driving response to adverse conditions--perhaps the rare case of

alcohol poisoning. Such an interpretation would render the provision practically meaningless.

Furthermore, as the Board correctly noted in its proposed findings, the deleted

paragraph was inconsistent with our prior decision in Employees Retirement System v. Benge , in

which we explicitly stated:

As in the case of an agency's interpretation of its own regulations or a statute

entrusted to the agency's administration, the Board's interpretation of a policy

exclusion is entitled to judicial respect regarding any uncertainty.

942 S.W.2d 742, 745 (Tex. App.--Austin 1997, writ denied).

Because the Board's interpretation was within its statutory authority and entitled to

judicial respect, we overrule Linda Edwards's second issue.

CONCLUSION

Having overruled all of Linda Edwards's issues, we affirm the judgment of the district

court.

Bea Ann Smith, Justice

Before Justices Kidd, B. A. Smith and Pemberton

Affirmed

Filed: August 26, 2004

1. We use "the Board" when referring to the Board of Trustees of the Employment Retirement

System of Texas. When we refer to the Employment Retirement System of Texas and Group Life

and Health as parties in this litigation, we will use ERS.

2. The Board cited four other permissible justifications for a modification of findings stated

in section 69.71 and provided a thorough discussion of why the provisions applied to its

modification. Linda Edwards has not specifically challenged the Board's explanations, but asserts

that the Board lacked the authority to modify the ALJ's findings of fact generally.

3. In fact, the policy at issue defines "accidental bodily injury" as a violent, external accidental

bodily injury resulting, directly and independently of all other causes from an accident, except as

excluded by the policy.