Articles Posted in Life Insurance

The correct response is, “maybe, or maybe not, depending on the facts, and the state in which you reside.”

Insurance policies very often have time limits on the submission of a claim for benefits. In some states, those deadlines are VERY strictly construed, and once the deadline has passed, it does become “too late” to make a claim.

However, more than half of the states apply some form of an insurance rule called the “notice prejudice” doctrine.  Simply put, even if an insurance policy imposes a time limit for the submission of the claim, if certain rules are met, a claim can be submitted after the time limit if the late notice does not “prejudice” the insurance company’s ability to investigate the claim.  However, that is just a basic summary of the rule.  In the states that apply some form of the notice prejudice doctrine, its application differs from state to state.  In some states, the insured making the late claim must demonstrate a “good reason” for making a late claim.  In others, the burden falls on the insured to prove that no prejudice would be suffered by the insurance company because of the late claim submission.

Elizabeth Hopkins and Michelle Roberts, Kantor & Kantor Partners, recently obtained a favorable decision from the Fourth Circuit Court of Appeals in Richmond, Virginia, concluding that a widow could hold her deceased husband’s employer accountable for its actions in preventing her from obtaining the life insurance under her husband’s ERISA-covered benefit plan.

Specifically, although the employer, National Counseling Group (NCG), collected premiums for the life insurance coverage from the husband until the time of his death, it never told him that when he began to work part-time, he became ineligible under the plan but could convert his coverage to an individual policy.  After he died, NCG told his widow not to pursue her claim against the insurance company because it was going to pay her the full benefits, even though it later refused to do so.  Despite these misdeeds, the trial judge dismissed the case after concluding that NCG owed no fiduciary duty to either the decedent or his widow.

Kantor & Kantor attorneys, who are ERISA litigation specialists, took over the case for the appeal.  They argued that the trial judge’s ruling was wrong because NCG was named as a fiduciary and plan administrator in the governing documents and, as such, NCG was required to give accurate and complete information to both the decedent and to his widow.

As you probably know, insurance companies are masters of fine print. You may think you have coverage for a condition or injury under your insurance, but when the worst happens, you may find out that you weren’t actually covered after all. Or, you may be covered, but you didn’t have as much coverage as you thought you did.

You can’t always protect yourselves from these gotchas. Many of us have insurance through our employers, and we don’t have power to negotiate the terms of those policies.

However, you can still avoid nasty surprises by reading the fine print in advance. Medical insurance is the type of insurance most people are familiar with, and while you don’t need to know your entire insurance policy by heart, you should know the basics of calculating your benefits – i.e., what your deductible, coinsurance, copay, and out-of-pocket maximums are.

Maybe you’ve heard (or experienced) the tragic story of someone becoming ill, forgetting or being unable to pay their life insurance premium, only to see the policy lapse at the time it is needed most. It’s more common than you may realize, and at our law firm we see it quite often. It is terribly unfortunate.

What most people don’t realize, however, is that there is law in California that may come to the rescue. That law is known as the “notice prejudice” rule. The rule emanates from a judicially created doctrine dating back to at least 1963, when the California Supreme Court decided Campbell v. Allstate Ins. Co. (1963) 60 Cal.2d 303, 305. The rule is simple: it prohibits insurers from denying insurance benefits on the ground that the insured presented an untimely claim, unless the insurer can show it was prejudiced by the delay. It is expressly designed to prohibit insurance companies from disclaiming liability based on a “technical escape hatch,” and to protect insureds from the unfair forfeiture of their benefits on procedural grounds. (The rule is also widespread; the majority of states impose a similar requirement on insurers.)

So, how does the rule apply to lapsed life insurance? Well, it is important to state at the outset that it only applies in certain circumstances. One of the most common examples is when the life insurance policy also includes a provision that premium payments will be excused or “waived” in the event the insured becomes disabled. This is usually referred to as a “life waiver of premium provision” (LWOP) or something similar. Many policies have such provisions but policyholders just aren’t aware of the benefit.

At Kantor & Kantor, we see the same scenario over and over again.   An individual submits a claim to a life insurance company, seeking to receive the life insurance benefits due to them resulting from the death of a loved one.   However, instead of a check, the individual receives a letter from the insurance company telling them why they WON’T be receiving any benefits.     The beneficiary is shocked, but feels helpless.  

The insurance company must know what they are doing, RIGHT?   

The insurance company wouldn’t negligently or intentionally fail to pay which should be paid, RIGHT?

Okay, that headline is a simplification, and maybe even an overstatement, but that’s the attitude of insurance companies, and even courts, when looking at evidence related to life, health and disability claims.

At Kantor & Kantor, one of the most common complaints we hear from prospective clients goes something like this: “When I called the insurance company, they told me to do xxxxxx. So I did xxxxxx. But then they sent me a letter denying my claim/cancelling my coverage because I didn’t do yyyyyy, as the policy required.”

Unfortunately, no matter how much we want to believe the prospective client, our answer is almost always the same: you have to understand, and act as though someone will one day soon say to you,  “if you can’t prove it, it never happened.”

When you think of what lawyers do for a living, the first thing you probably think of is arguing over a case in front of a judge.

You may be surprised to learn, then, that in the federal courts this staple of practicing law seems to be on the way out. The federal district courts – the trial courts of the federal system – are increasingly holding fewer and fewer oral arguments. Some district courts even have a standing default rule that they won’t hear oral argument on a motion unless the presiding judge explicitly asks for it.

This trend is even more accentuated in the federal circuit courts – the appellate courts of the federal system. While the Supreme Court of the United States holds oral argument in almost all of its cases, the circuit courts of appeal do not.

As you know, churches occupy a special place in the law. For example, the First Amendment bars the government from prohibiting the free exercise of religion, and churches, indeed almost all religioous institutions, get special tax treatment from the IRS.

However, you may not know that this distinction can also affect your employee benefits. Almost all employee benefits are governed by a federal law called ERISA (the Employee Retirement Income Security Act of 1974). This law provides various protections, including imposing a fiduciary duty on your employer to act in your best interests in administering your benefits.

However, if you are a beneficiary of an employee benefit plan established by a church (or other religious organization), your benefits are not governed by ERISA, because ERISA has an exemption for “church plans.” (There is also an exemption for government plans.) As a result, you may lose protections under ERISA if you are a church employee.

There may come a time in your life when you will need to consult with a lawyer – whether it be good news or bad news. We routinely speak with individuals who have had life, health, and disability claims denied by their insurance companies. Understandably, this is a very difficult time for the individuals who call us. We understand that, and try to make the process simple…but we need your help.

As lawyers, we are well-versed in the practice of law, but we rely on the information from our clients to steer us in the right direction and guide each case. It takes TEAMWORK to get a successful outcome for our clients.

Here are a few tips for talking to your lawyer and sharing with them what they need to know.

On May 11, 2017, the US Court of Appeals for the Ninth Circuit issued a decision in Orzechowski v. Boeing Co. Non-Union LTD Plan, et al., Case No. 14-55919 (9th Circ. May 11, 2017) upholding the application of the California law which invalidates “discretionary clauses” in Long Term Disability (LTD) plans and other life and disability contracts of insurance.

Prior to 2012, insurers in California (and many other states) were allowed to place “discretionary clauses” into their insurance policies. These clauses, while seemingly innocuous, actually made it significantly harder for insureds to challenge wrongful denials of insurance benefits in court. These clauses forced Federal Courts to review denials of insurance benefits under an “abuse of discretion” standard. In order to prevail under this standard, an insured not only had to show that they were entitled to the benefits under the contract, but they also had to show that the insurer’s decision was “arbitrary and capricious.”  The effect of this was that Court’s were routinely deferring to the “discretion” of the insurer thereby upholding their denial. This created is a much more difficult standard of proof for insureds to meet than in an ordinary civil lawsuit, where one need only prove their case by a “preponderance” of the evidence, and where Courts do not give any special weight to the evidence presented by the other side.  The result of the so-called discretionary clauses was that many insureds lost their lawsuits for wrongfully denied benefits even when, technically, they were entitled to benefits under the term of the contract.  Court’s would simply hold they could not find evidence the insurer “abused its discretion” or acted unreasonably enough so as to justify overturning the insurer’s denial of benefits.

In 2012, the California legislature passed California Insurance Code §10110.6, which provides that all discretionary clauses in California insurance contracts are null and void, if the insurance policy or plan “renewed” as of January 1, 2012. As a result, Courts will now look at the evidence anew, or “de novo” to make a determination of whether the insured is entitled to benefits, instead of simply deferring to the insurance company’s conclusions.  This is a much easier burden for insureds to meet than the older “abuse of discretion” standard.

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