Articles Tagged with Life insurance

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.

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?

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