Dallas Fort Worth Insurance Lawyer Blog

Most people think that the idea of life insurance is good. It shows you are thinking of the people in your life who are left behind. Sometimes, life insurance is purchased for business reasons. People who live in Arlington, Grand Prairie, Weatherford, or a big metropolitan area such as Dallas and Fort Worth are all going to consider life insurance at some point in their lives.
What happens when the idea of purchasing life insurance becomes a reality and after having bought the coverage, payments are missed? The Texas Court of Civil Appeals in San Antonio, decided this issue in 1962, and their decision is still good law for this question.
Merced Cantu et ux., v. Southern Life & Health Insurance Company, is a case that says, "It is not necessary for the insurance company to advise policy holders that their policy has lapsed". In this case, the Cantu's had a life insurance policy on their son. The son died and the Cantu's made a claim for benefits from Southern Life & Heath Insurance Company. Southern denied the claim stating that the policy had lapsed for non-payment of premiums.
The policy at issue provided a date that payments were due and that if the payments were not made on a timely basis that there was a four week grace period to make the payments but at the end of the four week grace period, the policy lapsed and was no longer in force and effect, unless of course the late payments were made during the four week grace period. In this case Cantu made late payments but only not enough to catch the policy all the way current.
The Court ruled that the policy had lapsed according to the wording in the policy and once it had lapsed, the policy was no longer in force and effect and thus there was no coverage when the death of the Cantu's son occurred.
It is important to realize that the policy itself and the wording within it, was notice to the policy holder of when and how the policy would terminate and the insurance company was not required to mail any sort of termination notice. It is also important to realize that sometimes there are ways of getting around the ruling made by this Court. In these situations it is necessary to seek the counsel of an experienced Insurance Law Attorney to make sure your rights under a policy of insurance are protected.

A person who buys a life insurance policy in Dallas, Texas, or in Arlington, Grand Prairie, Fort Worth or out in Weatherford in Parker County should have the same concern as everyone else when they purchase the policy. Is this policy going to pay benefits to the benficiary named in the policy? After all, that is the only reason it is being purchased.

A Federal Court case decided in 2007, gives good reason for looking over the policy and reading it well before purchasing it. The case, Assurity Life Insurance Company v. Grogan, was presented with the following policy condition: The policy coverage did not go into effect until the "first full premium was paid during the Proposed Insured's lifetime and continued good health."

Soon after purchashing the policy, the insured had a biopsy performed on a lump on his neck and was diagnosed with Hodgkin's disease. He died a few months later from complications.

Assurity Life filed a lawsuit saying the policy never took effect due to a failure of a condition precedent. Assurity subpoenaed the insured's medical records, which showed he had issues relating to the lump on his neck for several years.

The Court ruled in favor of Assurity Life. They held that the "good health" condition precedent for coverage had not been met because although the Hodgkin's disease had not been fully diagnosed before the policy took effect, it had manifested itself earlier through the ongoing neck problems.

The Court held that the "good health" condition precedent was well established in Texas law. The policy clearly stated that in order for it to take effect, the proposed insured must make the first premium payment while in good health.

This is a case where the insurance company won. What we do not know without talking to the people involved is whether or not there were other policies that could have been purchase had only the purchaser been aware of the limitations in this policy. Another issue is whether or not there is a potential claim against the agent who sold the policy. It would also be important to know how this policy was marketed or advertised.

The facts in each case will vary, just as the wording in each insurance policy will vary. It is important to have an experienced Insurance Law Attorney review the facts and the policy in each case where the claim for benefits is denied in order to insure that the insurance company is not treating someone wrong.

A United States Federal District Court in Texas recently discussed the above in a case. The life insurance policy was for $200,000. The policy was provided through a voluntary plan the beneficiary of the policy had with his employer and was an ERISA plan. ERISA stands for Employee Retirement Income Security Act. The case was Carmichael Khan v American International Group, Inc.

Like many people in Dallas, Fort Worth, and surrounding cities and counties Khan was a voluntary participant in a plan provided by his employer. The facts and issues in the case centered around Khans' employment terminating around April 7, 2006 and his wife having died in a car wreck on April 20, 2006. There were issues about termination paperwork Khan had filled out prior to his termination and his intent to covert coverage he had through his employer to continuing coverage once he left American. Also, there were issues about deductions from Khans last pay check for coverage. The fact pattern is long and the legal battle is also long and complicated. In the end the Federal Court ordered the case back to the Plan Administrator for further determinations to be made by the Plan Administrator. This case will likely continue over the next several months and possibly years unless a settlement is reached among the parties involved.

One of many things to be drawn from this case is that when a life insurance policy is in an ERISA plan, there is an administrative process that has to be exhausted before an appeal to a Federal Court can be fully litigated. All ERISA disputes are fought out in Federal Courts rather than State Court because ERISA issues are a matter of Federal Jurisdiction. Insurance companies prefer Federal Court for fighting their battles whereas attorneys who represent claimants prefer State Courts.

Continue reading "Life Insurance Policies, Interpretation, and ERISA" »