Articles Posted in Life Insurance

Here is a life insurance case that involves a plan under the Employee Retirement Income Security Act (ERISA).  It is a 2018, 5th Circuit Court of Appeals case styled, Jason Crawford v. Metropolitan Life Insurance Company.

This is a summary judgment case granted in favor of MetLife.  This Court sustained the ruling in favor of MetLife.

The deceased, Tracy Crawford, worked as a flight attendant for Southwest Airlines.  Tracy enrolled in the company offered life insurance benefit plan in 2008, and submitted a paper document naming her great-nephew as the primary beneficiary.

Life Insurance cases can have a surprising number of twists to them.  Readers of the DallasFortWorthInsuranceBlog have seen some of these various twists.

The U.S. District Court, Eastern District of Texas, Sherman Division, issued an opinion in a case styled, Reliastar Life Insurance v. Trina R. Wiemer, Laura R. Weimer, and Roderich W. Weimer, Jr., which is interesting.

This case is an interpleader action.  Reliastar issued a life insurance policy on the life of Vincent H. Weimer, who died on August 19, 2017.  The policy was for $3,000,000.00 and this amount is claimed by competing persons.  Because of these competing persons, Reliastar filed this interpleader action pursuant to Federal Rule of Civil Procedure 22 and 28 U.S.C. Section 1335.

This 2018, Fort Worth Court of Appeals opinion is unique and involves a situation most life insurance lawyers will not ever see, however, it is worth knowing about due to some of the ruling by the appeals court.  The case is styled, Old American Insurance Company v. Lincoln Factoring, LLC.

Lincoln is an assignee of a portion of benefits under a life insurance policy.  Lincoln was assigned a portion of the benefits by the life insurance beneficiary for advancing costs of the burial of the insured.  The insured had a life insurance policy with Old American.

When the insured died, the beneficiary made a claim for benefits.  Instead of paying the benefits, Old American insisted they needed a copy of the death certificate.  When a copy of the death certificate was provided, Old American withheld payment because the death certificate stated that the manner of death of the insured was pending investigation.

Here is a situation almost never seen.  It involves a case out of the Northern District of Texas, Dallas Division.  It is styled, William M Arrington, Individually, as Beneficiary, and as Representative of the Estate of William L. Arrington v. Jackson National Life Insurance Company, Danny C. Burba, and Gordon B. Richardson.

William applied for a life insurance policy and Burba and he signed the application.  Southwestern accepted the application and issued William a life insurance policy with a face value of $976,500.  The policy was a flexible premium adjustable life insurance policy.  Burba advised William as to the annual premium amount he had to pay to keep the policy in effect.  Burba allegedly told William to make a down payment of $1,100 per month for the life of the policy.  From 1998 to 2015, William paid more than $200,000 toward the policy.

In February 2007, William received notice that Southwestern merged with Valley Forge Live Insurance Company.  In September 2007, Bill received notice that Valley had changed its name to Reassure America Life Insurance Company.  On July 31, 2008, Margarita Arrington requested that Gordon Richardson replace Burba as the agent of record.  However, Burba continued to be copied on correspondence regarding the policy, and internal records referred to Burba as the “active agent.”

Most people would agree that reading legal papers can be confusing.  As it relates to life insurance policies the law in favor of the insured.  This is illustrated in the Houston [14th Dist.] Court of Appeals opinion, Parchman v. United Liberty Life Insurance Co., a 1982 opinion.

The Parchman case stands for the proposition that an incontestability clause cannot be more onerous than the clause that is prescribed by the Insurance Code, Section 1131.104 and 705.104.  These statutes do not specify whether the policy date or the effective date is considered its date; this creates an ambiguity that must be construed against the insurer.  And an insurer may not place a more onerous incontestability clause in the policy than the one prescribed by statute, although in may provide a shorter period than that prescribed.

In the Parchman case, the policy date in question was October 10, 1977, and the effective date was either July 20, 1977, or August 6, 1977, depending on whether a medical examination was required and completed.  Using the policy date of October 10 as the date that the clause began to run provided for a longer period than using the effective date of July 20 or August 6.  Thus, the policy’s incontestability clause was more onerous than the one prescribed by statute, so the statute prevailed, and the policy date in the incontestability clause was construed to mean the effective date.  In the case, the two year period began running on the earlier effective date rather than on the later policy date.

One of the issues confronted by life insurance lawyers deals with situations where the life insurance company is claiming misrepresentation in the policy application and as a result of the misrepresentation, coverage is denied.  A 1972 opinion from the Texas Supreme Court is language and law that life insurance lawyers need to know and understand.  The case is styled, The Minnesota Mutual Life Insurance Company v. Ethel C. Morse, Executrix et al.

This case was tried under an agreed statement of facts by which it was agreed that James K. Morse was neither able to perform, nor expected to resume, the usual duties of his livelihood at any time after October 29, 1962.  However, it has been held that Minnesota Mutual is liable to the extent of the deposits and loans made subsequent to the original issuance of these policies because the incontestability clauses in those policies bar the company from raising the disability defense.

The incontestability clause in policy no. 4666–W states: ‘This policy shall be incontestable two years from its date of issue.’ Policy no. 4666–G provides: ‘The validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue . . ..’ All premiums, computed on the increased balances, have been paid on these policies up to the date of Morse’s death.  Both policies had been in effect for more than two years when he died in 1967.  Petitioner did not contest coverage of the deceased prior to his death.

Here is an interesting case form the U.S. Northern District, Dallas Division, regarding payment on a life insurance policy.  The case is styled, Metropolitan Life Insurance Company v. Michael Wayne Battle II.

Metlife offers life insurance to federal employees through a program referred to here as FEGLI.  The Office of Personnel Management (OPM) administers the program.  Metlife is required to pay FEGLI benefits when a beneficiary establishes a valid claim under FEGLI.  FEGLI payments are prioritized thus: first, to the employee’s designated beneficiary; second, if there is no designated beneficiary, to the employee’s surviving spouse; and, third, if neither is present, to the employee’s child or children.  This is pursuant to 5 U.S.C. Section 8705.

Battles’ father, Michael Battle (Michael), was covered under the plan and had coverage totaling $475,000 at the time of his death.  Michael had not designated a beneficiary.

Exclusions in life insurance policies are common.  The Texas Insurance Code, Section 1101.055 limits the permissible life insurance exclusions to suicide, stated hazardous occupations, and aviation activities.  Courts have construed this list to render void other exclusions, such as one excluding a loss caused by a preexisting condition.

A 1921, Texas Supreme Court case does a good job of explaining limits on exclusions.  The opinion is styled, First Texas State Insurance Company v. Smalley.

As explained in Smalley:  It was formerly usual for policies of life insurance to contain numerous conditions on which the amount or amounts promised to be paid on the death of the insured might be reduced or entirely defeated.  Among common conditions were those relating to the insured’s occupation, habits, residence, and suicide.  Not infrequently the amount of the insurance was stated in bold type, on the face of the policy, while the conditions were inconspicuously put on the back.  Such policies could be used to lead the unwary into the belief that they held enforcible promises of real and substantial benefits, when the promises were so limited and conditioned as to have slight actual value.  In this way premiums could be collected from the insured in exchange for apparent, rather than real, obligations on the part of the insurers.

This may seem strange but there are times an insurance company will deny a claim for life insurance benefits based on their assertion that the insured has not been proven to be dead.  This is discussed in the 1987, Texas Supreme Court opinion styled, Davidson v. Great National Life Insurance Company.

Here are some interesting facts.  In May 1980, a man identifying himself as Dauod Alquassab applied for a $1,000,000 life insurance policy with Great National.  Alquassab had previously used the names of David Kassab and David Kay; was a convicted of felony fraud charges under a different name.  Alquassab named Ilan Eiger, his partner in a real estate business, as the beneficiary when Great National issued the policy in June 1980.  In September 1980, Alquassab changed the beneficiary designation from Eiger to Phyllis Davidson, his former wife from whom he was divorced in 1968.  Alquassab then traveled to Tel Aviv, Israel, in February 1981.  Prior to his departure, the record indicates that Alquassab allegedly defrauded First City Bank in Houston, of approximately $1.5 million dollars, and committed additional acts of fraud upon other banking institutions.

On Wednesday, February 11, 1981, a body was discovered approximately 100-200 yards from the hotel where Alquassab was registered.  The body, which Davidson claims was Alquassab, had been struck by a car and then dragged face down.  Great National was notified of Alquassab’s alleged death on February 12; the body was buried the following day, Friday, February 13.  After Davidson made a formal claim under the policy to Great National on June 1, Great National rescinded the policy because of Alquassab’s alleged fraud in procuring the policy, and refused to pay any beneficiary proceeds to Davidson.

Here is a case from the United States 7th Circuit that deals with life insurance when the policy is an Employee Retirement Income Security Act (ERISA) policy.  The case is styled, Emma Cehovic-Dixneuf v. Lisa Wong.

Pursuant to 29 U.S.C., Section 1104(a)(1)(D), ERISA requires administrators of employee benefit plans to comply with documents that control the plans.  In the case of life insurance policies, that means death benefits are paid to the beneficiary designated in the policy, notwithstanding equitable arguments or claims that others might assert.

In this case, the employee, Georges Cehovic, had two life insurance policies through his employer and the policies named his sister Emma as the sole and primary beneficiary.  When Georges died, his ex-wife, Wong, claimed that she and the child she had with Georges were entitled to the policy benefits.