Articles Posted in Life Insurance

Life insurance claims that are denied for missed payments of premiums is pretty common.  This issue was discussed in a Southern District of Texas, Houston Division, opinion styled, Colonial Penn Life Insurance Company v. Ashley E. Parker, et al.

Robert Parker applied for a whole life policy with Colonial on October 30, 2014.  Ashley Parker and Aden Barron were beneficiaries of the policy.  The policy was issued on November 20, 2014.

On June 22, 2015, seven months later, Parker died in a car wreck.  A claim for benefits were made on the life insurance policy.

The Law Office of Mark S. Humphreys, P.C., recently got a surprise for his client when contesting an ERISA life insurance claim.

The insured worked in Louisiana and had a life insurance policy through his employer. The insured was not married and did not have any children. Thus, the insured named his brother’s child as the beneficiary of his life insurance policy. The amount of the policy was $100,000. The insured was killed in a one vehicle accident. A claim was made for benefits. The plan administrator denied the claim benefit based on an exclusion if the deceased died as the result of intoxication. The toxicology report indicated proof of cocaine in the body of the insured at the time of the accident.

Mark hired a toxicology expert to write a report and contested the denial of benefits through the administrative process that has to be followed in ERISA claims. The report pointed out that the amount of cocaine in the system of the deceased was stated as being a “trace” amount. The toxicology expert report pointed out there was no way to prove intoxication had anything to do with the cause of death when the amount is just a “trace.”

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.