Here is a life insurance claim denial that is interesting factually and legally, and a must read for attorneys handling life insurance claims. This is a case handled by the Law Office of Mark S. Humphreys.
This is a December 10, 2021, opinion from the Northern District of Texas, Dallas Division. It is styled, Pham v. TransAmerica Premier Life Insurance Company. Johnny Pham sues in his own right and Kim Van Bui sues on behalf of minor children SKB and BDB.
This case will be presented in multiple blogs.
In January 2018, Bich (pronounced “Bick”) Pham1 applied for life insurance coverage of $600,000 from Transamerica. The same day, Bich gave her insurance agent a check to cover the first premium and received a “Conditional Receipt,” which provided temporary coverage as of the “Effective Date,” as long as Bich met all four “Conditions to Conditional Coverage.” In February, Transamerica informed Bich that she could only be insured at the lesser amount of $525,114. Bich then signed a supplemental illustration and numeric summary reflecting that lesser amount. In March, Transamerica notified Bich’s insurance agent that it had approved her application for the lesser coverage amount. Tragically, Bich was killed before the Policy was delivered to her.
Bich’s intended beneficiaries, her two minor children and her father, Johnny Pham (hereinafter “Plaintiffs”), filed a claim with Transamerica, which the company denied, stating that there was no coverage under the Policy or Conditional Receipt. Bich’s intended beneficiaries filed suit for breach of contract and violations of the Texas Insurance Code and Texas Prompt Payment of Claims Act in Texas court. Transamerica removed the case to the United States District Court for the Northern District of Texas and eventually moved for summary judgment on all of Plaintiffs’ claims. The district court granted summary judgment in favor of Transamerica, and Plaintiffs appealed.
The Facts were well laid out by the Court.
On January 29, 2018, Bich Pham applied for life insurance coverage of $600,000 from Transamerica. That same day, Bich gave her insurance agent, Kim Thu Tang, a check for $500 to cover the first premium. In return, Tang gave Bich a Conditional Receipt on behalf of Transamerica. The Conditional Receipt provided temporary life insurance as of the receipt’s “Effective Date,” if four conditions were met. The only condition relevant here required that Bich be “insurable at any rating under the Company’s rules for insurance on the plan applied for and in the amount . . . applied for.” (emphasis added). The Conditional Receipt provided that the Effective Date was the later of: “the date of completing all parts of the application,” the date of the last medical examinations required by Transamerica, or the date requested in the application.
On January 31, 2018, Transamerica acknowledged receipt of Bich’s application, the $500 premium payment, and the Conditional Receipt. On February 6, 2018, Bich completed the medical examinations and tests required by Transamerica.
On February 14, 2018, Transamerica notified Tang, Bich’s insurance agent, that Bich’s requested coverage amount of $600,000 did not comply with Transamerica’s premium-to-income underwriting guidelines. In other words, Bich’s income was too low to qualify for a $600,000 policy. Shortly thereafter, Transamerica determined that coverage of $525,114 with a $333 premium would satisfy its guidelines and sent notice of this fact to Tang in the form of a “supplemental illustration” and “numeric summary.” The numeric summary contained a disclaimer requiring Bich to acknowledge that she understood that “[the numeric summary] is a hypothetical illustration containing non-guaranteed elements and it is not intended to predict actual performance of the policy.” On February 26, 2018, Bich signed the numeric summary. Tang then informed Transamerica that Bich would accept the policy with $525,114 in coverage. On March 8, 2018, Transamerica notified Tang that it had “approved” Bich’s application for $525,114 in coverage.
The following day, March 9, 2018, Bich was killed. Prior to her death, Bich had not received the actual insurance policy (hereinafter, “the Policy”). Unaware of Bich’s death, Transamerica officially issued the Policy on March 20, 2018 and sent it to Tang by mail on March 21. Attached to the Policy was an “Amendment of Application,” which Bich was required to sign to acknowledge the adjusted coverage amount. The “Amendment of Application” document states, “The undersigned agrees that these changes shall be an amendment to and form a part of the original application . . . .”
On May 1, 2018, Bich’s father, Johnny Pham, one of the intended beneficiaries under the life insurance policy, submitted a claim for benefits to Transamerica.
On May 15, 2018, Transamerica denied the claim, and it later affirmed that decision after an internal appeal.
On February 25, 2019, Plaintiffs sued Transamerica in Texas court for breach of contract and violations of the Texas Insurance Code and Texas Prompt Payment of Claims Act. Transamerica removed the case to the United States District Court for the Northern District of Texas based on diversity. Transamerica eventually moved for summary judgment on all of Plaintiffs’ claims.
On December 14, 2020, the district court granted summary judgment for Transamerica, ruling that: (1) there was no coverage under the Policy because it was not in effect at the time of Bich’s death, (2) there was no temporary coverage under the Conditional Receipt because “Bich Pham was not insurable in the amount that she previously applied for—$600,000” on February 6, 2018, which the district court determined to be the Effective Date, and (3) Plaintiffs’ statutory, extra-contractual claims failed as a matter of law because there was no contractual coverage. Plaintiffs appealed.
See the Blog dated January 22, 2022, for continuation of this case.