Life Insurance Through Employer

Insurance lawyers will get frequent phone calls from a life insurance beneficiary wherein the beneficiary had a spouse who has died and that spouse had life insurance that had been obtained through their employer/work.  This was the case in a recent opinion from the Western District of Texas, El Paso Division.  The style of the case is Vanessa St. Pierre v. Dearborn National Life Insurance Company.

The facts of this case a somewhat confusing the opinion needs to be read to get what the exact facts were in this case.  However, the law related to insurance coverage when it is purchased through employment is discussed and knowing about this law is important when it comes to being able to properly discuss with clients the possible outcome in a case.

Quoting from the case:

As a threshold matter, the Court will address whether, as Plaintiff asserts, the City acted as Defendant’s “agent” under Texas Insurance Code § 4001.003(1)

Texas Insurance Code § 4001.003(1) defines “agent” as

a person who is an authorized agent of an insurer or health maintenance organization, a subagent, and any other person who performs the acts of an agent, whether through an oral, written, electronic, or other form of communication, by soliciting, negotiating, procuring, or collecting a premium on an insurance or annuity contract, or who represents or purports to represent a health maintenance organization, including a health maintenance organization offering only a single health care service plan, in soliciting, negotiating, procuring, or effectuating membership in the health maintenance organization.

Tex. Ins. Code. § 4001.003(1). However, the statute explicitly excludes from this definition

an employer or an employer’s officer or employee or a trustee of an employee benefit plan, to the extent that the employer, officer, employee, or trustee is engaged in the administration or operation of an employee benefits program involving the use of insurance or annuities issued by an insurer or memberships issued by a health maintenance organization, if the employer, officer, employee, or trustee is not directly or indirectly compensated by the insurer or health maintenance organization issuing the insurance or annuity contracts or memberships;

The above highlighted law is unknown to many insurance attorneys and it is important to understand how these two sections of the insurance code are interpreted by the Courts.

The opinion goes on to state:

Here, the City does not meet the statute’s definition of “agent” because it is explicitly excepted from this definition.  First, the City, at all times during the instant litigation, has been Plaintiff’s employer.  And second, the City has been “engaged in the administration or operation of an employee benefits program”—namely, Defendant’s.  From Plaintiff’s own exhibits, Exhibit 10, titled “Application for Group Insurance,” shows that all of the people involved in the administration of Defendant’s employee benefits program are City employees, not Defendant’s.  Therefore, as a matter of law, any action by the City cannot be directly attributable to Defendant.

In this case the intended beneficiary of the life insurance policy, that was purchased through the spouse’s employer, sued the life insurance company but not the employer but because of the above mentioned statute excluding responsibility for the employer as an agent of the life insurance company the company was not responsible for actions or in-actions of the employer.

There are other issues in this case discussed by the Court that are good to know and understand.

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