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Articles Posted in Life Insurance

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The First Circuit recently affirmed the position that when a policy or plan is ambiguous, it should be interpreted in favor of the insured. The case that gave rise to the question is Ministeri v. Reliance Standard Life Insurance Company. The facts of the case concern a denial by the Defendant (“Reliance”) for life insurance benefits due to the widow of a Plan member, Renee Ministeri (“Plaintiff”). Reliance argued that the Plaintiff’s late husband, Anthony (the member of the plan at issue), did not have coverage under the policy because it had lapsed due to his absence from work caused by a severe medical condition. Anthony passed away in 2015, with Reliance claiming that the policy lapsed during the time he was not working.

The dispute revolved around unclear language in the policy regarding the definitions of “actively” working in the role of “corporate vice president.” Further, the facts were unclear about the amount of hours Anthony had worked during the relevant period. The Court held that “under a reasonable construction of the phrase, Ministeri could be regarded as an ‘Active … Corporate Vice President’ as long as he was a non-retired employee holding a job title matching the rank of Corporate Vice President.” Further, the Court’s ruling stated that no dispute existed as to whether Ministeri’s status as a current employee was terminated prior to his formal announcement of leave in 2014. Thus, the Court rejected Reliance’s argument concerning the interpretation of the ambiguous terms in this section of the policy.

Reliance proffered a second argument, opining that $500,000 in supplemental coverage was not available to Renee Ministeri in addition to the $592,000 in basic coverage provided by the policy. Reliance argues that Renee failed to apply for the portability provision of the policy, though it was noted during oral arguments that she had applied for supplemental coverage. Applying for supplemental coverage was the Plaintiff’s avenue to enacting the portability provision, against which Reliance did not argue. Judge Bruce M. Selya stated in his opinion that Reliance delayed their defenses to the Plaintiff’s claims in violation of ERISA; his opinion read, “[Reliance] chose to keep quiet about its discovered basis for denial until litigation ensued … that is precisely the sort of delayed reaction ERISA forbids.”

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Yosaun Smith v. CommonSpirit Health et al. concerns the Plaintiff’s, Yosaun Smith (“Smith”), action against the administrators of her ERISA retirement plan, Defendants CommonSpirit (“CommonSpirit”) and Catholic Health Initiatives Retirement Plans Subcommittee (“Subcommittee”) alleging that the Defendants violated ERISA when they did not replace “actively managed mutual funds with passively managed mutual funds.” The Court of Appeals for the Sixth Circuit upheld the decision from the district court, affirming that ERISA does “not give the federal courts a broad license to second-guess the investment decisions of retirement plans,” and that remedies are only available under ERISA when a fiduciary duty has been violated. Thus, the Plaintiff in this case alleged no facts supporting the conclusion that the Defendants had violated any fiduciary duties under ERISA.

Over the last few decades, employer provided retirement funds have commonly been structured as defined-contribution 401(k) plans. These plans allow participants to contribute pre-tax income to accounts, the amount often matched by employers. Therefore, the value of the assets in the account is the determining factor of the amount participants will receive in their payout; “A beneficiary’s payout thus may ‘turn on the plan fiduciaries’ particular investment decisions.’” ERISA provides that under a defined-contribution plan, participants may bring an action for breach of fiduciary duty against the plan administrators if the fund is imprudently managed. Until recent years, plans were actively managed by plan fiduciaries where “the portfolio manager actively makes investment decisions and initiates buying and selling of securities in an effort to maximize return.” However, more recent trends have enabled investors to use index funds, creating a “fixed portfolio structured to match the overall market or a preselected part of it.” This option means that there is “little to no judgment” involved in the management of the plan.

The Plaintiff in this case is an employee of Catholic Health Initiatives (otherwise known as CommonSpirit Health) and has been a participant in its defined-contribution 401(k) plan (“Plan”) since 2016. The Plan is administered by an appointed administrative committee and serves more than 105,000 participants with more than $3 billion in assets. Options available to participants include index funds with low management fees (0.02%) as well as funds that are actively managed with management fees up to 0.82%. If employees do not select a fund, they are placed by default into the Fidelity Freedom Funds, which are actively managed. These are a group of “target date fund[s]” meaning that “managers change the allocation of the underlying investments that they hold over time, say by selling funds that hold stocks to buy a greater proportion of funds that hold bonds or cash.” The purpose of this management is the “reallocation of asset types [allowing] managers to protect an employee’s investment gains and spare her the unpredictability of market fluctuations as she approaches retirement.”

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The Eleventh Circuit Court of Appeals in Gimeno v. NichMD, Inc. analyzed whether Section 1132(a)(3) of ERISA provides authorization for a beneficiary of a plan governed by ERISA to sue for ‘”appropriate equitable relief’” due to violations of the plan or relevant statute. Thus, the question presented to the court is whether “Section 1132(a)(3) create[s] a cause of action for an ERISA beneficiary to recover monetary benefits lost due to a fiduciary’s breach of fiduciary duty in the plan enrollment process[.]” The Court answers this question in the affirmative, stating that a court “may order typical forms of equitable relief under Section 1132(a)(3).”

This decision reverses that of the district court, which had held that “such a claim would be futile.” The basis for this reversal is the common practice of awarding “equitable surcharge” in cases where a fiduciary’s breach of duty caused a beneficiary to sustain losses. The facts of the case center around the plan holder, Justin Polga, and his spouse, Raniero Gimeno (“Plaintiff”). Polga was an M.D. and an employee of NCHMD, Inc., a subsidiary of NCH Healthcare System Inc. (“Defendants”). When initially hired by the Defendants, the HR department assisted Polga in filling out the relevant paperwork. Gimeno was listed as the primary beneficiary under the relevant plan (“Plan”) and NCH Healthcare the administrator. Polga decided to elect to pay for $350,000 in “supplemental life insurance coverage on top of $150,000 in employer-paid coverage.” In order to receive this coverage, it was required that Polga submit “an evidence of insurability form,” however this form was not provided in his enrollment paperwork nor did the HR department attempt to rectify the error. Therefore, Polga was never properly enrolled on the program according to the insurance company. Despite this fact, the Plan “deducted premiums corresponding to $500,000 in life insurance coverage from Polga’s paychecks.” Further, Polga was provided with benefits statements that included the $500,000 in coverage.

When Polga passed away, the Plaintiff filed a claim with the Plan’s insurance company for benefits as the named beneficiary. The claim was partially denied, as the company approved the claim for the amount of benefits excluding the supplemental amount. Subsequent to this denial, the Plaintiff filed suit to recover the supplemental benefits, alleging that “by failing to notify Polga of the need for the form and misleading him about the nature of his coverage, the defendants breached their fiduciary duty to administer the plan fairly and properly, to inform Polga of his rights and benefits, and to ensure that all application forms were correctly completed and submitted.” As a remedy, the Plaintiff also sought that the Defendants be required by order to pay the benefits that would have been received if not for the breach – “the unpaid $350,000.”

On June 8, 2021, Mehr, Fairbanks & Peterson obtained a judgment for $190,000 against Hartford Life and Accident Company in federal court. Hartford wrongfully denied life insurance benefits to a widow after her husband died of cancer, and accused them of making misrepresentations on the insurance application. The court disagreed and ordered Hartford to pay the full $190,000 face value of the life insurance policy.

Mehr, Fairbanks & Peterson has a strong record of closing life insurance cases and earning positive judgments for you or your family. If you or someone you know has had a life insurance claim denied, contact Mehr, Fairbanks & Peterson today.

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Life insurance can be purchased one of two ways, either through your employer, in which case ERISA applies, or from a private life insurance company. ​Our experienced bad faith insurance and ERISA lawyers can assist you when either types of these claims have been denied.

For more information on life insurance claims, read the FAQs below:

  • Why would an insurer deny my life insurance claim? There are many reasons given by insurers for denying a life insurance claim. Most denials arise from the language in the actual policy . The insurer may deny payment because of the particular cause of death, or because a death occurs within a certain period of time after the policy is issued. A claim may be denied based upon alleged misrepresentations in the application- such as a statement that the deceased person was of “good health”.. Typically, the insurer doesn’t double check on the accuracy of such statement until after someone dies, when they look through the medical records with a fine-tooth comb.
  • Can a spouse contest a life insurance beneficiary? It is difficult to contest a beneficiary designated by a spouse on a life insurance policy, but it is not impossible. There are many factors which could lead a court to invalidating or rewriting a policy to more accurately reflect what an insured intended or to canceling a policy which was issued inappropriately.
  • Can a beneficiary claim on a lapsed policy? Even if a life insurance policy is lapsed, there may be opportunities to make a claim under it. The terms of the policy will be a major factor in making that determination.
  • Can a last-minute insurance beneficiary change be contested? A court can undo a last-minute change in the beneficiary of a life insurance policy in some situations where it appears that the change was improper.
  • Who can change the beneficiary of a life insurance policy? Generally, the owner of the life insurance policy can change the beneficiary of a life insurance policy. The owner may not be the insured. The owner is designated by the policy and is generally, but not always, the person who pays the premiums.
  • How do you find out if a deceased person had life insurance? It is important to review the papers, documents, and records of a deceased person to determine whether there may be any life insurance on their life. It is also a good idea to check with their insurance agents, bankers, employers, and any associations or organizations in which there were a member. Whether the deceased had a safe deposit box is also an important determination to make.
  • How do you find out if a life insurance policy was paid out? The insurance company is the best source of information on whether a life insurance policy was paid out. Bear in mind, the insurance company may not disclose that information to just anyone. You might have to show them why you need to know.
  • What happens to life insurance policies with no beneficiary? Generally, life insurance policies with no designated beneficiary or no surviving beneficiary will be paid in accordance with their terms, usually to the estate of the deceased.
  • How does money get split between beneficiaries? Generally, the proceeds of a life insurance policy are paid amongst the beneficiaries as designated by the insured or the owner of the policy. Otherwise, it is split equally amongst the beneficiaries unless the policy provides otherwise.
  • Can a life insurance beneficiary be changed after death? The beneficiary of a life insurance policy cannot generally be changed after the death of the insured, except by court order or, if allowed by the policy, by the direction of some other document, or by virtue of the beneficiary being a trust or some other entity who can re-direct the proceeds.
  • Can I share life insurance benefits with my siblings? The beneficiary of a life insurance policy can do whatever they want with the benefits that they receive, unless restricted by some other document, such as if they are the trustee of a trust.
  • The insurer claims the deceased committed suicide, but they did not. Can I make them pay? This happens sometimes and suicide “exclusions” are not enforcable generally if the policy has been in force for a certain number of years. And certainly the circumstances of what caused the death can be challenged by a lawyer.
  • The insurer denied the payment of the claim but sent the premiums paid back to the family. Should I cash the check? No. Do not cash the check until you discuss with a lawyer experienced in life insurance law.
  • The insurer claims the application contains mistakes, but it was the agent’s mistake. Do they have to pay? Sometimes they will have to be bound by what the agent wrote down if the agent’s answers to questions aren’t what the deceased person actually told them.

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Life insurance claims should be paid within 30 days of a proper claim being submitted to the insurance company. If the claim is not paid within 30 days, it is considered delayed. Any delay of benefits will put a strain on the survivors. Claims can be denied for any number of reasons. Most of the time when claims are denied, they are not denied for good cause. They are denied for minor technicalities or for missing information on the claim or in the policy application.  A delay does not necessarily mean that your claim will be denied but a delay of more than a month or two is just unreasonable.

If your life insurance claim has been denied of delayed, call us. We know how to force the insurance company to pay your claim.

Reason why life insurance claims are delayed:

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People obtain life insurance policies as part of financial planning for their loved ones’ future. Life insurance protects those who rely on the insured’s ongoing financial support and will suffer in the event that this support is withdrawn. Ideally, the life insurance company will pay the full policy amount after the insured’s death.

Unfortunately, this does not always happen. Life insurance claims get routinely denied by large insurance companies for various reasons. Here’s what you need to know regarding the process to appeal and win a denied life insurance claim.

Reasons Behind Life Insurance Claim Denials

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An accidental death policy offers protection when the insured dies as a result of an accident. Accidental death benefits may be found as part of a regular life insurance policy or as a separate contract.

What Does Accidental Death And Dismemberment Insurance Cover?

Accidental death and dismemberment coverage provides protection if the insured dies in an accident or suffers a loss of limb/vision/hearing as a result of an accident.

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