Life insurance companies routinely deny claims due to non-payment of premiums. While some of these denials are valid, many of them are not. Everyone knows that policyholders have a duty to pay premiums on time to avoid policy lapse, but what is not clear to many policyowners is what rules life insurance companies need to follow when it comes to payment of premiums. State laws differ in terms of what duties insurance companies have, which, in return, affect how a case involving a denied life insurance claim due to non-payment of premiums is handled.
California life insurance law, in particular, stands out. In this blog post we will explain what duties California life insurance companies have when dealing with lapsed policies and what you can do if your claim was denied due to non-payment of premiums.
If you or someone you know is dealing with such a case, call us at (888) 510-2212 for a free, no-obligation consultation with one of our life insurance lawyers.
The Responsibilities of a Life Insurance Company
Below is the list of some of the most common obligations placed on life insurers:
- Insurance companies may have a duty to send several pending lapse notices to the policyowner prior to policy lapse;
- Insurance companies may have a duty to send clear pending lapse notices within a certain time period to the policyowner’s correct address prior to allowing the policy to lapse;
- Insurance companies must follow lapse laws of the state where they sold the policy, including grace period laws and pending lapse notification rules;
- Insurance companies may have a special duty to alert policyholders who are 65 or older of the pending life insurance lapse;
- Insurance companies may have a duty to keep a life insurance policy active during the grace period even if a premium payment was not received;
- Insurance companies have a duty to properly allocate premiums received;
- Insurance companies may be required by state laws to include certain language in their life insurance lapse notices alerting policyowners of the upcoming lapse.
Depending on the laws of the state where the policy was issued, an insurance company may not be allowed to deny a life insurance claim due to lapse if it failed to adhere to the rules described above. Beneficiaries whose claims have been denied due to lapse should investigate the circumstances leading to the life insurance policy lapse to make sure their legal rights are protected. Read more on life insurance beneficiary rights.
What Happens if Life Insurance Lapses in California?
California laws place many duties on life insurance companies. For example, California life insurance companies have a duty to warn the policyowner of an impending lapse due to non-payment of premiums. It is not enough to simply send a notice after the coverage has already lapsed. Policyowners and their designees must be informed that a lapse is pending and life insurance companies are required to provide such notice within 30 days after a premium is due and unpaid. In addition, life insurance companies issuing policies in California are required to include in the policy a provision for a grace period of not less than 60 days from the premium due date. The provision must also inform policyowners that their policy will remain in force during the grace period.
Another duty placed on life insurance companies selling policies in California is a duty to give an applicant the right to designate someone else to receive notice of lapse or termination of a policy for non-payment of premium. Every year, life insurance companies must send California policyowners reminders to designate or change their written designation or designate more persons to receive premium-due notices. This is important because most life insurance policies lapse when the insured policyowner is ill, in the hospital, or mentally incapacitated and unable to open the mail and make a premium payment. This California life insurance law protects policyowners and their beneficiaries from a denied claim due to lapse by allowing policyonwers to designate another person to receive their bill/premium-due notice.
If insurance companies violate rules governing a life insurance policy lapse in California, they may be required to pay a claim they had denied due to lapse. If a life insurance claim is denied due to lapse in California, it is important to have a consultation with a life insurance attorney experienced in this area of law. Our attorneys have handled several life insurance lapse cases in California and will fight for you to protect your rights.
What to Do if a California Life Insurance Company Denied Your Claim Due to Lapse?
Very often, beneficiaries whose claims have been denied due to lapse in California receive a letter from the insurance company simply stating that the coverage had terminated and there was no life insurance coverage at the time of the insured’s death. Such denial letters are often vague and rarely reference any dates, for example, the date when the last premium was paid and when the grace period started and ended. Without knowing what coverage the last premium paid for and when the grace period started, it is impossible for beneficiaries to understand whether their claim denial was legitimate. In such situations, it is best for them to consult with an experienced life insurance lawyer who can evaluate their situation and determine if they have a case.
How Our Life Insurance Attorneys Can Help Recover Your Death Benefits
When a client calls us regarding a denied life insurance claim due to a policy lapse in California, we start investigating into the insurance company’s practices collecting and allocating premiums, notifying policyholders of impending lapse, adhering to the designation right notifications under the law, etc. We are often able to recover denied benefits within months from the initial consultation. If your claim has been denied due California life insurance policy lapse, our attorneys can help. We have recovered many denied claims after different life insurance companies wrongfully lapsed California life insurance policies.
Our attorneys have successfully recovered denied life insurance claims due to lapse in California from the following insurers:
- New York Life
- American General
- North American Company for Life and Health Insurance
- Minnesota Life Insurance Company
- Monumental Life Insurance Company
Below are some examples of cases due to a California policy lapse our life insurance attorneys have handled.
New York Life Insurance Company — $1,000,000 recovered
Our client was the surviving spouse of the insured. Her husband applied for life insurance coverage through New York Life in California in 2011. New York Life approved his application and issued coverage in the amount of $1,000,000. New York Life made premium withdrawals from the insured’s bank account until April, 2013. In April 2013, the designated bank account had insufficient funds and New York Life’s request for a premium payment was returned. Two months prior, the insured had been diagnosed with pancreatic cancer and started undergoing treatment. In April 2013, when the premium was due, the insured was no longer able to take care of his affairs.
New York Life did not send any pending lapse notifications to the insured. New York Life did not send any premium-due notices to the insured or any other designated person in regards to the unpaid premiums. Insured died in August 2013 and his wife (beneficiary) contacted New York Life in order to file a claim. New York informed her that his life insurance coverage had expired due to non-payment and that the policy had no value at the time of the insured’s death. Our attorneys were able to recover the full amount of the policy – $1,000,000 – for the beneficiaries.
John Hancock Life Insurance Company — $1,000,000 class action lawsuit
Our law firm is currently involved in a class action litigation against John Hancock Life Insurance Company after its denial of $1,000,000 to our client due to a California policy lapse. Our client called us after John Hancock refused to pay her claim following her husband’s death. The insured applied for life insurance coverage in the amount of $1,000,0000 through John Hancock in 2002 in California. John Hancock approved his application and issued coverage for $1,000,000 in California. The insured paid premiums annually for this coverage. In 2007, the insured was diagnosed with cancer. When he was ill, he was unable to handle his affairs and overlooked paying an annual premium. He died in October 2017. When his wife (beneficiary) tried to file a claim, John Hancock informed her that the policy had lapsed due to non-payment.
Neither the insured nor any other individual has ever received any notices from John Hancock in regard to this policy lapse. After John Hancock refused to pay our client’s claim for a California life insurance policy lapse, our client filed a class action lawsuit against the insurer based on its failure to timely notify the insured of the pending policy lapse and of his right to designate another person to receive premium-due notices. Our life insurance attorneys are fighting hard on behalf of our client and all similarly situated beneficiaries whose claims were denied by John Hancock due to a California life insurance policy lapse.
North American Company for Life and Health Insurance — $351,000 recovered
Our client called us after North American refused to honor her claim for $351,000 following the death of her ex-husband. The insured applied for life insurance coverage through North American in 2011 in California. North American approved his application and issued the policy in California. The insured paid premiums monthly for his coverage. He died in October, 2020. When his beneficiary tried to file a claim under the policy, a North American representative informed her on the phone that the policy had lapsed due to non-payment in May 2019.
Neither the policy owner nor any other individual has ever received any notices from North American in regard to this policy lapse or the non-payment of premium. When our life insurance attorneys took the case, they investigated the premium payment history and discovered that North American successfully collected the policy premiums but may have improperly allocated the premiums as the insured had more than one policy with the company. Our law firm was able to recover the full amount of the policy within 3 months.
American General Life Insurance Company — $195,000 recovered
Our client called us after American General had denied her life insurance claim due to lapse in California following the death of her mother. The policy was issued in 2005 in California and the insured made premium payments regularly until September 2018 when she got sick and was not able to take care of her affairs. The premium was due September 20, 2018, but was missed. The insured never received any notifications that a premium was due or that the policy was in danger of a lapse. She never received any notices, bills or letters from American General regarding the non-payment of premium, grace period, pending lapse, policy termination or designation of another person to receive premium-due notices. She died in November 2018. When the beneficiary contacted American General in order to file a claim, she was informed that her mother’s policy had lapsed for non-payment of premiums. Our life insurance attorneys were able to recover $195,000 for our client to her satisfaction.
Minnesota Life Insurance Company — $113,000 recovered
The insured purchased accidental death and dismemberment coverage from Minnesota Life in 1997 and paid monthly premiums. A few years later, she changed the premium payment method to a quarterly paper bill. The insured did not receive the bill for the period from June 1, 2014 through August 31, 2014, even though the insurance company claimed it sent it to her home address. The insured died in an accident in July 2014. Minnesota Life denied the beneficiary’s claim due to lapse.
Our life insurance attorneys were able to prove that Minnesota Life wrongfully denied the claim. It failed to notify the insured of her right to designate another person to receive premium-due notices and failed to send premium-due notices to the insured at least 30 days prior to the effective date of the lapse or termination warning the insured that the policy was going to lapse on June 30, 2014. Our life insurance attorneys were successful in recovering the full amount of the accidental death and dismemberment policy for our client.
Monumental Life Insurance Company — $99,000 recovered
The insured applied for life insurance coverage through Monumental Life in 2003 in California. Monumental Life approved his application and issued the policy in California.The insured timely paid annual premium payments from 2007 to 2012. In 2013, however, Monumental Life did not receive a premium payment. Monumental Life did not send any notifications to Insured about the non-payment of premium. Monumental Life did not send any premium-due notices to the insured or any other designated person in regards to the unpaid premiums.
Insured died in February 2014. After the insured’s death, his daughter (beneficiary) filed a claim for life insurance benefits. Monumental Life denied her claim stating that the policy lapsed in September 2013 due to non-payment of premiums. Our life insurance attorneys were able to recover the full amount of the denied claim due to lapse in California.
Genworth Life and Annuity Insurance Company — $75,000 recovered
The insured in this case applied for life insurance coverage in the amount of $75,0000 through Genworth in October 1996 in California. Genworth approved his application and issued the policy in California. Insured was billed quarterly for this coverage. Insured died in January 2017. When his beneficiary filed a claim under the policy, her claim was denied. Genworth claimed that the policy lapsed on 12/01/2016 due to non-payment of premium, which was due on December 1, 2016. Even though Genworth sent several notices to the insured regarding this California policy lapse, it applied a 30-day grace period, not a 60-day period. In addition, Genworth did not send the insured any notices advising him of his right to designate another person to receive lapse notices. Our life insurance attorneys recovered this denied life insurance claim due to lapse in California within six months.
If a California life insurance company denied your claim due to a policy lapse, call our life insurance attorneys today for a free consultation. Contact us at (888) 510-2212.