A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

A heartwarming story comes out of Bloomfield Hills, Michigan about a jury verdict that awarded a $2 million policy to an elderly widow after the life insurance company, United of Omaha, declared the policy to have lapsed when she and her husband failed to make a timely premium payment while he was dying in the hospital.

The insured was a physician who had invested $350,000 in premiums in the policy (roughly $4,000 per month), issued in 2001, in order to provide for his aging wife and their blind and disabled son. Because she did not receive the policy value, the widow actually ended up losing her home.

Apparently, the agent notified the insurer in August 2008 that the insured was seriously ill. The December 2008 premium notice was purportedly mailed out, but the widow said she never received it. Shortly after her husband died on January 23, 2009, she noticed the oversight and sent in two payments that were rejected. According to the widow’s attorney, United of Omaha returned the payments, saying the policy was paid in full. Then, strangely, it returned them and said it was not honoring the death claim. United of Omaha claimed that it sent multiple premium notices and would have accepted the late payments if the husband had not passed away.

Indeed, it is heartwarming that the widow eventually was paid, although she did suffer great hardship by losing her home and undoubtedly also endured much emotional distress. In my opinion, in a case such as this, the insured should receive damages above the face value of the policy with interest, in order to provide just compensation and deter this type of conduct. This is especially warranted in this case where the insurance company was on notice that the insured was seriously ill. It could have reached out to the family to make sure that payments were timely made and the policy remained in force. Of course, it did not do so.

It is important to realize from this case that insureds frequently, when they are very ill and on their deathbeds, neglect to pay their premiums. Naturally, paying them is not first and foremost on their minds when they are struggling for their lives, and may be incapacitated or in severe pain. An insured, therefore, should investigate purchasing a policy rider that covers premiums in the event of a disability.

It is also important to note that insurance companies regularly earn profits from this type of situation. It’s not just a fluke that happens once in a while, but rather, life insurance companies know this is a significant source of revenue. Insureds will invest considerable sums in life insurance policies only to have their coverage lapse during their final days because they missed one premium payment. It is unfortunate that this occurs, and in my view a shameful way to consciously earn profits year after year, but it happens all the time.

A life insurance policy is designed to protect beneficiaries in the event of the death of the insured. It is of course known that insureds may be incapacitated prior to death and therefore may miss premium payments. You would think a feature that safeguards this from happening would be built into each and every policy, but unfortunately it is not.

 

 

One Response to “Michigan Jury Awards Policy to 82-Year-Old Widow”

  1. Hey Eric,
    That’s a great story, and I’ve honestly never encountered this problem before or even thought of it. I hear a lot of stories about how insurance companies will go out of their way to pay claims and avoid bad press, but am finding out a different story on your blog. Not sure the waiver of premium due to disability would help much, because that benefit by itself must be exercised by filling out a claim. Fortunately, these days, a large majority of my clients are urged to pay by automatic bank draft, and most do, to avoid these problems. It would be nice, though, if there was some rule built into the policy, as you say, that would allow an unpaid premium if the family can prove incapacitation at the time of the unpaid premium, especially in the case where the insured has paid premiums for years.

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