United Life Insurance partially denied a claim for life insurance benefits under a voluntary policy due to an uncompleted form despite premiums being paid for ten years.
In Shields v. United of Omaha Life Insurance Company, the Court addresses whether an insurance company is required to inform you that you are eligible for coverage before taking your premiums.
Myron worked for Duramax and was enrolled in both the basic and the voluntary life insurance policies with coverage to equal three times his annual salary. Myron designated his wife, Lorna, as the beneficiary of his life insurance policies.
It is important to know that Myron was not given an Evidence of Good Health form or any other form to complete to satisfy the good health requirement at the time he enrolled in November of 2008.
In October of 2017, Myron verified with the HR director of Duramax that both life insurance policies were active.
From November 2008 to Myron’s death in 2018, premiums were paid for both policies.
Duramax sent a census to United every two years that described the number of employees enrolled in the voluntary life insurance policy. On at least one of the census’, Myron’s name was included as being enrolled for excess coverage.
When Myron died on June 5, 2018, Lorna timely submitted a claim for life insurance benefits to United.
United paid Lorna $236,000 in life insurance benefits—$136,000 for the basic life plan and $100,000 for the guaranteed issue of the voluntary life plan. United denied Lorna’s claim for the additional $100,000 of excess coverage under the voluntary plan.
United explained that they “did not receive and approve Evidence of Good Health” therefore they were “unable to allow the additional $100,000 of voluntary life coverage.”
Lorna filed suit against United in the District of Maine on October 3, 2019. The District Court granted summary judgment to United on Lorna’s recovery of plan benefits and breach of fiduciary duty claims. Lorna timely appealed the District Court’s ruling to the United States Court of Appeals, First Circuit.
Lorna contended that the record supports that United had a fiduciary duty to notify Myron he was uninsurable and that United breached this duty by accepting premiums from him even though he was uninsurable.
The First Circuit rejected this argument stating that even if United had a duty, the record does not show a supportable inference that United made an insurability determination regarding Myron’s excess coverage that could have triggered the duty to notify.
However, the court vacated the summary judgment rulings on the breach of fiduciary duty because the lower court did not address what the record shows about whether United took reasonable steps to confirm Myron’s eligibility for excess coverage in a timely manner after accepting his premiums.
When enrolling in a Life Insurance Policy—whether voluntary or basic—it is important to review all terms of the policy to ensure that you are insurable and have completed all necessary forms for eligibility. These insurance companies have no problem taking your money, despite you being uninsurable.
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