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Most mid-size and large companies provide their employees with specific benefits, such as life insurance, disability insurance, health insurance and pension benefits. Such benefits can include a defined-benefit pension plan. A defined-benefit plan is a type of retirement plan sponsored by employers. It involves a promised specific benefit that cannot be reduced once it is earned or “vested.” These plans are employer-sponsored, employer-funded benefits, and the amount you are promised as a benefit depends on the specifics of your plan. They are governed by a federal law called the Employee Retirement Income Security Act of 1974 (“ERISA”).

Find out more about defined-benefit plans, including your ability to file ERISA insurance and ERISA pension claims, from an experienced ERISA pension attorney if you believe you are being denied benefits that were promised to you and rightfully earned.

How Is the Defined Benefit Determined?

Some defined-benefits plans include a promise for a specific dollar amount. For example, you might have a promised benefit of $200 per month when you retire. More commonly, the defined benefit is calculated using some type of formula that involves factors such as your annual earnings, your age, or how long you worked with an employer.

As an example, a potential calculation might take 1% of your average monthly salary for the final five years you worked for an employer. That number might be multiplied by your total years of service to arrive at a promised benefit amount. If, for example, someone earned an average of $6,000 per month for the final five years of their service with a company, 1% would be $60 per month. If the person had 10 years of service with the company, the benefit would be $7,200.

You typically must meet eligibility requirements to earn the vested right to benefits contributed by your employer. That might mean working a certain number of years before you are fully vested. Part-time employees may be allowed to join the plan in some cases, and if they work a minimum number of hours a year, they have to be credited with a proportion of the benefits that a full-time employee might receive.

Can the Promised Benefits Be Reduced?

No, benefits you have already accrued in a defined-benefit plan cannot be reduced or taken away. However, the rate at which future benefits are accrued can be changed, which can lead to reduced benefits in the future.

For example, if a benefit is set up to accrue at a rate of $10 a month, the employer can decide to make a change to reduce the accrual rate to $8 a month starting at a certain period, such as July 2023. The $10 per month accrued prior to that date cannot be reduced once it has vested, but after July 2023, you would accrue benefits at the lower rate.

Defined-Benefit Plan Versus Defined-Contribution Plan

It is important to understand the difference between a defined benefit versus a defined contribution plan.

With a defined-contribution plan, you are not promised a specific benefit upon retirement. Instead, you can contribute to the plan via pre-tax contributions from your paycheck. Your employer also contributes funds to your account, either via a calculated benefit contribution amount or a contribution match.

You manage the investment of the funds in the account, and when you retire, you can start taking withdrawals from the total funds that have accumulated over time. One of the most familiar defined contribution plans is the 401(k).

What Is the Pension Benefit Guaranty Corporation?

The Pension Benefit Guaranty Corporation is a corporation chartered by the federal government for the purpose of guaranteeing some types of defined benefits. If your defined-benefit plan is covered by this guarantee, you will receive the promised benefits even if the plan itself is terminated.

The Pension Benefit Guaranty Corporation was created when the federal government passed the Employee Retirement Income Security Act of 1974, or ERISA. Other provisions of ERISA include required accountability of plans and the ability for participants to sue for their benefits or if they feel that a fiduciary duty has been breached by the administrators of a plan.

When to Consult an Attorney

You worked hard for your retirement benefits throughout the years, so you want to know that you can count on them to pay out as promised when the time comes. Many people base their plans for retirement, long-term care decisions, and other important financial choices on the hope that their benefits will pay out as planned, especially pension plan benefits that they have earned over time.

Unfortunately, sometimes there are issues with future pension benefits payments. They can range from clerical errors, such as someone calculating a benefit incorrectly, to serious bad faith that involves companies or plans not paying out what was promised, losing pension claims information, and not properly maintaining relevant pension plan documents. This problem is exacerbated by company mergers and acquisitions.

In these cases, working with an ERISA pension lawyer can help you fight for the benefits that are rightfully yours. A lawyer can help you understand why your benefits might be held up or not as much as you feel they should be. They can also help you navigate appeals and complaint processes and file a lawsuit if necessary to attempt to seek compensation for lost benefits, and/or you can bring breach of fiduciary duty claims, among other claims, under ERISA.

For more information on how experienced ERISA pension lawyers can help with ERISA pension claims and other employee benefits, contact the McKennon Law Group PC today.

Most Americans obtain their insurance benefits through their employment. These employee benefits include health insurance, dental insurance, disability insurance, and life insurance. Most of these benefits are governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA imposes a variety of fiduciary obligations on the administrators for these employee benefit plans. One of those obligations is to not make misrepresentations to plan participants, i.e., the employees and insureds. When either a plan administrator (usually the employer) or a claims administrator (usually an insurance company) provides misinformation to a plan participant, the administrator may have breached its fiduciary duty to the plan participant. McKennon Law Group recently brought a breach of fiduciary duty claim in the Western District of Kentucky and defeated the employer’s Motion to Dismiss (the “Motion”) for failure to state a claim. See Blackburn v. Reliance-Standard Life Ins. Co., 2022 WL 17082673 (W.D. Ky. 2022).

Our client, Ashley Blackburn, is a nurse. She and her husband, Ray Blackburn, both worked for Baptist Healthcare System (“BHS”) in Kentucky. Through their employment, they obtained a variety of employee benefits, including disability insurance and life insurance. Our client and her husband obtained life insurance through Reliance Standard Life Insurance Company (“Reliance Standard”) that covered themselves. They also obtained supplemental life insurance that covered the other spouse. Before doing so, they asked BHS’s representative whether they were allowed to obtain supplemental coverage. They were told that they could. BHS’s representative told them that they were allowed to obtain up to $100,000 in supplemental coverage.

The couple paid for their supplemental coverage for ten years. During that time, our client’s husband developed cancer. Through BHS, he had disability insurance. While out on disability, his life insurance was automatically maintained under a waiver of premium provision of his disability policy. Our client had to spend increasingly longer periods of time away from work to tend to her husband and ultimately had to leave her job. When she left BHS, she converted the supplemental life coverage for her husband into an individual policy. This allowed her to maintain the insurance even though she had left her job to tend to her ailing husband.

Unfortunately, our client’s husband passed away due to cancer. When she submitted a life insurance claim to Reliance Standard, it denied her claim because the supplemental life insurance was improper and disallowed by the Plan language, contrary to what our client had been told by BHS’s representative. Ms. Blackburn hired McKennon Law Group PC, and we sued both the employer and Reliance Standard under ERISA Section 502(a)(3) alleging defendants breached their fiduciary duties by misleading her into believing that she was insured. She also sought statutory penalties under Section 1132(c) for defendants failing to timely disclose plan documents upon request. BHS moved to dismiss our claims against it. It insisted that even assuming that everything in our complaint was true, Ms. Blackburn was not entitled to relief. BHS raised a variety of arguments. It insisted that our client’s breach of fiduciary claim was improper because it was duplicative of an improper denial of benefits claim (a separate type of ERISA claim) and that, ultimately, any oral misrepresentations by BHS’s representative were irrelevant. The Court disagreed and denied the Motion.

The Court explained that a plan participant, such as our client, may bring a claim for breach of fiduciary duty when an administrator provides misinformation to the plan participant. The Court relied heavily on a Sixth Circuit case, Gregg v. Transportation Workers of America International, 343 F.3d 833, 847 (6th Cir. 2003). The Court explained:

[An administrator] also has a duty to honestly respond to all the beneficiary’s inquiries. See Gregg v. Transp. of Am. Int’l, 343 F.3d 833, 847 (6th Cir. 2003). “[O]nce an ERISA beneficiary has requested information from an ERISA fiduciary who is aware of the beneficiary’s status and situation, the fiduciary has an obligation to convey complete and accurate information material to the beneficiary’s circumstance . . . .” Krohn, 173 F.3d at 547. In Gregg, a union administered a group life insurance policy for its members. 343 F.3d at 847. At a meeting where members asked questions about the union’s new life insurance plan before deciding whether to join it, the union’s leaders neglected to share material facts about the policy and gave members information that was contrary to the policy’s express terms (which one of the leaders did not read). Id. at 847–48. The court held that the union breached its fiduciary duties to provide its members with all material information and to truthfully answer their questions. Id. at 848.

Here, Baptist, as the plan administrator, had a duty to answer all of Mrs. Blackburn’s insurance questions truthfully. See Gregg, 343 F.3d at 847; [DN 20-3 at 24]. When she asked whether she could obtain supplemental life insurance on her husband’s life, Baptist was dutybound to tell her she could not, for it knew full well that Mr. and Mrs. Blackburn were both Baptist employees.

Blackburn, 2022 WL 17082673, at *4. Contrary to BHS’s assertions, the oral misrepresentations were potentially a breach of its fiduciary duties to our client. It does not matter that the misrepresentations were not made in writing. It also does not matter what the applicable plan documents state. What mattered is that BHS actively misrepresented information to our client. See id. at **4-5.

As for BHS’s argument that the claim was duplicative and improper, the Court explained that some claims are of such a nature that a claimant cannot pursue a claim for improper denial of benefits in court because, pursuant to the applicable policy/plan terms, the insurer properly applied the plan terms. Instead, the injury stems from improper conduct directed to a plan participant. While Reliance Standard was correct that, under the plain language of the Plan documents, supplemental life insurance was not available to our client and her husband, that did not change the fact that BHS actively provided misinformation to and harmed our client. The Court correctly noted that there must be a remedy for such conduct. See id. at *3.

As the Court explained, whereas some courts state that a claimant cannot “repackage” a claim under both an improper-denial-of-benefits theory and a breach of fiduciary duty theory, those holdings relate to the damages sought, not to the nature of the claim. Under ERISA, a plan participant cannot obtain double relief, a payment under both legal theories. However, when the two claims arise from different conduct, then either claim is a viable avenue to relief, so long as the claimant only obtains relief once. Given that our client did not have a viable claim for relief under an improper-denial-of-benefits theory, the breach of fiduciary duty claim could not be a “repackaging” of such a claim. See id.

The Court accurately explained this area of the law. It is well established throughout the country that neither plan administrators nor claims administrators may provide misinformation to plan participants. To do so may be a breach of fiduciary duty.

When such conduct causes a plan participant harm, the plan participant may seek a variety of forms of equitable relief. The U.S. Supreme Court has addressed these types of fiduciary issues extensively and explained in Cigna Corp. v. Amara, 563 U.S. 421, 439 (2011), that a variety of equitable remedies such as reformation, surcharge, and equitable estoppel are available to ERISA plan participants when they establish breach of fiduciary duty claims. In short, they are entitled to the value of the benefits that they were promised.

Breach of fiduciary duty claims under ERISA are very complicated. There are multiple ways in which an administrator may breach its fiduciary duty to a plan participant. These issues are often intensely litigated. However, courts throughout the country are clear that an administrator may not make material misrepresentations to plan participants who rely on them. When a plan fiduciary such as Reliance Standard or BHS speaks, they must speak truthfully.

If you or someone you love needs to file a disability insurance claim due to a mental health condition that makes it impossible to perform your occupational duties, you are going to need the advice, insights and services of a California disability insurance claims attorney.

How can you prove to an insurance company that you are suffering from a disabling mental health condition, a condition that cannot be observed or measured? What steps can you take if an insurance company denies your mental health disability insurance claim?

Keep reading this article concerning disability insurance mental health claims and you will learn why you may need the advice and services of a California disability claims lawyer in order to prevail with your disability insurance claim.

What Should You Know About Filing a Disability Insurance Claim?

People who struggle with certain mental health conditions may be eligible for benefits through employer-sponsored short-term disability insurance (STD) or long-term disability insurance (LTD). There are also STD and LTD policies purchased directly from an insurance company, typically through a life and disability insurance agent or broker.

Qualifying mental health conditions may include anxiety, depression, eating disorders, obsessive-compulsive disorder (OCD), panic disorder, and post-traumatic stress disorder (PTSD). These conditions are often as debilitating as any physical illness or injury.

Most STD and LTD policies require you to be covered by the policy for a certain period of time – called an “elimination” or “qualifying” period – before you may file a claim for benefits. That time period may vary, but most policies establish a two-year qualifying period.

In addition, most employer-sponsored STD and LTD policies have a limitation on the time period for which you can receive disability benefits. This period is typically 24-36 months. Most individual disability income policies have no time limitations for receiving disability benefits based on a mental health condition.

How Can You Prove a Mental Health Disability?

To prove your mental health disability claim to your disability insurer, you will need to submit a disability insurance claim form along with an attending physician statement signed by your treating physician or other medical provider who provides a statement of your mental health conditions and how and why you have restrictions and limitations as a result. You will also be required to provide your disability insurer with your medical records, test results and any other pertinent medical evidence which indicates that you are unable to perform your work or maintain full-time employment.

A comprehensive professional letter that discusses your condition should include a clinical diagnosis for the condition (i.e., depression, bipolar disorder or schizophrenia) and indicate that you cannot perform work or maintain employment because of that condition. The statement should also address how your mental health condition affects your activities of daily living. A statement of the restrictions and limitations you have should be clearly stated and your medical health professional should state why your medical condition renders you unable to perform your occupational duties.

Provide the insurance company with as much medical evidence as you can in order to strengthen your claim. Include statements from those who are closest to you (e.g., friends, co-workers and family members) because they are the ones who see how your mental health affects your ability to perform work, maintain employment and your activities of daily living.

If Your Claim is Denied, Can You File an Appeal?

In most situations, you will be able to appeal the denial of a disability insurance claim. Whether you are required to do so depends on whether your claim is covered by a federal law called the Employer Retirement Income Security Act of 1974 (ERISA). Often, an appeal will be necessary since insurers or their hired medical consultants will work hard to uncover any evidence to deny your claim for disability insurance benefits. For example, we often see insurers hire medical consultants who misrepresent that they attempted to contact our clients’ medical health professionals but were unable to do so. The insurer will then use this information to deny the claim, asserting that our clients’ doctors did not cooperate with claim investigation and infer that the clients’ doctors were afraid to have contact because they did not truly have support for the mental health disability claim. These medical consultants who are beholden to the insurers that pay them will ignore medical evidence or misconstrue it to justify a conclusion that you are not disabled.

If your disability claim is denied, you typically have the right to appeal the disability denial decision within a limited time period. To begin the process of filing an appeal, you should contact an experienced disability insurance claims attorney for help. You can appeal a denial of your claim for mental health disability insurance benefits, but the appeals process is usually more complicated if your insurance is employer-provided than if you purchased the policy privately.

Private sector, employer-provided disability policies are governed by ERISA, the federal law which sets legal requirements for group insurance, retirement and pension plans provided by private employers. As discussed in more detail below, if your disability insurance claim is governed by ERISA, you will be required to file an appeal of your denied disability insurance claim.

What Does ERISA Require?

ERISA requires you to pursue at least one “administrative” appeal through your insurance company before you may take the company to court. In most cases, you will have 180 days from the date you receive a claim denial letter to file an administrative appeal with the company.

If you fail to follow the insurance company’s administrative appeal process, you could waive your right to continue to pursue your disability claim. If you do not present adequate evidence of your disability claim to the insurer on appeal, you will likely have waived the ability to provide any further evidence in your subsequent court case against the insurer. Therefore, you can ensure that no mistakes are made by asking an experienced disability insurance claims attorney to handle your administrative appeal on your behalf.

Federal courts have jurisdiction in ERISA-related legal matters, but if you purchased disability insurance privately in California, and if you believe that your claim has been wrongly denied, a California disability insurance claims attorney can negotiate with the company on your behalf, or if necessary, take your case to the California or other state courts. Many attorneys handle disability claims nationwide, including the McKennon Law Group PC.

What is Bad Faith?

In California as in most states, if your disability claim for your mental health condition is denied by your insurance company, you may be able to bring a bad faith lawsuit against the insurer for your unpaid disability benefits as well as for:

emotional distress and other damages caused by the company’s bad faith
interest on past-due benefits
your attorney’s fees
possible punitive damages

Bad faith is the legal term for what happens when an insurance company handles a claim unfairly or, more precisely, unreasonably. An insurance company’s bad faith practices may include but are not limited to:

persistently trying to settle your claim for less than it is actually worth
unreasonable delays
rejecting your claim for disingenuous or false reasons
threatening to cancel your coverage unless you accept a “lowball” settlement amount
continually demanding more information as a delaying tactic
inadequate investigation of the disability insurance claim

How Will a Disability Insurance Claims Attorney Help You?

If you are struggling with either the claims process or the appeals process, contact a California disability claims lawyer at once for the legal assistance you need. In fact, the smart move is to consult an attorney even before you submit your initial mental health disability insurance claim.

Your disability claims attorney will ensure that all of your paperwork is accurate, complete, and on time, and your attorney will additionally ensure that there are no misunderstandings or mistakes on your part that could delay or derail the claims or appeals process.

If you let an experienced California insurance claims lawyer guide you through the claims or appeals process, you will be much more likely to prevail. In order to prevail, you should work from the beginning of the process with an attorney who has thorough knowledge of ERISA, disability insurance claims, your rights, and the law.

If you need to file a mental health disability insurance claim, or if you have already filed a claim that has been denied, arrange a legal consultation – at no cost and with no obligation – to discuss your case with an experienced and capable disability insurance claims lawyer as soon as possible. We believe McKennon Law Group PC should be that law firm.

Claimants who have sued insurance companies for wrongful denial of their claims –including health insurance claims – occasionally find themselves faced with a defendant’s motion to dismiss or transfer their case to a different court. This request to transfer the case could be based on a number of factors, but typically the defendant insurance company argues that it would be more convenient to litigate the case in the alternative forum. In California, the doctrine of forum non conveniens permits a court to dismiss an action when it believes the case may be more appropriately and justly tried elsewhere. Stangvik v. Shiley Inc., 54 Cal.3d 744, 751 (1991). The doctrine of forum non conveniens is codified in Code of Civil Procedure Section 410.30(a), which provides, “When a court upon a motion of a party . . . finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just.” In determining whether to grant a motion based on forum non conveniens, a court first decides whether the alternative forum is a “suitable place for trial” and, if so, the court then balances the private interests of the litigants and the interests of the public to decide whether the action should remain in California or be prosecuted in the alternative forum. Stangvik, supra, 54 Cal.3d at 751.

In the matter of Miriam Abu Sharkh, et al. v. Continentale Krankenversicherung A.G., et al., (May 17, 2021, B303219), the McKennon Law Group PC secured a reversal of the trial court’s decision granting such a motion and dismissing our clients’ case in favor of a German forum. The lawsuit arose from the defendant health insurance company’s wrongful and egregious termination of our clients’ health insurance coverage without sufficient explanation or reasoning at the time of the family’s greatest need – when our client’s son was hospitalized due to complications from a rare, terminal illness. Our clients were living in California at the time of the wrongful conduct but, due to the termination of their health coverage, were forced to leave the state to seek affordable healthcare abroad. The health insurance company filed a motion to transfer the case to Germany and dismiss the case, arguing that California was an inconvenient forum and that the case should be filed in Germany, where the insurance company was based. The trial court, focusing primarily on the residence of the parties, granted the motion. On appeal, the McKennon Law Group PC argued that the private and public factors weighed heavily in favor of a California forum and that the trial court had abused its discretion in dismissing the case based on forum non conveniens.

The Court of Appeal agreed that California had a substantial interest in this case, finding that “where Continentale issued insurance policies to three California residents, evaluated claims arising in California, paid claims to California providers and terminated coverage while the insureds resided in California, the ‘substantial interest of California in these transactions is obvious.’” (Citing People v. United National Life Ins. Co., 66 Cal.2d 577, 593 (1967)). The Court of Appeal also agreed that the lower court had placed too much emphasis on the parties’ residence. The Court recognized that while location of the parties at the time of the litigation is relevant to the court’s analysis, it cannot be the exclusive factor on which a court relies. See Stangvik, supra, 54 Cal.3d at 753, fn. 4 (“An undue emphasis on a single factor is especially threatening to a balanced analysis because some of the matters to be weighed will by their nature point to a grant or denial of the motion.”). Lastly, the Court of Appeal agreed that the lower court’s finding that California had no interest in the dispute was unreasonable given the facts of the case. After extensive briefing and oral argument, the Court of Appeal ruled that the Superior Court abused its discretion when it granted the defendant health insurance company’s motion to transfer the case to Germany and dismiss our clients’ bad faith health insurance lawsuit on the basis of forum non conveniens. The Court of Appeal remanded the case and ordered the trial court to weigh the interests of both forums, as well as all pertinent public and private factors.

This was a significant victory for our clients because they will now be able to again pursue their bad faith case against the German insurer and its third-party administrator in a California court. In situations such as this, it is imperative that claimants have retained experienced bad faith insurance attorneys such as the McKennon Law Group PC to ensure access to their chosen forum and pursue insurance bad faith remedies in a local court concerning their wrongly-denied health insurance benefits.

Life insurance policies allow those with dependents, such as children and spouses, to provide some financial stability to the people who depend on them if they die unexpectedly or at least offset the costs of a funeral and end-of-life medical care. Many married couples invest in life insurance policies for both spouses, and it is also common for parents to purchase policies that will protect their children.

Unfortunately, at the moment when someone needs that coverage the most, the company involved could try to avoid their obligations. If the policyholder paid their premium and maintain coverage, their dependents have every reasonable right to expect a timely payout on the policy when they die.

However, insurance companies can take steps to avoid paying out on legitimate claims. This kind of behavior, known as bad faith insurance denials, can leave customers vulnerable despite the best intentions of their loved ones. Thankfully, the beneficiaries of a life insurance policy with a claim denied in bad faith can likely take legal action against the company.

Determine the grounds for the attempted denial

The first and most important step toward pushing back against a bad faith insurance denial involves obtaining a statement from the insurance company, preferably in writing, explaining why they will not fulfill their obligations.

They might claim that the investigation into the cause of death is still underway, or they might point to some clause that they claim the policyholder or the beneficiaries violated. Once you know the reason for the denial, you can begin to gather evidence to support your claim.

Insurance providers have an obligation to the people who pay for their policies

Insurance companies make the most money from people who carry coverage that they never need. These often for-profit businesses will take a financial loss when they approve a substantial claim. Clearly, the business makes more money when it denies more claims.

However, to prevent companies from rejecting valid claims, there are many laws and rules in place protecting those who carry various forms of insurance. A company may take steps to mitigate its liability by limiting coverage in certain situations, but they may not deny valid claims in bad faith or make their contracts so complex that most legitimate claims would wind up denied.

If you can show either that the alleged reason for the denial is inaccurate or that the terms of the policy would effectively preclude most people from bringing a claim, you may have a good case for a bad faith action against the insurance company. You could seek the full benefit, as well as damages in certain cases.

It’s important to remember that the insurance company has to answer to state and federal regulators, as well as to people who carry their coverage. Taking action after an unfair denial of a life insurance claim can protect your family during a vulnerable time and other people who have similar coverage.

Life insurance lapse generally refers to coverage ending for insufficient or nonpayment of policy premiums. If premiums are not paid during the grace period to sustain the policy, then the life insurance ends. The lapse of a life insurance policy at the wrong time could have disastrous consequences for persons or families because policyholders could easily lose their life insurance if a single premium is accidentally missed, even if they have been paying premiums on time for years. On January 1, 2013, California added new sections 10113.71 and 10113.72 to the Insurance Code, as a way of providing consumer safeguards against life insurance policy lapse.

California Insurance Code Sections 10113.71 and 10113.72 primarily do three things: (1) mandate that life insurance policies issued or delivered in California have a 60-day grace period; (2) set forth notice of pending lapse and termination requirements; and (3) require insurers to provide notice to applicants and annual notice to policyholders of their right to designate someone other than themselves to receive lapse notices. The latter requirement, which applies only to individual life insurance policies, was an important addition to the California Insurance Code because it allows policyholders to designate persons who can receive lapse notices so that if the policyholder is too sick to read a premium notice and/or pay a premium, he may still be protected. While both statutes went into effect on January 1, 2013, a question remained as to whether these safeguards would apply to life insurance policies issued or delivered prior to January 1, 2013. As discussed below, the answer to this question is “no.”

In a recent decision, McHugh v. Protective Life Insurance, 40 Cal.App.5th 1166 (2019) (“McHugh”), the California Court of Appeals ruled that Insurance Code Sections 10113.71 and 10113.72 only apply to policies issued or delivered after January 1, 2013. William Patrick McHugh (“Insured”) purchased a life insurance policy (“Policy”) from Protective Life Insurance Company (“Protective Life”) on January 9, 2005, that provided for a 31-day grace period. The insured failed to make his 2013 premium payment; therefore, on February 9, 2013, the Policy lapsed per its express terms. Protective Life never received an additional premium payment or reinstatement application from the insured. The insured died in August 2013. Plaintiffs, the policy beneficiaries, sued Protective Life for breach of contract and insurance bad faith, alleging that Protective Life did not provide the insured with a 60-day grace period per code section 10113.71 and therefore, the lapse notices and subsequent termination of the policy were void. The court found that the 2013 statutes did not apply retroactively to the Policy, stating:

Sections 10113.71, subdivision (a)(1) and 10113.72, subdivision (a)(1), refer to term life insurance policies “issued or delivered,” a term that in California case law imports prospective application: “the terms ‘issued’ and ‘delivered’ must refer to the original issuance and delivery of the policy; they are fixed as to time and do not stretch into infinity.” (Ball v. California State Auto Assn. Inter-Ins. Bureau (1962) 201 Cal.App.2d 85, 87.) Therefore, as this policy was issued and delivered to McHugh in 2005, it could not incorporate the statutory amendments that became effective in 2013. Id.

Since the Policy was issued in 2005, Protective Life was not obligated to comply with California Insurance Code Sections 10113.71 and 10113.72. Thus, the express terms in the Policy dictated the duration of the grace period and any terms as to notice to the insured regarding the termination of the Policy. The court also rejected the contention that the statutes applied if the Policy was renewed after January 1, 2013.

This is an unfortunate ruling that does not protect insureds who have paid premiums for years and who may become too sick to pay a premium, thus allowing a policy lapse at the time the insured needs the life insurance the most. Policyholders need to be aware of the date their life insurance policy was first issued and/or delivered. If the policy was issued or delivered prior to January 1, 2013, a policyholder needs to carefully read the express terms of the policy to make sure they understand how their policies can lapse and they should take steps to protect themselves. When it comes to life insurance policies, a lack of knowledge can lead to big problems.

If you have questions about the lapse of a life insurance policy, McKennon Law Group PC has significant experience with most issues involving life insurance and we may be able to assist you. Please contact us for a free consultation.

Can a Defined-Benefit Pension Plan Under ERISA Reduce Promised Benefits?