Articles Posted in Life Insurance

Life insurance lawyers will at some point have a situation involving a life insurance policy and a life settlement. Understanding these life settlements is important. WealthManagement.com published an article that is educational. The article is titled “Survey Shows Life Settlements Remain Misunderstood.”

The life settlement industry has an exceptional opportunity to re-cast how it is perceived by the financial planning community. It should begin soon and stress eduction and opportunity.

Executives know that a key to growing any business is understanding the market and customers. The life settlement industry is no different, and for years it has relied on the financial services industry to help promote our message and value proposition. Recently, it was learned that despite more than 20 years in existence and countless educational efforts, life settlements remain misunderstood among many financial advisors – and there is the research to prove it.

Life insurance lawyers in Dallas and Fort Worth might have a situation where someone sells their life insurance policy to a third party. This situation is discussed in a National Law Review article titled, Life Settlement Disclosure Legislation.

What are an insurer’s duties to insureds about disclosing the possibility of a life settlement? At least three recent cases have addressed an insurer’s duty to inform insureds about the existence and availability of life settlements. Moreover, a handful of states have already enacted legislation requiring insurers to inform insureds about the possibility of a life settlement.

With respect to legislation, a handful of states have enacted various versions of the NCOIL Life Insurance Consumer Disclosure Model Law (the “NCOIL Model Law”), requiring insurers to inform policy owners of alternatives to the lapse or surrender of a policy. While the disclosure statutes are similar in requiring notification of alternatives to the lapse or surrender of policies, the legislative framework is not uniform. This presents a potential legal minefield for insurers. Some states require disclosure and others do not, but even within those states that require disclosure, the triggers for disclosure and disclosure requirements themselves differ.

Weatherford life insurance lawyers, this writer included, have represented clients trying to recover proceeds from a life insurance policy purchased by third parties. The answer is yes. WealthManagement.com purchased an article discussing this issue. It is titled, Facilitating Life Settlements.

As growing numbers of aging baby boomers turn to their advisors to help them achieve their retirement and estate planning objectives, many estate attorneys are faced with decisions regarding life insurance policies purchased that are no longer relevant. Life settlements have steadily gained greater recognition as a vital financial planning tool. Yet, some estate attorneys may be hesitant to recommend them until they gain deeper insight into the “inner workings” of what they view as a nascent industry with a still-maturing regulatory environment.

Based on our experience, estate attorneys have three priorities relating to life settlements.

This San Antonio Court of Appeals opinion is one for life insurance lawyers to read and know about. It is a 1996 opinion styled, Mendoza v. American National Insurance Co.

Jerry Mendoza purchased a $25,000.00 life insurance policy on August 1, 1991. The October premium was not paid. The policy provided for a thirty-one day grace period. On November 1, 1991, the last day of the grace period, American National’s district manager, Sitka, verbally agreed to extend the grace period until November 4, 1991. The policy, however, specifically provided that only American National’s president, vice president or secretary had the authority to extend this time period. Jerry Mendoza died in an automobile accident on November 3, 1991. The premium was never paid. In a prior appeal, this Court affirmed a summary judgment in favor of American National on Plaintiff’s breach of contract, negligence and bad faith claims. This appeal concerns the trial court’s granting of summary judgment on Plaintiff’s claims for intentional infliction of emotional distress, Insurance Code and DTPA violations.

In order to qualify as a consumer under the DTPA, a person must seek to acquire goods or services by purchase or lease and those goods or services must form the basis of the complaint. Lack of privity between plaintiff and defendant does not preclude a plaintiff from establishing consumer status. The Insurance Code provides standing to “any person” who has been injured by another’s engaging in an unfair or deceptive act or practice in the business of insurance as declared in the Code; rules and regulations of the Code; or Section 17.46 of the DTPA. Therefore, a plaintiff may assert causes of action under the Insurance Code for violations of Section 17.46 of the DTPA even though the plaintiff is not a “consumer.” Carrion, a named beneficiary of the policy, would clearly be injured as a result of Sitka’s alleged misrepresentation. Therefore, Carrion has standing under the Texas Insurance Code. Mendoza’s mother, in her capacity as representative of his estate, however, does not have standing to assert Insurance Code or DTPA claims because those claims do not survive Mendoza’s death and his mother is not a “consumer” in her own right.

Life insurance attorneys might find this story interesting. It is from U.S. News. The story is titled, Marijuana Business Man Denied Life Insurance.

A successful businessman with a growing footprint in several states says he was shocked when he was refused a personal life insurance policy by Mutual of Omaha, one of the nation’s largest insurers.

The company informed Derek Peterson, CEO of Terra Tech Corp., in a letter dated June 13 that “we cannot accept premium[s] from individuals or entities who are associated with the marijuana industry.”

Life insurance lawyers will have clients approach after a claim for life insurance benefits has been denied because of a denial based on an exclusion for use of illegal drugs. A 2016, 5th Circuit opinion is a good read for how the courts look at these situations. The style of the opinion is, Eleanor Crose v. Humana Insurance Company.

The facts in the case show Ronald Crose died after ingesting ecstasy. Humana denied the claim for life insurance benefits by Eleanor citing the following exclusion in the policy:

“Causation Exclusions . . . Loss due to being intoxicated or under the influence of any narcotic unless administered on the advice of a health care practitioner.”

Dallas area life insurance attorneys will occasionally see a situations like this 1997, Dallas Court of Appeals case. The case is styled, Grant v. Group Life & Health Insurance Co.

Grant used a pry bar to break into the residence of Stokes. When Grant entered the residence Stokes shot him five times, killing him. Grant’s wife sued Group Life to recover benefits under an accident policy for the death of her husband. Group Life moved for summary judgement on the basis that Grant died while committing a burglary and, therefore, his death was not accidental. The trial court granted the summary judgment and Grant appealed.

In it’s ruling, the Court said that because Grant’s death was not accidental, the trial court correctly granted Group Life’s motion for summary judgement. Grant argues that because Group Life id not furnish her with a certificate of insurance, it is estopped from relying on undisclosed exclusions. Because the policy in question does not provide coverage for Grant’s death the policy exclusions are irrelevant.

A Texas life insurance lawyer will want to keep this case in his file. It is a 1941, opinion from the Waco Court of Appeals and is styled, National Life & Accident Ins. Co., Inc., et al. v. Thompson.

Velma Thompson instituted this suit for the recovery of $200 and statutory penalties alleged to be due her as beneficiary in a policy of insurance on the life of her husband, Era Thompson. Defendant answered with a plea in abatement on the ground that plaintiff had assigned the policy sued upon to one Braswell, and, subject thereto, with general demurrer and general denial. The brother and sisters of the insured filed their plea of intervention, asserting their right to recover the proceeds due under said policy, by reason of their allegation that plaintiff wilfully brought about the death of her husband. Defendant answered further, alleging that it was unable to determine who was entitled to receive the proceeds due under said policy and that it was paying into the registry of the court the sum of $200 to abide the judgment in the cause, and it prayed that it be dismissed from further liability with its costs.

The case was submitted to a jury on special issues, in response to which they found that plaintiff did not wilfully bring about the death of the insured; that a common-law marriage was in existence between plaintiff and the insured at the time of the latter’s death; and that $100 would be a reasonable attorney’s fee for the legal services rendered in prosecuting plaintiff’s case. Interveners and defendant each presented separate motions for judgment in their favor, respectively, non obstante veredicto. The court rendered judgment in favor of plaintiff and against defendant for the sum of $200, with interest and court costs, and that interveners take nothing. Each of the parties filed separate motions for new trial, all of which were overruled, and to which each duly excepted and gave notice of appeal.

Most attorneys who consider themselves very busy life insurance lawyers can tell you all kinds of war stories about the things life insurance companies and their agents do that is illegal and improper. 60 Minutes ran a story titled “Life Insurance Industry Under Investigation” that should be read.

When you take out a life insurance policy, you pay premiums in the expectation that when you die your spouse or your children will receive the benefit. But audits of the nation’s leading insurance companies have uncovered a systematic, industry-wide practice of not paying significant numbers of beneficiaries.

In a little-known series of settlements, 25 of the nation’s biggest life insurance companies have agreed to pay more than $7.5 billion in back-death benefits. However, about 35 insurance companies have not settled and remain under investigation for not paying when the beneficiary is unaware there was a policy, something that is not at all uncommon.