Servicemembers Group Life Insurance

We have handled several disputes in 2012 regarding the proper beneficiary of a Servicemember's Group Life Insurance Policy (SGLI).   SGLI coverage was established to provide low cost life insurance to active duty members of the military.  The SGLI program is subsidized by the Federal Government to make the premiums affordable to servicemembers. It currently provides up to $400,000  in coverage, through payroll deductions.

Disputes occasionally arise regarding the proper beneficiary of an SGLI policy.  When such a dispute arises, it is important to consult with an attorney experienced in handling SGLI claims.  Unlike life insurance purchased independently through an agent, SGLI policies are subject to federal law, not state law.  That means that state laws regarding spouses or ex-spouses as beneficiaries do not apply, nor do community property laws.  Although concepts such as undue influence, lack of capacity, and slayer forfeiture may apply.

Potential disputes may arise regarding the proper beneficiary or regarding a denial by the insurer.

Attorneys Handling SGLI Disputes

Diagnosing the Life Insurance Beneficiary Dispute

J. Michael Young of the firm of Sanders, O'Hanlon, Motley & Young routinely handles disputes all over Texas regarding life insurance beneficiaries.  The Dallas Bar Association has published an article by Michael entitled "Diagnosing the Life Insurance Beneficiary Dispute" in the November edition of its Headnotes magazine.  The article can be found at this link on page 15.  Please call Michael at 903 892 9133 or use the contact form if you are involved in a dispute regarding life insurance benefits.

Life insurance beneficiary disputes

Our firm is often contacted by persons who are involved in disputes regarding the proper beneficiary of a life insurance policy.  It is important that such persons contact a lawyer early in the dispute process, preferably just after the death of the insured.  For example, a potential beneficiary is in a much better position if the insurance company is notified of the dispute before the proceeds are paid out.  Our firm handles life insurance beneficiary disputes all over Texas, in both state and federal courts. 

Holocaust survivors still seeking life insurance payouts

A fascinating, and of course tragic, after-affect of the Holocaust have been lingering life insurance claims. Many victims had purchased life insurance policies, but their survivors often never received benefits. The International Commission on Holocaust Era Insurance Claims was established in the 1990s and has reportedly paid out hundreds of millions of dollars to claimants. However, according to an article in the Miami Herald, lawyers for survivor's groups contend the actual amount owed is likely far greater. They are trying to change laws that prevent the claims from being heard by US courts:

Rep. Lamar Smith, R-Texas, who chairs the House Judiciary Committee, met with some of the survivors, but has not scheduled a crucial hearing needed to consider the legislation. He has told key lawmakers he wants to review it more before making any decision.

The proposed bipartisan bill - sponsored by Rep. Ileana Ros-Lehtinen, R-Fla., and Rep. Ted Deutch, D-Fla. - would give thousands of survivors the right to sue Germany's Allianz SE, Italy's Assicurazioni Generali and other major European companies in U.S. courts to recover the value of life insurance policies bought before World War II. It would also force those companies to disclose lists of policies held by Jews during that era.

Hundreds, if not thousands, of survivors have been denied access to the U.S. courts because the federal government has said that the claims system under an international Holocaust commission is the only way for them to be compensated for their losses.

My sense is that this will be an uphill battle.

Read more here: http://www.miamiherald.com/2012/06/07/2838236/holocaust-survivors-continue-efforts.html#storylink=cpy

Read more here: http://www.miamiherald.com/2012/06/07/2838236/holocaust-survivors-continue-efforts.html#storylink=

Advanced Insurance Law Seminar

I will be attending the Advanced Insurance Law Seminar in Dallas on April 12 and 13, sponsored by the State Bar of Texas.  There are no specific topics on life insurance, but plenty of discussion regarding negotiating with and litigating against insurance companies. 

Insurers hold payouts in general accounts

A Bloomberg story entitled, Fallen Soldiers' Families Denied Cash as Insurers Profit, explores the practice of insurers holding life insurance benefits in their general accounts. Simply put, instead of sending a check to the designated beneficiary for the policy benefit, the insurance company sends the beneficiary a check book.  The beneficiary can then write checks against the funds.

What is the problem with this arrangement?  For starters, the insurance company typically pays well below market interest rates on the funds.  Also, the money is not kept in an FDIC insured account. Instead, the funds are mingled in the general operating accounts of the insurance company:

"This unregulated quasi-banking system operated by insurers has none of the protections of the actual banking system. Lawrence Baxter, a professor at Duke University School of Law in Durham, North Carolina, says the potential exists for a catastrophe."

The benefit to the insurance company is obvious: it operates as an unofficial bank and is able to profit from the spread consisting of the difference it pays in interest against the returns it gains by investing the money.

Texas Insurance Coverage Lawyers

The insurer's duty of good faith and fair dealing

Texas law imposes a general duty of good faith and fair dealing on isurance companies.  In essence, it means that an insurance company has a duty to deal fairly and in good faith with an insured.  The duty is imposed because of the following public policy reasons:

• the unequal bargaining power which would allow unscrupulous insurers to take advantage of their insureds' misfortunes in bargaining for settlement or the resolution of claims;
•  without such a duty, insurers could arbitrarily deny coverage and delay payment of the claim with no more penalty than the interest on the amount owed; and
• an insurance company has the exclusive control over the evaluation, processing and denial of claims.

Unfortunately, the Texas Supreme Court has gradually chipped away at policy holder rights as the insurance industry has gained political power in Austin over the past dozen or so years.  It is important to contact a lawyer if you believe you or your business in Texas are not being dealt with reasonably by an insurance company.

Texas Life Insurance and Coverage Law Firm

Houston federal court rejects insurer's claim denial

Gilberto Espinoza, an employee of Houston-based Defendant Becon Construction Company, died in an automobile accident in Kentucky. His blood alcohol levels showed he was legally intoxicated.  Life Insurance Company of North America denied his widow's claim for acidental death benefits.  The insurance company claimed the death was not an "accident" because it was not “a sudden, unforeseeable event."  In essence, the insurance company contended that because Espinoza “would have been aware of the risks involved in operating his vehicle while under the influence,"  his death was a foreseeable result of his actions and thus not an accident.

In a well-reasoned opinion, the Houston federal district court ruled against the insurance company and its attempt to craft a per se rule that driving while intoxicated is never an accident.  Had the insurance company wanted to enforce such an exlusion, it should have explicitly been stated in the policy.

Texas Accidental Life Insurance Lawyer

Expose: Insurers Dodge Payouts

Bloomberg has a feature story on insurance companies refusing to pay valid claims. According to the article, insurers will find creative reasons to deny claims.  These denials pay off, because beneficiaries often don't consult attorneys or want to fight a legal battle.  The abuses are particularly common when the policy is purchased through an employer.  Those policies are covered by the Employee Retirement Security Act, better known as ERISA. Unfortunately, life insurance claim denials are not uncommon in Texas.

Texas Life Insurance Claim Denial Attorneys

Federal Court rejects effort to rescind policy

In Federated Life Insurance Company v. Jafreh, the life insurance company attempted to rescind a policy over six years after it was issued. The insurance company claimed the insured had misrepresented his health status in the policy application.  Both the District Judge in Houston and the Fifth Circuit Court of Appeals rejected this effort and found the insurance company liable for the benefits along with 18% penalty interest.

Texas Life Insurance Dispute and Denial Law Firm

Texas insurance commissioner forbids discretionary clauses

Life insurance companies in Texas will no longer be able to rely on so-called discretionary clauses to deny claims. These clauses give insurance companies the right to deny claims based on their own interpretation of policy provisions. Such interpretations can be difficult to overturn in court.  A Dallas Morning News article focuses on the problem:

"Health, life and disability insurers will no longer have blanket authority to decide what their policies do and don't cover in Texas, under rules approved Monday by Insurance Commissioner Mike Geeslin.

The decision, which was sought by the state consumer advocate for insurance, ends long-standing provisions in most health and disability plans – called discretionary clauses – that give insurers the right to interpret their policies and decide what benefits must be paid.

In formally adopting the new rules, Geeslin wrote that the discretionary powers of companies "are unjust, encourage misrepresentation and are deceptive because they mislead consumers regarding the terms of coverage" in their policies.

Prohibiting those provisions, the commissioner said, will protect consumers from "incorrect and unfair coverage determinations by insurers and HMOs without a subsequent opportunity for a full and independent review" of their claims."

This decision by the Texas Insurance Commissioner was long overdue and levels the playing field somewhat between insurance companies and consumers.

Fifth Circuit overturns denial of benefits

Life insurance cases under ERISA can be difficult, because courts review the insurance company's denial under an abuse of discretion standard.  Essentially, this means the courts consider whether the insurer had a reasonable basis for the denial, with substantial evidence in support.  However, courts do not seek to determine if the insurer made the "right" decision.  Furthermore, in ERISA cases there is no jury available to review the insurer's denial. This standard gives plenty of leeway for the insurer to find a reason to deny benefits.

In a recent case, however, the Fifth Circuit Court of Appeals overturned a district court's decision upholding Unum Life Insurance Company's denial of benefits. While the decision dealt with disability insurance instead of life insurance, the legal concepts at issue are similar in both contexts.  The Fifth Circuit disagreed with the trial court that Unum had not abused its discretion. The Fifth Circuit appeared troubled that Unum pressured its consulting physician to rule that the claimant was not disabled, even though the physician was not provided with an MRI he had previously deemed important to review.  Furthermore, Unum based its denial on opinions from its own paid physicians that were somewhat vague and certainly less than concrete.

Life insurance claim denied texas

Rescission of life insurance policy during contestability period

Insurance companies routinely try to find a reason to rescind a policy.  The reason rescission is a favorite tactic is because it is so powerful.  Why fight over whether a particular claim is covered if the insurance company can simply obtain a finding that the entire policy never existed?

Generally a life insurance company can rescind a policy purchased within two years of the insured's death if it proves the application contained a misrepresentation.  However, under the Texas Insurance Code, it must be shown that such misrepresentation:

(1) is of a material fact; and

(2) affects the risks assumed

.

Texas Insurance Code: Section 705.051

You should immediately contact an experienced life insurance attorney if you have a claim denied or contested due to an alleged policy misrepresentation.

Life insurance denial lawyer in Texas

Selling life insurance the latest hot job?

According to the Wall Street Journal, selling life insurance is a career returning to popularity.  A major factor is the vast layoffs in other financial services sectors.  Also, the resurgance in whole life policies creates a need for sales staff:

One factor turning this around is the way insurers' core product, whole life, came through the financial crisis. Competing term insurance, priced much lower, was sold on the pitch "Buy term and invest the difference." But when stocks plunged early on in the financial crisis, "invest the difference" sometimes meant "lose the difference." By contrast, money paid for whole life was still there.

Term-life sales were flat in the second half of 2009, according to Limra, while sales of whole-life policies were up 12% from a year earlier.

Whole life, given its complexity, generally isn't sold via the Internet, but needs an agent to explain it. So now the insurers that specialize in whole life are capitalizing on the more positive light in which it is viewed, adding agents.

Claim for benefit proceeds after payment made by an ERISA plan?

Can a person claiming the right to ERISA life insurance benefits wait until the policy benefits are made, then sue the payee to recover the benefits under Texas law?  Under some circumstances it is possible, according to a recent US Supreme Court decision.  This is a very complex issue.  Consult a Texas Life Insurance Lawyer for counsel regarding this issue.

Texas Insurance Lawyers

Top 40 Texas Life Insurers

The Texas Department of Insurance has an informative ranking of the Top 40 life insurance companies, based on written premiums and percentage of market share.  The information can be found here.

Is death due to a surgical mistake "accidental"?

Most accidental death policies exclude coverage for death due to sickness or disease.  But what if a mistake during a medical procedure causes death, instead of the underlying medical condition?  Courts have not ruled consistently on this issue.

An article in Forbes, entitled "Does Life Insurance Cover Death During Surgery." highlights the following case:

Trudy Barnes, a 31-year-old mother of three, suffered from curvature of the spine and sought to have it corrected in February 2007 at a suburban Dallas hospital. During the surgery an anesthesiologist inserted a catheter too far into her chest, puncturing a vein and causing heavy bleeding. She went into cardiac arrest and died two days later.

Trudy was insured through an employee life insurance plan at defense contractor L-3 Communications, where her husband, Clint, worked. When Clint signed himself up for the plan--run by the life insurance division of American International Group --he purchased $149,000 worth of coverage for Trudy in the event of her accidental death. After Trudy died, Clint submitted a claim for accidental death benefits. . .

In his Feb. 4 ruling in favor of Barnes, Judge Chin stressed that Trudy's death was not caused by her back problems. "[The misplacement of the catheter] was not supposed to happen," Chin wrote. "Rather it was an unintentional, unexpected, unusual and unforeseen event--an accident. AIG's determination to the contrary must be set aside as arbitrary and capricious."

The reasoning of this decision is sound.  It wasn't her back problems that were fatal, it was the accidental misplacement of the catheter.  However, other courts have ruled that surgical mistakes are not accidents as defined by accidental death policies.

Texas Life Insurance Denial Lawyers

Be careful investing in life policies

An increasingly popular alternative investment is investing in the life insurance of an elderly person.  In an article entitled Grim Risks of Investing in Death's Rewards, the Wall Street Journal discusses the mechanics:

Called "life settlements," these arrangements allow senior citizens to sell their policies at a discount to face value. As a buyer, you claim the benefits when the seller dies. In the meantime, you pay the policy premiums. Investment earnings hinge on how long the insured person lives. The ghoulish facts of such investing: The sooner the original policyholder dies, the better for the investor.

Say you purchase a $1 million policy held by an 82-year-old woman. Actuarial tables say she has five years to live. If you do the deal via Life Partners Holdings Inc., a major life-settlements firm, you must pony up $540,000. The woman gets $200,000 of that; the remainder goes toward future premiums and transaction fees.

Should she obligingly die on time, you net a 13% annual return. Yet if she doesn't shuffle off this mortal coil for 10 years and you end up forking over much more in premiums, the return sinks to 3%. Every extra year she soldiers on, your take shrinks.

As the article details, these investments are fraught with risk and are only suitable for wealthy and sophisticated investors.

Texas insurance attorneys

Who gets the life insurance?

Most of the time the answer is easy: whoever is listed as the beneficiary gets the policy proceeds. Such designation will override the terms of a will.

However, in some circumstances the answer is not so simple.  Claims to life insurance proceeds often must be evaluated under both Texas and federal law.  Some factors to consider:

1. Was the policy owner married when the policy was purchased?
2. Did the policy owner get divorced after the policy was purchased?
3. Did the policy owner remarry?
4. Was the policy bought directly or through an employer?
5. What was the source of the premium payments?

I have found that many attorneys have difficulty evaluating these claims.  That is likely because they can involve a mixture of Texas community property laws and federal ERISA regulations.  In some cases, designating someone other than a spouse as the beneficiary creates a fraud on the community claim.  But such claims can sometimes be preempted by ERISA.

It is very important to contact an appropriate attorney to evaluate life insurance claims.  The advice you get from friends and relatives will very often be incomplete or simply wrong.

Welcome

Welcome to the Texas Life Insurance Law blog, by J. Michael Young and the other attorneys at Sanders, O'Hanlon & Motley.  Our firm is devoted to protecting the interests of individuals and small businesses. Our life insurance practice fights for the rights of life insurance beneficiaries throught Texas. Whether a life insurance company has denied your claim, or someone else is claiming benefits to which you are rightly entitled, we can help.