A Louisiana widow is suing her insurance broker, alleging that the broker negligently failed to inform her and her husband that a payment was necessary in order for the policy to renew. As a result, the lawsuit alleges that the husband’s policy lapsed and was not in force when he died. When the widow subsequently attempted to claim the cash benefit promised by her husband’s policy, the carrier denied the claim. The widow’s lawsuit alleges that the broker had a legal obligation to notify her and/or her husband about the necessity that a payment be made in order to keep the policy in force. The lawsuit seeks $1 million in damages (the cash benefit of the life insurance policy) along with the widow’s legal fees.
A Common Reason Why Life Insurance Claims are Denied
There are several grounds that a life insurance carrier can rely upon to deny a claim for benefits following the death of the policyholder. A missed premium payment is one of the more common reasons why a carrier may choose to deny a life insurance claim. The carrier will claim that because a premium payment was missed, the policy lapsed prior to the policyholder’s death. As a result, the insurance carrier is under no obligation to pay the claim.
Whose Job is it to Keep Track of Premium Payments?
The widow’s lawsuit is still pending in Louisiana courts (although for the sake of this discussion, it is immaterial in which state the widow chose to file her lawsuit). However, she likely faces an uphill battle. An insurance agent or broker is not likely to be determined to have a legal duty to notify the insured that a premium payment is due or that the policy is in jeopardy of being cancelled except in three potential situations:
- Where the agent or broker has actually assumed the obligation, he or she may have a legal duty to notify the policyholder of the pending lapse in coverage. To actually assume an obligation, the agent or broker would need to specifically agree – preferably in writing – to notify the policyholder if the policy is in jeopardy of cancellation due to nonpayment of premiums.
- When it is the agent or broker’s business practice, either with this policyholder or with other policyholders, to make notification, a legal duty may exist. In this situation, the practice will usually need to be standard operating procedure.
- If the policyholder is informed by the agent, broker, or his or her representative that the policy is in force and no premium is due after a specific inquiry, the agent or broker may have a legal obligation to inform the policyholder if the policy is in jeopardy of being cancelled.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].