California Insurance Litigation Blog

Insurance Commissioner Dave Jones last week announced that Governor Jerry Brown has signed AB 1747, authored by Assembly Member Mike Feuer (D-Los Angeles).  The bill was strongly supported by Commissioner Jones and the California Department of Insurance and provides important consumer safeguards for life insurance policyholders.  AB 1747, which will be effective January 1, 2013, adds new Sections 10113.71 and 10113.72 to the Insurance Code and will apply to every individual and group life insurance policy issued or delivered in California after January 1, 2013. 

AB 1747 will require that every life insurance policy issued or delivered in this state contain a provision for a grace period of not less than 60 days from the premium due date and that the policy remains in force during the 60-day grace period.  The law will also require an insurer to give the applicant for an individual life insurance policy the right to designate at least one person, in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium.  The law will require an insurer to provide each applicant with a form, as specified, to make the designation and to notify the policy owner annually of the right to change the designation.  The law will also prohibit a notice of pending lapse and termination from being effective unless mailed by the insurer to the named policy owner, a named designee for an individual life insurance policy, and a known assignee or other person having an interest in the individual life insurance policy at least 30 days prior to the effective date of termination if termination is for nonpayment of premium.

Los Angeles – Noted Southern California insurance and business litigator Robert J. McKennon was featured in the “Southern California Legal Profiles” section of the January 2012 issue of Forbes Magazine in an article highlighting his experience as a top Southern California insurance and business litigation attorney.

On April 25, 2011, California Insurance Commissioner Dave Jones and California State Controller John Chiang announced that they are investigating Metropolitan Life Insurance Company (“MetLife”) for a failure to pay out life insurance benefits after learning of an insured’s death.  It appears that while MetLife learned of its insured’s deaths through a database prepared by the Social Security Administration called "Death Master," which lists all Americans who die, MetLife failed to use this information to pay legitimate claims. 

As noted in the California Department of Insurance’s Press Release:

The Commissioner and the Controller are responding to preliminary findings from an audit the Controller launched in 2008, indicating that for two decades, MetLife failed to pay life insurance policy benefits to named beneficiaries or the State even after learning that an insured had died. The company has a huge number of so-called Industrial Policies, valued at an estimated $1.2 billion, which were primarily sold in the 1940s and 1950s to working-class people. The payments, which were collected weekly, typically were higher than the final death benefit. The Controller's unclaimed property audit indicates that MetLife did not take steps to determine whether policy owners of dormant accounts are still alive, and if not, pay the beneficiaries, or the State if they cannot be located.

In addition, the preliminary findings revealed that MetLife may have similarly failed to contact the owners of annuity contracts:

Simultaneously, the preliminary findings show, when MetLife knew that an owner of an annuity contract - which generates income for the policy owner at the time the annuity matures - had died, or the annuity had matured, the company did not contact the policy holder or beneficiary, even though it subscribed to the "Death Master" database. Furthermore, MetLife continued making premium payments from the policy holder's account until the cash reserves were used up, and then cancelled the contract.

While Monday’s press release was limited to the State’s investigation of MetLife, both the “Commissioner and Controller believe that these practices are not isolated, but are systemic in the insurance industry.”

If you believe you have a life insurance policy or annuity issued by MetLife, or any other insurer, for which you have failed to properly receive life insurance benefits, contact McKennon Law Group PC for a free consultation.

Stranger-Owned Annuities allow investors to purchase an interest in the life of an elderly or terminally ill person, inducing the insured to purchase the policy largely for the benefit of unrelated and sometimes unknown beneficiaries. The NAIC will examine whether greater regulation of the Stranger-Owned Annuity market is warranted and whether consumers are adequately protected.

In recent history, as discussed in the firm’s California Insurance Litigation Blog, the insurance industry has focused on Stranger-Originated Life Insurance Policies and many states, including California, have now regulated them. Numerous states such as California have outlawed them.

Stranger-Owned Annuities are less well known, but equally concerning to the industry. The investors have no insurable interest in the owner of the annuity, and generally purchase the annuity to receive an enhanced death benefit or some other advantage. Other than scattered lawsuits challenging the validity of Stranger-Owned Annuities, the market is largely unregulated. Many states have strict laws regarding insurance interests in life insurance policies, but have little or no regulation regarding annuities.

For a copy of the NAIC’s press release, click here: http://www.naic.org/Releases/2010_docs/stranger_owned_annuities.htm