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Rules are rules, and insurance companies are all about rules p2

Our discussion is about a decision from a federal appeals court that highlights some important facts about life insurance. As we said in our last post, the case is not out of Texas, but the principles the court based the decision on are commonly applied in insurance disputes.

As you may recall, the insured was a man who had been diagnosed with terminal cancer. According to court documents, after learning that he had a very short time to live, he completed a change of beneficiary form. He changed the beneficiary from his son to his wife and signed the form. He also executed a will, discussed in our last post, that stipulated that his wife be the sole beneficiary of any life insurance policies. He died just a few days later.

The insurance company did not pay the wife, who is now the plaintiff. Instead, it sent the money to the decedent's son. The wife appealed; the insurer denied the appeal. The wife sued; the trial court decided for the insurance company. The wife appealed that decision, but the outcome was the same: She was not the beneficiary.

The policy required that a change of beneficiary form be filed within 30 days of its execution. (That's insurance-speak for, "If you want to change the beneficiary, fill out the form and sign it. Then send it to us within 30 days.") In this case, the form was completed and signed, but the 30 days came and went. The form was not mailed to the insurance company before the woman's husband passed away.

An insurance policy is a contract, and that means that one party, the insurance company, can refuse to do something, like pay a benefit, if the rules laid out in the policy are not followed. By failing to send the form in as required -- and as the parties agreed when the policy was first purchased -- the husband had breached the contract.

The lesson for us all is to read the fine print on insurance policies and follow the directions carefully, even under the most stressful circumstances.


Courthouse News, "Signed but Never Filed Form Won't Help Widow," Joe Harris, May 12, 2014

US Court of Appeals for the 8th Circuit, Jane Marie Hall v. Metropolitan Life Insurance Company and Dennis Lynn Hall II, decision filed May 8, 2014

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