A federal court in Illinois ruled that Reliance Standard Life Insurance Company (“Reliance”) was wrong to deny the life insurance claim and ordered to pay the life insurance proceeds to the decedent’s children.
Background
Mr. Jeffrey McCombs died in July 2016. At the time of his death, he had group life insurance coverage through his employer in the amount of $130,000. His named beneficiaries were his two children, Annabelle and Anthony. Of note, at the time he died in 2016, the children were minors and he was divorced from the children’s mother.
Several days after his death, a benefits analyst at Jeffrey’s employer reached out to Reliance on behalf of the mother and children. In her email, she informed Reliance that Jeffrey passed away, his beneficiaries were minors, and asked whether there was a special form for the mother to complete as the guardian. The benefits analyst signed her name in the email.
In response, another Reliance employee responded and said that the mother may sign the forms. The Reliance employee also said the money would not be released to the minor children without a court order appointing the mother as the guardian of their estate/property. If there is no court order, then Reliance will hold the money until the children reach legal age.
Several years later, Annabelle, the older child, turned 18. She filed a claim for benefits along with a copy of the death certificate. The mother also signed a claim form on behalf of Anthony, the younger child who was still under 18. Reliance denied the claims because the claim was not received more than 3 years after Jeffrey’s death in violation of the policy’s “notice of claim” and “proof of loss” provisions. The children submitted appeals, and Reliance denied the appeals.
Lawsuit
After the appeals were denied, the beneficiary children filed a lawsuit. Reliance argued that the denials were reasonable because the children failed to timely provide notice of the claim and failed to timely provide proof of loss. The children argued that 1) notice of claim was timely provided when the employer’s benefits analyst sent an email to Reliance in 2016; and 2) proof of loss was also timely provided because it was provided once Annabelle was legally capable to do so.
The court reviewed the policy provisions at issue and based on the language in the policy, agreed with the children. The court found the 2016 email to Reliance was sufficient and timely notice of claim. The court also noted that Reliance failed to provide a reasoned explanation as to why it was not sufficient and time notice.
Thus, the decision was arbitrary and capricious. The court also agreed that Annabelle was legally incapable of providing proof of loss (i.e. the death certificate) before she turned 18. Although Reliance tried to limit legal incapacity to mental incompetence, the court disagreed. It noted that legal incompetence also includes minors who have not yet reached the legal age of 18.
Ultimately, the court ordered Reliance to pay the full amount of life insurance benefits.
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