Beneficiaries of employees in Chicago with group life insurance or accidental death insurance coverage through work face difficulty when the life insurance company denies the claim on an exclusion or due to lack of coverage. Perhaps the worst is to discover as you are grieving, the insurer will not pay the claim because it contends it never received evidence of insurability. Here is a primer on what evidence of insurability is and who is responsible for it in group life insurance policies.
What Is Evidence of Insurability?
In some group life insurance plans, the insurer may require employees demonstrate evidence of insurability for the coverage. This most commonly occurs with small employers who have non-contributory coverage, and even larger employers that offer voluntary, contributory coverage (meaning the employee opts into the coverage and pays for it). Insurers take more precautions when employees choose it, because they are concerned those with major health problems will be the ones signing up. In those cases, the insurer requires the individuals apply, similar to the procedure for individual life insurance policies.
How Do You Provide Evidence of Insurability in a Group Policy?
Most often, the employer, as administrator of the plan, is responsible for distributing the application to employees for evidence of insurability and transmitting the applications to the insurer before the employer begins deducting premium payments from the employee’s pay. But how would you know evidence of insurability is required if the employer never told you about it or gave you the forms to complete, and just started deducting premiums from your pay? That was precisely the issue in Shields v. United of Omaha Life Insurance Co., No. 19-cv-448, 2021 WL 982322 (D. Me. Mar. 16, 2021).
Unfortunately, the Court held that Shields could not sue the insurer, Untied of Omaha (also known as Mutual of Omaha), because the terms of the coverage required evidence of insurability. Shields demonstrated the employer never requested it, and collected premiums from paychecks. But courts have before held the insurer liable under an agency theory: because the employer collects premiums on the insurer’s behalf, the insurer would be liable, and it could then have a claim against the employer. I believe that is the correct approach when the insurer relies on the employer to collect premiums, but the best course of action is to sue both the employer and the insurance company in that scenario.
If you have been denied life insurance or accidental death insurance benefits due to failure to provide evidence of insurability, and the employer collected premiums for the coverage, call a knowledgeable ERISA life insurance lawyer immediately.