Robinson & Warncke lawyers convince the insurer to change its decision and pay Supplemental Life Insurance benefits to the widow, despite her deceased husband’s failure to follow the policy’s Evidence of Insurability requirement.

Sun Life Supplemental Life Insurance Policy Benefits

In this case, our client’s husband was automatically enrolled in his employer’s basic life insurance coverage when he began working.  Several years later, after their child was born, the husband decided to increase his life insurance coverage to provide greater financial protection for his growing family. He therefore enrolled in his employer’s voluntary Supplemental Life Insurance policy with Sun Life during one of the company’s annual enrollment periods.

For nine months, the employer deducted premiums from his paychecks for his supplemental life insurance coverage.   The employer also sent him a benefit summary that showed he was covered for supplemental life insurance.

Unfortunately the employer did not tell our client’s husband that enrollment in the Sun Life supplemental life insurance policy required submission an Evidence of Insurability form disclosing his medical history.  These forms are commonly known as EOI forms.  Under the terms of the supplemental life policy, an employee’s coverage could not begin until after Sun Life received, reviewed and approved coverage based on a completed EOI form.

During the nine months that premiums were deducted for supplemental life coverage, neither the employer nor Sun Life ever told the husband that he needed to submit an EOI form.  Yet, when he died nine months later, Sun Life refused to pay our client any supplemental life benefits – asserting that her deceased husband was never actually covered under the Supplemental Life policy because he failed to submit the required EOI forms.

This is a scenario that happens too often.  Because the employer handles the enrollment process, the employer usually determines which employees need to complete the EOI forms, provides them to the employees at the time they enroll in supplemental life coverage, and then forwards the completed forms to the insurer for approval. Once a month, the employer collects or withholds premiums from each employee who is supposedly covered by the supplemental life policy and sends one combined premium payment to the insurer.  Insurers argue that they have no way of knowing which employees contributed to the combined premium payment or whether each of those employees completed the required EOI forms.

In other words, the life insurance companies simply collect the premiums from the employer without doing any investigation to determine whether it may be accepting premiums from unsuspecting employees who reasonably believe they are covered by the policy – but really aren’t.  Only after an employee dies and a claim is made will the insurer investigate to see if that employee failed to submit the required evidence of insurability forms.  At this point it’s too late for the family to correct the error.

This works perfectly for life insurance companies.  On one hand, because most employees’ supplemental life coverage ends when they switch companies before they die, the life insurance company collects and keeps premiums paid by those employees regardless of whether they completed the required EOI forms to start their coverage.  It is only when one of those employees dies that the insurer investigates and scrutinizes whether the employee complied with the evidence of insurability requirements and submitted the EOI forms so it can avoid ever paying the supplemental life death benefit by simply returning the premiums to the policy beneficiary.  This has horrible consequences for the employees and their families who rightfully believed they had supplemental life insurance protection.

Because most supplemental life insurance is acquired through an employer, it is governed by the federal Employee Retirement Security Act (“ERISA”) and regulated by the U.S. Department of Labor.  In 2023, the Department of Labor weighed in on this issue and sided with the employees and their beneficiaries in connection with investigations of similar insurance practices by two well-known life insurance companies, Prudential and United of Omaha.  The Department of Labor took the position that a life insurance company “has a fiduciary duty pursuant to ERISA … to ensure that it makes eligibility determinations for each employee or their eligible dependent for supplemental coverage at or near the time [it]l receives premiums for such coverage.”   In other words, the insurer cannot simply wait until the employee dies to investigate whether they have submitted the required evidence of insurability information.  The Department of Labor entered into separate binding settlement agreements with Prudential and United of Omaha under which those companies are now prohibited from denying coverage under a group supplemental life insurance policy based on failure to submit evidence of insurability (EOI) if they received at least three months of premiums for the deceased employee’s supplemental life coverage before the employee dies.

Although our case involved Sun Life, which is not specially covered by the Department of Labor settlement agreements with Prudential and United of Omaha, we successfully argued that both the employer and Sun Life bore responsibility for failing to advise our client’s husband about the supplemental life insurance policy’s EOI requirement before he died.  The employer bore the initial responsibility for notifying him of the EOI requirement and providing him with the necessary forms.  The insurer, Sun Life, was also at fault and breached its fiduciary duty by failing to investigate whether our client’s husband had met the policy’s eligibility requirements during the nine months it accepted premiums payments for him before he died.  Between the employer and Sun life, our client was able to collect the full amount of the benefit under the supplemental life policy.  This was the just outcome and ensured our client received the benefits her husband reasonably believed he had purchased to protect his family when he died.