Life Insurance Benefits Recovered in Court After UNUM Denied Benefits for Failing to Timely Convert From Group to Individual PolicyÂ
The facts:Â
Our client’s mother, Decedent, went out of work under her employer’s ERISA long-term disability plan suffering with lupus and adrenal insufficiency illness. She was also an insured under the plan’s Life insurance coverage insured by UNUM Life Insurance Company of America (UNUM). She died a short time after stopping work. Our client was the beneficiary daughter.
After she stopped working, her employer, which was also the plan administrator, assured her that her life insurance coverage would remain in effect as long as she continued to pay the insurance premium. So paid the premium to her employer until she died.Â
The denial:
When our client filed with UNUM for her life insurance, UNUM denied the claim for failure to timely convert from group to individual coverage. Â
Our investigation and appeal:
We gathered Decedent’s bank records, which proved Decedent’s payment of premium to the employer. The claim file and life insurance policy conversion provisions showed that the employer had specific procedures in place to trigger an employee’s notification of the right and need to convert from group to individual coverage, and to send the employee an application to do so once work had stopped. But those procedures were not followed.
The key policy provisions:
UNUM’s policy provided that when employment terminates, the employer was to notify UNUM, and a conversion application would be mailed the employee’s address. The provision read as follows:Â
“ONCE YOUR COVERAGE BEGINS, WHAT HAPPENS IF YOU ARE NOT WORKING DUE TO INJURY OR SICKNESS?
If you are not working due to injury or sickness, and if premium is paid, you may continue to be covered up to your retirement date.”…Â
“WHAT INSURANCE IS AVAILABLE WHEN COVERAGE ENDS?  (Conversion  Privilege)
When coverage ends under the plan, you and your dependents can convert your coverages to individual life policies, without evidence of insurability…
You and your dependents must apply for individual life insurance under this life conversion privilege and pay the first premium within 31 days after the date:
– your employment terminates; or
– you or your dependents no longer are eligible to participate in the coverage of the plan…
“APPLYING FOR CONVERSION
If your coverage terminates, Unum will be notified by your Employer and a conversion application form which includes cost information will be mailed to your home address.
When you complete the conversion application, send it with the first premium amount to [a Unum address].” Â
Emails between the employer plan administrator and UNUM found in the claim file proved that the employer failed to notify UNUM of Decedent’s employment ending, so no conversion application was sent to her. Additionally, although Decedent paid premium to her employer to maintain continued life insurance coverage, the employer did not pass those payments along to UNUM.Â
Still, the employer and UNUM refused to pay and denied the appeal.Â
The lawsuit:
We filed suit in federal court, and were able to finally get the claim resolved there in a settlement, the terms of which called for confidentiality regarding the amount of settlement.
Key takeaway: Study the policy or plan provisions in detail, as well as key dates, and all communications in the claim file to discover if the employer plan administrator or life insurance company had any standard procedures in effect regarding conversion that they failed to follow.
Life or accidental death and dismemberment insurance claim denials for failure to timely convert from group to individual coverage after employment terminates can often be overturned on appeal or in court. So whatever you do, don’t give up.
