The state of California commenced a lawsuit against American General Life Insurance Co., Transamerica and other life insurance companies.
The enforcement action alleged the defendants purposefully left out warnings of pending lapses or terminations, and did not notify beneficiaries when they could make a claim.
The case, brought on behalf of the People of the State of California by San Diego City Attorney Mara W. Elliott, claimed the insurance companies’ alleged motivation was to raise profits.
“Put simply, insurers make money when policies are dropped or forgotten about,” the lawsuit claimed. “These tactics, though, are illegal.”
In California Superior Court for San Diego County, the case was filed against American General Life Insurance Co., Lincoln Benefit Life Co., Everlake Life Insurance Co. and Transamerica Life Insurance Co.
“This lawsuit is a wake up call to the life insurance industry,” Elliott claimed. “Californians expect you to follow the law, not to exploit a beneficiary when a loved one has died, or an owner who is incapacitated. The industry’s antics are unlawful, and we will do all we can to hold them accountable and get relief for those they’ve harmed.”
The insurance companies did not respond to requests to comment.
The plaintiff claimed the defendants violated the anti-lapse provisions of Insurance Code Sections 10113.71 and 10113.72 and the Unclaimed Life Insurance and Annuities Act at Section 10509.940.
The anti-lapse provisions went into effect in 2013, and required life insurers doing business in California to give a 30 day warning notice and a 60 day grace period before the police lapses or is terminated. The complaint stated there are no exceptions to these requirements.
However, the defendants allegedly did not adhere to the law, and the companies similarly contended that the provisions did not apply to California life insurance policies before 2013.
Individual policy owners whose coverage had been lapsed or terminated were successful in court, which confirmed that the code applied to policies before and after 2013, the complaint claimed. These affirmative judgments include the cases Bentley v. United of Omaha Life Ins. Co., Thomas v. State Farm Life Ins. Co., and Siino v. Foresters Life Ins. and Annuity Co.
In addition, the plaintiff alleged the defendants are violating the Unclaimed Life insurance and Annuities Act, which was enacted in 2020. Under this law, insurance companies must “proactively and on a regular basis seek out beneficiaries of life insurance policies if they learn an insured has died,” the complaint stated.
“Defendants, in other words, are refusing to act or disclose key information to consumers as required by the act, hoping that consumers will remain in the dark about their potential claims to valuable life insurance benefits that their family members typically spent years paying for and hoped would be there for their family upon their death,” the complaint claimed.
The suit called for the court to issue an injunction against the defendants to prevent the companies from allegedly violating the insurance code statutes and the act, restitution, civil penalties, interest and attorney’s fees and costs.