Stennett & Casino filed suit against our client’s life insurance company for not paying benefits following his wife’s death.
Sally taught the hearing-impaired at the public school. She herself was deaf and communicated mostly by sign language. Her speech is called deaf speech which is difficult to understand until one becomes accustomed to it. Sally’s benefit package as a teacher included life insurance and disability insurance. The premiums for those insurances were deducted from her paycheck. Both policies were written by the same Insurance Company.
Sally received a cancer diagnosis in early 2020. She stopped working as a teacher in March 2020 so she could pursue treatment to recover from her illness. After leaving work she applied for and received disability benefits from the Insurance Company.
In January 2021 Sally received from Insurance Company a mailing urging her to apply for additional life insurance with the assurance that “no health questions asked.” She called the number on the mailing to increase her current life coverage from $100,000 to $150,000. She “talked” to an individual at Insurance Company who filled out a “telephonic enrollment” form. For Sally to “talk” on the phone she would have to call a service that would then call Insurance Company to speak on Sally’s behalf. The service would have a video link to Sally so they could communicate through sign language. Then the service would interpret that sign language to Insurance Company.
The policy requires an employee to be “actively at work” to increase coverage. Sally was not actively at work when she applied for the increased coverage but she continued to be a school employee. One key question on the “telephonic enrollment” form asks if you are “Currently Working? The answer recorded on the form was “Yes”.
Stennett & Casino asserted that Insurance Company waived the “actively at work” requirement under the plan by issuing the policy and accepting premiums while knowing she did not meet the “actively at work” requirement. “Courts have applied the waiver doctrine in ERISA cases when an insurer accepted premium payments with knowledge that the insured did not meet certain requirements of the insurance policy.” Salyers v. Metro. Life Ins. Co. (9th Cir. 2017) 871 F.3d 934, 938.
Insurance Company claimed that it did not know that Sally was not working when she applied for increased coverage and that Sally told them she was working during the telephonic application. Stennett & Casino asked for the recording of the phone call, but Insurance Company refused to provide it claiming it was confidential and proprietary.
The following evidence established that Insurance Company knew Sally was not actively at work when she applied for the increase in coverage.
- Insurance Company knew this since it was paying her disability benefits at the time.
- Insurance Company’s monthly premium statements for the increased coverage were sent to Sally’s home. Active employees were not mailed premium statements. Those premiums were paid by the employer as a deduction from the employee’s paycheck.
- The intake person also knew that Sally was not actively at work when she applied for an increase in coverage. The mailing from Insurance Company encouraging Sally to apply for additional insurance contained Sally’s notes indicating she called Insurance Company on February 17, 2021, applied for the increase of life insurance, and noted “may not be approved because I am not currently working.” There is no reference in the mailing to a requirement that an employee be “actively working” to qualify for an increase of benefits. Thus, clearly there was a discussion during the telephonic application about the fact that she was not currently working and that may interfere with an increase in coverage.
Despite this knowledge Insurance Company issued the policy, billed Sally for the premiums and accepted her premium payments effectively waiving the actively at work provision.
Even if one were to believe Insurance Company did not know that Sally was not actively working, issuing coverage and charging premiums before determining whether the applicant is eligible for such coverage is a breach of its fiduciary’s duty. See Skelton v. Radisson Hotel Bloomington, 2022 U.S. App. LEXIS 12238 (8th Cir. May 6, 2022) holding that an insurer breaches its fiduciary obligations by failing to have in place an enrollment process that would avoid enrolling participants that were not eligible and accepting premiums from ineligible employees. Similar holdings include Shields v. United of Omaha Life Ins. Co. (1st Cir. 2022) 50 F.4th 236; McCravy v. Metropolitan Life Ins. Co., 690 F.3d 176 (4th Cir. 2012); Silva v. Metropolitan Life Ins. Co., 762 F.3d 711 (8th Cir. 2014
Stennett & Casino also asserted Insurance Company breached its fiduciary duty by failing to advise Sally at the time of application that she did not qualify for the increased coverage requested unless she returned to active work for at least one day. Sally’s husband was first told this by Insurance Company after Sally’s death. According to her husband, had she known that fact she could have complied with that requirement (particularly since classes were being taught remotely).
[A] fiduciary is not only under a “negative duty not to misinform, but also [under] an affirmative duty to inform when the trustee knows that silence might be harmful.” Bixler v. Central Pa. Teamsters Health and Welfare Fund, 12 F.3d 1292, 1300 (3d Cir. 1993). “The fiduciary has an obligation to convey complete and accurate information material to the beneficiary’s circumstance. This is so even if that information comprises elements about which the beneficiary has not specifically inquired.”
Est. of Gore v. Crozer Chester Med. Ctr. (E.D. PA. 1997) 1997 U.S. Dist. LEXIS 13833, at *10-13).
Stennett & Casino eventually obtained a reasonable settlement offer from Insurance Company that was accepted by our client.