Class Action: Lincoln Benefit Life Co. Failed to Provide Proper Notices Before Life Insurance Lapse, Termination

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Lincoln Benefit Life Company faces a proposed class action that claims the insurer has “robbed” thousands of policyholders and their beneficiaries by failing to provide statutory notices designed to prevent the loss of valuable insurance coverage.

More specifically, the 24-page lawsuit claims Lincoln ran afoul of the California Insurance Code by failing to notify policyholders of pending lapses or terminations of coverage and of their right to designate someone as the recipient of critical notices regarding their life insurance.

The net effect of Lincoln’s actions, according to the case, is that thousands of policyholders have lost their insurance coverage and the associated benefits.

“Indeed, thousands of policy owners and beneficiaries have lost, and continue to lose, the benefit, value and security of their life insurance; have been, and continue to be, forced into unnecessary reinstatements; and in many instances have lost all reasonable access to any insurance at all,” the complaint states.

Per the case, the California Insurance Code requires insurers to provide a 60-day grace period before a lapse or termination of coverage can be effective. Moreover, insurers must provide a 30-day written notice of a pending lapse or termination of life insurance coverage to the policyholder and any individual designated by the policyholder to receive such notice, as well as any party with an interest in the policy.

The statutes further mandate that insurers provide initial and annual notice to policyholders of their right to designate additional notice recipients, the suit says. Unless all the provisions of the insurance code are met, no lapse or termination of coverage is effective, the case stresses.

According to the suit, Lincoln has failed to comply with the California Insurance Code notification provisions since their effective date of January 1, 2013. As a result, policyholders have suffered an improper lapse or termination of their coverage, a loss of their capacity to be insured, the denial of claims, and the loss of “millions, or perhaps billions, in insurance benefits that Defendant has illegally retained.”

The plaintiff, who purchased a life insurance policy from Lincoln in 2011 for her minor son, says the policy lapsed in 2016 after she inadvertently missed a payment. In order to reinstate the policy, the plaintiff and her son were required to submit a reinsurance application that once again assessed the son’s insurability, the case claims. Additionally, the woman was required to pay the premiums from the date of the lapse, even though her son was not insured during that time, according to the suit.

Per the case, the plaintiff accidentally missed another payment in 2018, after which the policy was terminated. The plaintiff argues that the defendant never provided proper notice—either of the pending lapse or termination of coverage or her right to designate another notice recipient—on either occasion, and that her policy is therefore still in effect.

According to the suit, Lincoln’s alleged failure to send proper notices to the plaintiff is a result of the insurer’s general business practice of “ignoring and misapplying” sections of the California Insurance Code and the express language of its policies.

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