Northwestern Mutual Failed to Send Timely Life Insurance Termination Notices, Class Action Alleges

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A proposed class action claims Northwestern Mutual Life Insurance Company has unlawfully failed to timely issue notice of insurance policy terminations and inform policyholders of their right to designate a recipient for termination notices.

According to the 15-page breach-of-contract suit, Northwestern Mutual’s failure to send the statutory notices in a timely manner caused the plaintiff’s husband’s policies to be terminated prior to his unexpected death in April 2018. The case additionally claims the defendant wrongfully refused to honor a claim for benefits due under the policy since California law mandates that the failure of an insurer to comply with notice statutes “means that the policy cannot lapse.”

Per the case, Northwestern Mutual has applied the same unlawful practice to many other insurance policy beneficiaries, in particular those for policies issued before 2013.

The lawsuit explains that California’s Insurance Code, which applies to policies issued in the state before 2013, requires insurers to provide a 60-day grace period before a policy can be terminated for nonpayment of premiums. Moreover, an insured must receive notice of termination within 30 days of a missed premium payment and at least 30 days before the policy is terminated, the suit relays. Finally, insurers are required to annually notify insureds of their right to designate an individual to receive termination notices or change their designation, the case says.

The suit relays that the plaintiff’s husband “dutifully paid” the premiums for his two Northwestern Mutual life insurance policies, of which the plaintiff and her husband’s two sons were beneficiaries, until his bank mistakenly froze his checking account in December 2017. Per the complaint, Northwestern Mutual sent the plaintiff’s husband on December 27 a “Returned Payment Notice” that stated his coverage “remains in force until the end of the grace period,” which was noted as January 21, 2018 for one policy and February 3, 2018 for the other.

A January 24, 2018 notice advised the plaintiff’s husband that his accounts had been closed and that the “non-payment provision” would become effective if payment was not received by the end of the grace period, the case states. Another notice sent on the same day specified that the grace period for one of the plaintiff’s husband’s policies expired on January 21, and advised him that he could submit payment without evidence of insurability as long as it was received by February 19, 2018, according to the complaint.

Per the suit, two more notices were sent for each policy, stating the policies had lapsed and that premiums were due by March 21, 2018 and April 3, 2018, respectively, to keep the policies in force.

The lawsuit claims Northwestern Mutual violated California law in that the insurer failed to provide a 60-day grace period from the premium due date and send notices of termination within 30 days of the premium due date and at least 30 days before the termination date. Moreover, the defendant failed to provide an annual notice of the plaintiff’s husband’s right to designate an individual to receive termination notices or change his designation, the suit contests.

The case goes on to allege that after the plaintiff’s husband died in late April 2018, Northwestern Mutual unlawfully refused to honor his family’s claim for death benefits.

“Northwestern Mutual’s failure to comply with Statutes means that the policies issued to [the plaintiff’s husband] remained in force through the date of his death and Northwestern Mutual’s refusal to entertain any claim for death benefits under the policies breached the terms of the policies and the obligations superimposed on those terms by California law,” the complaint argues.

The plaintiff looks to represent anyone designated as a beneficiary under individual life insurance policies issued in California before January 1, 2013 by Northwestern Mutual that were terminated for nonpayment of premiums on or after January 1, 2013 and where the insureds’ deaths occurred within the past four years while the policies were in a terminated status.

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