Department of Labor settles with Mutual of Omaha

Many people obtain through life insurance coverage through their job. If it is a private company, the policy will be regulated by a federal law commonly known as ERISA. ERISA is often very unfair to employees. ERISA allows the insurance company that administers the life insurance plan wide discretion to make benefit determinations about whether to pay a claim. If a policy owner sues, ERISA does not allow for a jury and federal judges are to defer to the discretion of the insurance company. In essence, the insurance company gets to be its own judge. Congress could change this unfair system, but won’t take action.

An example I see often is an employee who enrolls in a group life insurance plan through their work and has the premiums deducted from their paychecks. The employee, and their family, reasonably believes they are covered. But when they die, the life insurance company decides they were never eligible in the first place and refuses to pay the claim. This isn’t just a theoretical concern, I get calls from grieving beneficiaries all the time.

The The U.S. Department of Labor contends that United of Omaha Life Insurance Company has regularly engaged in such behavior:

An investigation by the department’s Employee Benefits Security Administration found United often accepted premiums for years without determining if insurability requirements were satisfied, causing participants and their beneficiaries to believe they had coverage. After the participant died, United would then often deny claims for benefits on the grounds the company never received the participant’s evidence of insurability, leaving their beneficiaries without life insurance benefits for which their loved one had paid.

“This terrible practice denied grieving families life insurance benefits for which their loved ones had paid, in some cases, for many years,” explained Solicitor of Labor Seema Nanda. “This settlement with United of Omaha Life Insurance ensures that beneficiaries are not harmed by the company’s failure to verify, on a timely basis, that premium-paying participants have satisfied applicable evidence of insurability requirements. All insurers should examine their practices to prevent similar conduct.”

The DOL settled the claim. The settlement terms require:

The settlement reached by the department’s Office of the Solicitor gives United 90 days after it receives a participant’s first premium payment to determine whether the participant has satisfied any applicable evidence of insurability requirements. After the 90-day period expires, the company cannot deny a claim for life insurance benefits for reasons related to evidence of insurability. These requirements also apply to United’s parent company — Mutual of Omaha Insurance Co. — and United’s subsidiary, Companion Life Insurance Co.

The DOL had previously settled similar claims against Prudential Insurance Company of America.

This is a positive step to counter a practice of wrongfully denying life insurance coverage and critical benefits for grieving families. It is also a warning that consumers are often better off buying life insurance company on their own and not through their employer.

If you are facing disputed ERISA life insurance benefits, contact an experienced ERISA life insurance lawyer.