Life insurers sued by California

Through San Diego City Attorney Mara W. Elliott (pictured right), the state of California has taken American General Life Insurance Company, Lincoln Benefit Life Company, Everlake Life Insurance Company, Transamerica Life Insurance Company, and Does 1-100 to court over alleged breaches of anti-lapse laws.

“The insurance company defendants named here are some of the largest participants in the California insurance markets, each having sold tens of thousands of life insurance policies to Californians that became subject to the anti-lapse statutes. Yet Defendants, and each of them, have systematically violated the anti-lapse statutes,” reads part of the court document seen by Insurance Business.

“On information and belief, they have each failed to provide full 60-day grace periods where required, and in many cases affirmatively misrepresented the amount of grace consumers were entitled to. Defendants have also failed to provide full and proper written notice to consumers of pending lapses or terminations, and/or they have failed to regularly inform policy owners of their right to designate a third party to receive notices of lapse.

“Defendants have then terminated, wrongfully, thousands of California policies for nonpayment of premiums despite the anti-lapse statutes expressly prohibiting this.”

The alleged violations were attributed to the insurers’ supposed decision not to apply the statutes to policies sold before the January 2013 effective date even if the lapse at issue occurred afterwards.

The defendants are accused of having “largely sat back and hoped that consumers would not realize that they have rights under their terminated policies” while essentially daring those who have recognized the issues to sue them and fight them individually in courts.

Similarly, the insurers are said to be violating the Unclaimed Life Insurance and Annuities Act via their refusal to acknowledge the in-force status of the policies deemed by the state as wrongly terminated.

“The People [of the State of California] now respectfully bring this action against Defendants to ensure compliance with the Act and, once again, to stop Defendants from wrongfully withholding or delaying the valuable life insurance benefits rightfully belonging to thousands of California consumers,” the lawsuit reads.

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