'A Wake Up Call to the Life Insurance Industry:' California Sues Insurers

The anti-lapse provisions went into effect in 2013, and required life insurers doing business in California to give a 30-day warning notice and a 60-day grace period before the policy lapses or is terminated. The complaint stated there are no exceptions to these requirements.

However, the defendants allegedly did not adhere to the law, and the companies similarly contended that the provisions did not apply to California life insurance policies before 2013.

Individual policy owners whose coverage had been lapsed or terminated were successful in court, which confirmed that the code applied to policies before and after 2013, the complaint claimed. These affirmative judgments include the cases Bentley v. United of Omaha Life Ins. Co., Thomas v. State Farm Life Ins. Co., and Siino v. Foresters Life Ins. and Annuity Co.

In addition, the plaintiff alleged the defendants are violating the Unclaimed Life insurance and Annuities Act, which was enacted in 2020. Under this law, insurance companies must “proactively and on a regular basis seek out beneficiaries of life insurance policies if they learn an insured has died,” the complaint stated.

“Defendants, in other words, are refusing to act or disclose key information to consumers as required by the act, hoping that consumers will remain in the dark about their potential claims to valuable life insurance benefits that their family members typically spent years paying for and hoped would be there for their family upon their death,” the complaint claimed.

The suit called for the court to issue an injunction against the defendants to prevent the companies from allegedly violating the insurance code statutes and the act, restitution, civil penalties, interest and attorney’s fees and costs.