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Perhaps capable attorneys using a jury and antipathy towards insurance companies to get a settlement their client may not be entitled to.
Jury Awards $113.85M in United of Omaha Rescission Case
- Thread starter Northeast Agent
- Start date
- 2,624
You got that right. Back around 1990 I was investigating death claims for life insurance companies. Mostly routine. I had one contestable death claim on a $40,000 policy where the husband was killed in an auto accident during the two year contestability period. I was provided a copy of the insured's application. I interviewed the widow, got his medical history, health insurance, pharmacy, etc. I obtained all the records. All the answers to all the questions on the application checked out except one glaring omission. The man had spent 3 months in an alcohol rehab center within a year or two of the policy and, you guessed it, the alcoholism question was answered no. The policy was rescinded and the premiums refunded.
A year or two later I learned that the widow sued. I was called to testify about my investigation. I was not privy to the decision until later when I learned that the jury awarded the $40,000 to the widow because the insured was Hispanic and didn't understand the questions. Bogus. 1 - He got the rest of them right. 2 - The agent was also Hispanic. So, put a widow and 3 children in front of a jury and the law goes out the window.
The insurance company didn't appeal. Too small an amount to justify continued litigation.
Getting back to the Costello case, here is the decision of the Court of Appeals that remanded the case back to the state court.
MUTUAL OF OMAHA LIFE INSURANCE COMPANY v. COSTELLO | FindLaw
The state court's decision is on a site only available to attorneys who are paid members.
We're going to have to wait for Mutual of Omaha's appeal to become available. When it happens it'll be available on non-pay sites.
I'm guessing at least a year.
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I know that from a legal perspective, a big issue with rescissions are the instances where the policy would have been issued, just at a different rate.
Like the one Jack mentioned with the alcohol question... was it a knock out question? Would the insured still have been approved, just at a different rate?
If so, there have been multiple court decisions to deduct the difference in premiums, from the DB. Which seems like the morally decent thing to do... even if you deducted interest as well.
If it was something that would have caused a decline, then rescission is the right thing to do imo.
Like the one Jack mentioned with the alcohol question... was it a knock out question? Would the insured still have been approved, just at a different rate?
If so, there have been multiple court decisions to deduct the difference in premiums, from the DB. Which seems like the morally decent thing to do... even if you deducted interest as well.
If it was something that would have caused a decline, then rescission is the right thing to do imo.
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The problem with that isn't the ones that die in the first two years. It is the higher mortality rate down the road. I don't know but i would assume the actuaries allow for a certain amount of deceprion on the app when setting the rates.
If the judgement was for the death benefit plus 5k in court fees, may be the insurer would settle. Now however, they have every incentive in the book to push this all the way to Supreme court. It will likely get overturned before then. I doubt Supreme Court will approve a judgement that may put the whole industry out of business. If you notice we dont know the details of medical history. I call that lawyer spin. If someone has a medical condition and they have not seen a doctor in 20 years and nothing is mentioned in the APS, I can see a jury looking the other way. It looks like she had more than one test. Now it is a question of what was asked on the application and what was the details/history of her medical condition. Fraud can be raised beyond 2 years. There was an agent, he was getting the blood tests always done by the same person and he only sold insurance to those who look liked his test person. The insurance company woke up after getting about the same blood test results for all of his applications. So if you always sell life insurance to those 5.3 and 165 pounds, they catch on. Going back, I dont think the insurance company has burden of proof to show fraud here. They have a right to full medical information at the time of underwriting. It is a question of whether the ommission of additional test was material for the insurance company. The insurance company would have to show they would have denied the policy at issue.
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That's completely incorrect. If they apply for something and clearly don't qualify they should NEVER be given what they should have applied for. Not in a million years. Yes some jury might award it. But the insurance companies should never take that laying down.
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Read what I wrote again.
I said if they would have qualified under a different rate class.
And I specifically said if it would have been a decline, then it should have been rescinded.
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For instance. If they qualify for Standard but lied about health and got issued preferred and then they have a death during the 1st two years, they should only get return of premium. That's it. They should not get the standard benefit. Otherwise why wouldn't everyone lie and take their chances? Why would smokers EVER disclose that they smoked if the worst that would happen is that they would get the same benefit that the honest smokers got?
That is the way companies used to handle smokers. It was the same as mistatement of age. At death, the face would be adjusted to the proper face amount for the status.. Companies were taking a bath on it and insurance commissions allowed to be changed to a material misstatement.
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