A report broadcast last Sunday on 60 Minutes brought into stark detail alleged abuses in the insurance industry. CBS News found a pattern, which it believes is replicated nationwide, of insurance giants failing to pay life insurance policies despite knowing that the insured person had died.
The report quotes Florida’s insurance commissioner calling the behavior “unconscionable, indefensible” and alleging that it is close to universal in the industry. Simply put, it involves insurance companies knowing that a person has died but failing to inform the beneficiaries of life insurance policies. Instead, the company simply waits for premium payments from the now-deceased policyholder to stop coming in, then cancels the policy for non-payment and pockets what would have been the benefit owed to a surviving spouse, children or grandchildren.
CBS adds: “In a little-known series of settlements, 25 of the nation’s biggest life insurance companies have agreed to pay more than $7.5 billion in back-death benefits. However, about 35 insurance companies have not settled and remain under investigation for not paying when the beneficiary is unaware there was a policy, something that is not at all uncommon.”
This is exactly the sort of behavior that is a reminder why we always need to ensure that ordinary Americans have proper and easy access to the court system. Insurance industry lobbyists quoted in the 60 Minutes piece said, in essence, ‘read the fine print’ and contend that the companies have no obligation to pay someone – even someone they know they owe money – if that person does not ask for it within a few weeks or months of a loved one’s passing. As CBS points out, however, that claim is, in fact, in conflict with the law in Florida and some other states. Simply put, the companies have been relying on public ignorance to keep cheating Americans out of money they were owed from policies purchased from these companies in good faith.
As a Portland attorney who focuses on helping Oregonians and Washington State residents get the representation they need when going up against corporate giants with deep pockets I hope everyone will look at the 60 Minutes piece linked below and then ask relatives whether they have any policies that loved ones should know about in the event of someone’s death. In the long-run we need legislation and strong oversight at the state and federal levels to solve this problem. But the 60 Minutes piece is also a reminder of how essential our civil justice system is when it comes to righting these wrongs. Until the enforcement problems are fixed it is only through the courts that ordinary Americans can ensure that these huge companies keep the promises they have made.
60 Minutes/CBS News: Life Insurance Industry Under Investigation