Insurance Company Adds Exclusions Without Informing Policy Owners

Case Overview

This case involves a volunteer firemen’s association that purchased accidental death and dismemberment insurance policies for its volunteers. The association purchased their policies from a fortune 500 insurance company and appointed an agency to procure life insurance coverage for the volunteers. The insurance company’s policies contained a handful of exclusions, such as death by suicide. About a year after the purchase of these policies, the agency sent a letter to the association informing them that another insurance company would replace their former company on these policies. The letter explicitly stated that this new company would maintain all of the benefits that had been purchased. The agency never sought the association’s consent in replacing the underwriter and policies, and there was no notice of additional exclusions. Under the new insurance company’s terms, an additional exclusion was added which excluded from coverage any accident in which the insured is the operator of a motor vehicle and does not possess a valid license. Several months later, a volunteer firefighter died in a car accident. At the time of the accident, he had been drinking and was driving without a driver’s license. The beneficiaries of his policy filed a claim with the new insurance company and were denied the claim for benefits. The legal counsel for the family of the decedent contended that these exclusions were newly inserted and undisclosed. An expert in accidental death and dismemberment insurance was sought to clarify the roles of the various parties in this matter and discuss the industry standard of care for changes in coverage, as well as the regulatory issues behind the change in underwriters.