Turner v. OM Financial Life Insurance
2011 U.S. Dist. LEXIS 113350
| W.D. La. | 2011Background
- Plaintiffs seek life insurance benefits under their father Robert T. Jacques's policy issued by Fidelity and Guaranty Life Insurance (now OM Financial).
- Policy is a Flexible Premium Adjustable Death Benefit type, where coverage continues if account value covers monthly deductions, regardless of paying planned premiums.
- A 61-day Grace Period exists when account value fails to cover monthly deductions; notice must be given at least 31 days before end of Grace Period.
- Jacques paid many planned premiums in the past; in 2008 hurricane evacuation prevented receipt of the September 16, 2008 Premium Due Notice. The October 17, 2008 Grace Period Notice demanded a different amount.
- OM Financial declared lapse after the Grace Period; Plaintiffs allege failure to provide proper statutory notice; Jacques died April 29, 2009.
- Court considers whether OM Financial complied with La. R.S. 22:905 and whether contra non valentem applies, awarding the policy proceeds if notice was defective.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OM complied with La. R.S. 22:905 notice requirements | Turner argues notice failed to specify the amount needed to prevent lapse. | OM Financial contends September 16, 2008 notice satisfied timing and amount. | OM Financial failed to comply; proceeds awarded. |
| Whether the October 17, 2008 Grace Period Notice complied with timing | Notice timing did not meet the 15–45 day pre-due window. | Grace Period Notice properly triggered lapse consideration. | Notice timing inadequate; lapse not validly declared. |
| Whether contra non valentem applies to prevent lapse due to Ike evacuation | Nonreceipt due to evacuation supports the doctrine. | Court should not apply contra non valentem given no lapse was properly declared. | Court need not reach contra non valentem; statute noncompliance controls. |
| Whether penalty interest under La. R.S. 22:1811 is appropriate | Failure to pay death benefits warrants 8% interest. | Insurer had reasonable grounds to believe policy lapsed. | Penalty interest not awarded; not without just cause. |
Key Cases Cited
- Lester v. Aetna Life Ins. Co., 295 F. Supp. 1208 (W.D. La. 1968) (statutory notice must inform of premium amount required to prevent lapse)
- Vining v. State Farm Life Ins. Co., 409 So.2d 1306 (La. App. 2d Cir. 1982) (statutory notice protects insured from inadvertent lapse)
- Ledoux v. Old Republic Life Ins. Co., 233 So.2d 731 (La. App. 3d Cir. 1970) (policyholder entitlement considerations under notice statute)
- First American Bank & Trust v. Texas Life Ins. Co., 10 F.3d 332 (5th Cir. 1994) (strict construction of forfeiture statute in favor of insured)