Third Circuit Rules that Life Insurer Allowed to Charge Aggregate Premium to Both Smoking and Non-Smoking Juveniles

Alleman v. State Farm Life Insurance Co.

(3rd Cir. [ Pa.] June 26, 2009)

The owner of two whole life insurance policies insuring the lives of her sons filed suit against the insurer alleging that it breached its insurance contract by charging the same insurance premiums for non-smoking juveniles as it did for smoking juveniles.  Although the insurer asked whether the insureds smoked in the application for insurance, it had a single aggregate premium for all juveniles.  The Third Circuit held that

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District Court Determines that Administrator’s Decision to Deny Benefits was Reasonable

Ramsteck v. Aetna Life Ins. Co.

S.D.N.Y., June 24, 2009


Concluding the plaintiff had a full and fair review of her medical claim, the district court held the plan administrator’s decision to deny benefits was reasonable and, therefore, not arbitrary and capricious.   Documentation in the administrative record was sufficient to demonstrate the procedure was “experimental and investigational” and not covered under her medical plan.  Additionally, the court determined that plaintiff did not demonstrate “good cause” to support a review of testimony outside

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Second Circuit Finds Insurer’s Decision Rejecting Life Insurance Benefits Arbitrary and Capricious

Cohen v. Metropolitan Life Ins. Co.

(2nd Cir., June 9, 2009)

The Second Circuit upheld a district court's ruling that an insurer’s denial of life insurance benefits was arbitrary and capricious.  The court, in upholding the district court's decision, concluded that its rationale that it had a “pre-existing condition” was questionable especially when one factors that the insurer was operating under an actual conflict of interest as both an administrator and fiduciary to the plan. 


The Second Circuit, however, finds that an award for

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Vermont Passes “Historic” Legislation Regulating The Stranger-Originated Life Insurance (STOLI) Market

Vermont became the latest state to regulate and provide firm disclosure guidelines regarding the selling and marketing of stranger-originated life insurance policies.  This legislation is aimed at curbing the esclating schemes directed at seniors to part with their life insurance policies.  Often times, seniors are not given the necessary information to make an informed decision regarding the positives and negatives in selling their life insurance policy.  Florida and other states have already passed similar legislation. 

Click here to Download Vermont.Stoli.Legislation 

by Daniel W. Gerber and Kimberly E. Whistler

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Disability insurer had no obligation to provide further disability benefits where participant breached the policy.

Paul Revere Life Ins. Co. v. Cahn

U.S. Ct. of App. (2nd Circuit, June 2, 2009)

The participant’s willful failure to provide insurer relevant information related to the first-party benefits claim breached the policy conditions, justifying the insurer’s disclaimer.


Click here for the decision


By Daniel W. Gerber and Kimberly Whistler

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Life Insurance Carrier Waived Right to Rescind Policy, Despite Finding Action was Timely Commenced

Security Mutual Life Ins. Co. v. Rodriguez

(New York State, Appellate Division, 1st Dept.)  May 26, 2009

Although life insurer’s action was not barred by the incontestability clause, the court held it waived its right to rescind the policy after it continued to collect premiums.  There, the insurance carrier commenced an action seeking to rescind a life insurance policy based on the policyholder’s alleged false and misleading representations.  Pursuant to the statutory requirement of New York Insurance Law §3203, the policy

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IRS Issues “Stranger Owned Life Insurance” Rules

The Internal Revenue Service (“IRS”) issued two Revenue Rulings on May 1, 2009, addressing certain tax aspects of sales and surrenders of life insurance policies: Rev. Rul. 2009-13 and Rev. Rul. 2009-14. These rulings resolve some longstanding questions regarding sales of life insurance policies and in many respects are consistent with life settlement industry expectations.

By Daniel W. Gerber and Kimberly E. Whistler


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Spouse Has No Individual Tort Claim Against Health Insurer

The Mega Life and Health Ins. Co. v. The Superior Court of Riverside County
(Ct. App.Ca., April 14, 2009)

A spouse can recover on a tort claim for fraud based on the issuance of a health insurance policy to his deceased wife. The spouse, however, has no separate and individual tort claim based on the policy.

Here is the full case

By       Daniel W. Gerber and  Kimberly Whistler

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