On Wednesday, the Department of Labor said that Prudential Financial improperly rejected more than 200 life insurance claims despite receiving payment from plan members. This is the most recent instance in which a life insurer was discovered rejecting allegations even though the client had contributed to the plan for years.
As an employee perk, many firms provide what is referred to as supplemental life insurance, which enables a worker to pay for additional life insurance via their salary. The agreement between Prudential of Newark, New Jersey, and the federal government deals with “evidence of insurability,” a practice common in underwriting supplemental life insurance contracts where the insured must fill out a form demonstrating their good health to be covered.
According to the settlement, despite not having the proper form filled out, Prudential continued to receive premiums from some of these participants as far back as 2004.
Prudential would subsequently refuse any claims on the life insurance policy, even though it had been paying premiums between at least 2017 and 2020, alleging a lack of “evidence of insurability” documentation.
The Department of Labor stated that the settlement requires Prudential to pay out a life insurance claim if premiums were paid, even if there was no proof of insurability.
There have been other lawsuits and settlements with proof of insurability problems in life insurance before this one.
The Department of Labor and United of Omaha Life Insurance settled a dispute in 2021 involving a situation in which the insurer refused to pay a life insurance claim even though the client had contributed to the plan for years.
The Eighth Circuit Court of Appeals decided in favor of a widower last year who had been denied life insurance payments under a Reliance Standard Life Insurance policy for a related problem.