The US Department of Labor has reached a settlement with United of Omaha Life Insurance mandating the company to modify its administration of the requirement for participants in employer-sponsored life insurance plans to present proof of good health – known as evidence of insurability – before obtaining coverage under certain circumstances.
Following an investigation by the department’s Employee Benefits Security Administration (EBSA), it was revealed that United frequently accepted premiums for extended periods without confirming whether insurability requirements were met. This practice misled participants and their beneficiaries into believing they had coverage.
Subsequently, when a participant passed away, United often rejected claims for benefits, stating they never received evidence of insurability, thus leaving beneficiaries without the life insurance benefits for which their loved ones had paid.
United informed the department that it voluntarily reassessed claims dating back to February 2018, rectifying claims that were denied solely due to a participant’s failure to provide evidence of insurability.
EBSA’s inquiry focused on the administration of life insurance plans by United that fall under the Employee Retirement Income Security Act of 1974. The investigation found numerous instances where the company denied claims due to a participant's failure to provide evidence of insurability.
Brokered by the department’s Office of the Solicitor, the agreement stipulates that United has 90 days from receipt of a participant’s initial premium payment to determine if the participant has fulfilled any relevant evidence of insurability prerequisites. Once this 90-day period lapses, the company is barred from denying a claim for life insurance benefits based on evidence of insurability. These provisions also extend to United’s parent company, Mutual of Omaha Insurance, and its subsidiary, Companion Life Insurance.
“This terrible practice denied grieving families life insurance benefits for which their loved ones had paid, in some cases, for many years,” Labor Department solicitor Seema Nanda said. “This settlement with United of Omaha Life Insurance ensures that beneficiaries are not harmed by the company’s failure to verify, on a timely basis, that premium-paying participants have satisfied applicable evidence of insurability requirements. All insurers should examine their practices to prevent similar conduct.”
The department’s settlement with United follows a comparable agreement reached with Prudential Insurance in April earlier this year. Investigations into the practices of other life insurance companies concerning evidence of insurability are ongoing.
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