California’s Life Insurance Liability Trap, published in DRI’s ‘For the Defense’
California’s Life Insurance Liability Trap, published in DRI’s ‘For the Defense’
The results of the McHugh decision in subsequent case law, and the interplay of new statutes, may have created a liability trap for unsuspecting life insurance companies.
Miami partner Joshua Lerner and Birmingham associate Fred Clarke’s article was published in the July/August 2022 issue of For the Defense, DRI’s monthly magazine for civil defense practitioners.
In 2012, the California Legislature enacted changes to the California Insurance Code that provide protections intended to shield consumers from losing life insurance coverage due to late or missed insurance premium payments. See Cal. Ins. Code §§ 10113.71 and 10113.72. (Several other states have similar statutes.) These changes went into effect on January 1, 2013. Last year, on August 30, 2021, the Supreme Court of California held that these changes applied to all life insurance policies that were in force when the statutes became effective. McHugh v. Protective Life Ins. Co., 494 P.3d 24 (Cal. 2021). Thus, life insurance policies issued or delivered in California even before January 1, 2013, cannot lapse or be terminated for nonpayment of premiums unless the insurer first complies with the grace period and notice provisions created by the legislation.