If you live in Chicago, or elsewhere in Illinois, and are covered by a life insurance policy, it may behoove you to consult an ERISA attorney before leaving your job to make sure you can keep the coverage. It may seem straight forward that you lose group coverage when you stop working, but often whether you can keep the coverage is anything but clear. Often, life insurance policies issued to your employer that cover you contain numerous ways to maintain your coverage after you stop working. One of them is a waiver of premium clause, which maintains your coverage in the event you stop working due to disability. Another is a right to convert the coverage to an individual policy. But both features usually have strict time limits by when you must take action, either proving disability, or applying to keep the policy, and the time limits can be shorter than you think. A recent case out of the United States District Court for the Northern District of Illinois illustrates the procedural hurdles your beneficiaries can face if you did not get sound advice before stopping work.
In Frankenthal v. Connecticut General Life Insurance Co., No. 15-cv-10307,2016 U.S. Dist. LEXIS 122060 (N.D. Ill. Sept. 8, 2016), Mr. Frankenthal had group life insurance coverage through his employer. He stopped working for that employer in 2001, but apparently kept the coverage for the next year. He stopped paying the premium in 2002 and stopped working altogether due to disability. His children claimed the life insurance benefit, but were denied the claim. The insurer argued he did not pay the premiums at the time of death, and did not apply for waiver of premium before he stopped paying the premiums. His children sued to recover the benefits, making claims for breach of contract and for bad faith denial of insurance claims under § 155 of the Illinois Insurance Code. Connecticut General (since acquired by Cigna), moved to dismiss the bad faith claim, and argued the breach of contract claim must be treated as a claim under ERISA § 502(a) because the coverage was part of an employer sponsored group policy, which is an employee welfare benefit plan covered by ERISA.
The court dismissed the second count for bad faith under ERISA preemption principles, and gave indication the claim would arise under ERISA because the policy was part of a group policy, notwithstanding the children’s argument that the conversion to an individual policy would exempt the claim from ERISA. Ultimately, the Frankenthal children may be left without any recourse because Mr. Frankenthal did not timely apply for a waiver of premium benefit under the policy.
Keeping your life insurance in force after you stop working is just as important as applying for it and naming your beneficiaries in the first instance. It’s how you protect your loved ones in the event you cannot financially support them, due to death or disability. If you are leaving an employer, for any reason, and want to know if you can keep your life insurance coverage, call an experienced ERISA life insurance lawyer right away to avoid missing any deadlines under your policy.
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