Published by The Pellegrin Firm September 2, 2019

In an August 20, 2019, ruling out of the U.S. District Court for the Western District of Louisiana, Judge S. Maurice Hicks sided with Metropolitan Life Insurance Company in a dispute against a deceased man’s wife and children over life insurance benefits.  

The deceased, Greg Lynfield Beazley, was laid off from Schlumberger Technology Corporation May 6, 2014. Mr. Beazley had a life insurance policy with his job at Schlumberger, and in keeping with the policy, the insurance company (Metropolitan) sent him a notice that he could convert the policy to an individual policy upon written request.

However, Mr. Beazley got sick and died June 12, 2019, before he ever opened the notice of eligibility to covert to an individual policy. His wife stated she opened the letter from Metropolitan the day after he died. It is uncontroverted that the notice of conversion rights was somewhat late, and the policy stated the insured had 45 days from the date of the notice to convert the policy. Mr. Beazley was eligible to convert the policy when he died. However, the judge found that because he did not do so, there was no coverage, even though notice was late.

In addition, the wife had no standing or authority to make the conversion after he had already died. The judge found no evidence in the record that Mr. Beazley was too sick or otherwise incapable of making the conversion while he was still alive. The insurance company found that the late notice only extended the application period to convert coverage, as opposed to extending the coverage itself. The judge agreed that this interpretation of the policy was reasonable. (Yes, right or wrong, the case law states that insurance companies have some discretion in interpreting their own policies if there is a discretionary clause, like there was in the policy in this case.)

Had Mr. Beazley died six days earlier, there would have been coverage, because the policy automatically extended coverage for 31 days after termination, regardless of whether the insured converted to an individual policy or not. However, he clearly died slightly past that 31-day time limit, if only a little later. The judge found that this extension clause was not affected by the late notice of conversion rights. The language of the clause did not imply that the period of automatic coverage extension would extend along with the extended period to make the conversion to an individual policy. The purported beneficiaries asked that the court apply Louisiana Revised Statute 22:942(12), which they claimed required the insurer to extend coverage during any application period to port coverage. The judge found this statute to be completely preempted by ERISA and could not be considered, as the insurance coverage was part of an employer-provided benefit plan.

The beneficiaries and their attorney did everything right in this case to preserve their rights. Sadly, once Mr. Beazley died more than 31-days after termination without converting to an individual policy, nothing would have made a difference, at least as far as Judge Hicks sees it. It remains to be seen whether the beneficiaries will appeal to the U.S. Court of Appeals for the Fifth Circuit and whether the result will change on appeal. The case is Beazley v. Metropolitan Life Insurance Company, No. CV 16-1188, 2019 WL 3941055 (W.D. La. Aug. 20, 2019).