March 30, 2017 @ 1:46 AM

Cooke v. Jackson National Life Insurance Company, 15-CV-817 (NDIL, March 20, 2017)

 

The life insurance company denied the claim after insured missed his premium payment on his term life insurance policy, and the initial 31 day grace period expired without payment. In Illinois, life insurance policies must contain a provision allowing a 30 day or one month grace period within which to make up a missed payment. If the insured dies within the grace period then the policy remains in effect and the benefits are owed, but the overdue premium is deducted from the insurance benefits.

 

Here, 18 days into the grace period the insurer changed the premium due from a monthly premium to a quarterly premium as allowed under the policy. We argued that the insurer was then required to give a new 31 day grace period to pay the new premium due, (within which grace period the insured did pass away) and could not enforce the original grace period after changing the premium due. The court agreed and held the insurer breached the contract by failing to recognize a new grace period for the new premium due. 

 

The court also held that because the policy was no longer payable by monthly premium after the insurer withdrew its consent to pay by monthly premiums, and because insurer had not given proper notice of policy forfeiture for policies with a quarterly or less frequent payment basis, Illinois law imposed a six month non-forfeiture period within which the insurer could not declare the policy forfeit after the default premium payment.

 

Finally, the court granted bad faith damages for the insurer's litigation delays.