Failure of Proposed Insured Stay Alive Until Policy Delivered Costs
Fiance Almost $5 Million
On January 27, 2021, Dr. Travis Richardson completed an application for
an individual life
insurance policy with Pacific Life seeking $4,816,949.00 in coverage.
Blevins was Dr. Richardson's fiancé and was listed as the primary
beneficiary of the policy. Lamar Breshears was the insurance agent for
Pacific Life. Champion Agency (“Champion”) handled details. Dr.
Richardson died unexpectedly before the policy was delivered and the
insurer refused to pay.
In Pacific Life Insurance Company v. Katie Blevins, No. 3:21-CV-00143
JM, United States District Court, E.D. Arkansas, Northern Division (June
15, 2023} the USDC resolved the claim of the beneficiary.
FACTS
On February 1, 2021, Champion transmitted Dr. Richardson's application
to Pacific Life with the instructions to process the application and to
mail the policy to Champion at its office in Albuquerque, New Mexico.
Pacific Life received Dr. Richardson's application on February 2, 2021.
On March 11, 2021, Pacific Life's underwriting department approved Dr.
Richardson for Policy and the initial monthly premium of $16,668.68 was
paid.
On March 12, 2021, Dr. Richardson emailed Breshears and asked him when
the policy was active. Breshears responded the same day, stating,
“Today. If you were to die today, the policy would pay out a death
benefit.” Breshears was wrong because Dr. Richardson died unexpectedly
on March 14, 2021.
The physical policy was received by Champion March 15, 2021. Pacific
Life refunded the initial premium payment on March 25, 2021, taking the
position that the policy was not “in force” at the time of Dr.
Richardson's death because it had not been “delivered” as required by
the application and policy.
ANALYSIS
It was undisputed that delivery of the policy was a valid condition
precedent to Blevins being entitled to receive payment under the policy.
The application states that: “[c]overage will take effect when the
Policy is delivered and the entire first premium is paid only if at that
time each Proposed Insured is alive, and all answers in this
Application are still true and complete.” (emphasis added.).
The policy, which incorporates the application, states that a Policy is
in effect and provides a Death Benefit on the Insured on the date the
Policy and associated riders become effective. The Policy Date for this
policy was March 11, 2021 a date before Dr. Richardson died.
The fact that the challenged terms are not defined does not make them
vague and ambiguous.
Breshears testified that he understood delivery of the policy to mean
“physically sending the policy to the client,” and that a “hundred
percent of his policies have been delivered by paper.” Pacific Life has
established that it physically mailed the policy to Champion pursuant to
the instructions it received with the transmittal of Dr. Richardson's
application. Included with the mailed policy were a delivery receipt and
an amendment to the application to correct minor inaccuracies. Blevins
did not establish that there is a genuine issue of material fact on the
issue of constructive delivery of the policy.
The Court has no doubt that Dr. Richardson, Breshears, and Blevins
believed that Dr. Richardson was covered under the policy as of March
11, 2021. However, Pacific Life's motion for summary judgment was
granted.
ZALMA OPINION
People buy life insurance because they recognize that life is a disease
from which all humans suffer. We all, eventually, die. Dr. Richardson
wanted to protect his fiance and applied for a life insurance policy
that he expected to have for many years only to die before the policy
was delivered to him. Insurance policies must be read as a whole. In
this case, the policy never came into effect because he was not alive
when the policy was delivered. A sad result but on its face a correct
decision.