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Deceit and Misrepresentation Discussed in New Massachusetts Appellate Case

Imagine purchasing a life insurance policy for your spouse, then finding out when it’s too late—once your spouse has passed away—that the policy had expired. That’s an unfortunate circumstance. Now imagine that the insurer called you before the policy expired and advised you to buy a new policy—then denied your spouse’s new application. More than just an unfortunate circumstance, could you have grounds for a lawsuit? This was the issue in a recent Massachusetts appellate case.

In the case, Brown v. SBLI of Massachusetts, both husband and wife were holders of ten-year term life insurance policies. In 2011, the husband’s policy and one of the wife’s policies reached the end of their ten-year term. Just before the end of the term, the insurance company called the parties’ home regarding the increase in policy premium for each policy. When the wife spoke with an insurance agent from the company, according to her, the agent recommended that both husband and wife purchase new policies. At his deposition, the agent acknowledged that typically, it was the company’s policy to tell the insured party to keep the insurance policy in place until a new policy issued, as long as that new policy was a replacement issued before the old policy lapsed.

The husband did not pay any portion of the premium and also did not apply for a new policy before his old one lapsed. In January 2012, the insurer sent a notice to the parties, letting them know that the policy lapsed and that they could seek to revive it if they filled out an application for reinstatement of coverage. About a week later, the agent again called the parties’ home. He spoke with the wife, who at this point was separated, the husband having moved to their summer home. The wife expressed her concern regarding the lapsed policy. The agent informed her that she would have to do a reinstatement in order to cover the husband, but advised her not to do that, as it would be cheaper to apply for a new ten-year term plan. The agent did not offer a reinstatement of the husband’s policy as an option pending approval of the new policy at this point. The wife again expressed her nervousness that there was no coverage currently in place. Regardless, the agent responded by explaining the application process and stating that the husband would be without a policy for about 30 days only.

The husband applied for the new policy, a process which included releasing medical information and undergoing a medical exam. The husband’s application for the new policy was denied. The letter of denial was sent only to the husband, so that the wife was unaware of the denial until after her husband passed away in 2012.

After the husband‘s death, the wife wrote to the insurance company and asked for a claim form for the husband’s death benefits. The insurance company responded that the original policy had lapsed and no new policy had issued.

The wife brought suit against the insurance company for breach of contract, along with tort claims for deceit and breach of the consumer protection statutes. The insurer filed a motion for summary judgment, arguing that the wife’s complaint was barred by the statute limitations because it was brought more than two years after the policy had lapsed, going against a clause in the policy. The motion judge issued a memorandum of decision, agreeing with the insurance company. The plaintiff appealed.

The Appeals Court agreed partially with the trial judge, holding that the contract claims were barred. However, as for the tort claims, the Court reversed. “The motion judge ruled as a matter of law that [the wife] should have known to maintain or reinstate the coverage. This was error,” the Court stated. “In view of the evidence that [the agent] advised against maintaining the policy, that in the 2011 conversation, [the agent] failed to tell [the wife] of the importance of maintaining coverage, and later, when asked, failed to disclose to her the option for reinstatement, it was for a jury to decide what inferences to draw from the evidence.”

The Court continued: “Moreover, [the wife] has offered evidence that the omissions were deliberate, because [the agent] stood to make a commission on a new policy but not the reinstatement of the old policy. Intentional misrepresentation also rises to the level of a [consumer protection] violation… This aspect of the c. 93A claim should not have been dismissed.”

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