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In Life Insurance Remedies: May a Living Insured Recover Damages for an Insurer’s Failure to Provide a Required Grace Period Notice?, by Michael P. Cunningham of Funk & Bolton, P.A., the author notes that most attorneys practicing in the area of life insurance have likely encountered cases involving an alleged wrongful lapse of a life insurance policy. These cases often involve an allegation that the insurer failed to provide a required policy notice causing a valuable policy to lapse for nonpayment of premiums. In most cases, the policyholder argues the failure to provide notice requires that the policy be put back in force. But increasingly, policyholders are taking the position that they are entitled to the “present value” of the policy death benefit, even when the insured is still living.
Until recently, case law addressing the appropriate remedy in such matters has been nonexistent. This issue, however, was squarely addressed in Goldstein v. The Lincoln National Life Insurance Co., where a federal district court ruled a living insured cannot recover the present value of a policy death benefit based on the alleged wrongful lapse of a life insurance policy. Rather, the only remedy available is a declaration the policy remains in force, subject to payment of past due premiums. This commentary provides an in-depth look at this recent decision, which is perhaps the only modern case to analyze the issue of remedies where the insured is still living and the policy is alleged to have lapsed, without notice, for nonpayment of premiums.
Michael P. Cunningham is a member in the Baltimore office of Funk & Bolton, P.A. He primarily represents life, health and disability insurers in federal and state court litigation, including ERISA matters. Mr. Cunningham received his undergraduate degree from the University of Maryland Baltimore County and graduated summa cum laude from the University of Baltimore School of Law. Mr. Cunningham has extensive experience briefing insurance matters before the Court of Appeals of Maryland, the United States Courts of Appeals for the Third, Fourth, and District of Columbia Circuits, as well as the United States Supreme Court. He is a member of the Maryland and District of Columbia bars and was named a “Rising Star” in Maryland Super Lawyers. Mr. Cunningham gratefully acknowledges the work of Adam R. Gazaille, an associate of Funk & Bolton, P.A., in assisting with the preparation of this commentary.
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