Court finds widow's suit on husband’s life insurance policy time barred even though her lawsuit was filed shortly after his death

In a case that highlights the sometimes harsh nature of statutes of limitations, a federal court in Southern California granted defendant USAA’s motion for summary judgment on all claims brought by a widow because she failed to file her lawsuit on time. Earlywine v. USAA Life Ins. Co., No. 3:17-CV-328-CAB-NLS, 2018 U.S. Dist. LEXIS 16968 (S.D. Cal. Feb. 1, 2018).

USAA first issued the life insurance policy to the plaintiff’s late husband in 1990 when he was 54 years old. USAA or its agent allegedly told the plaintiff and her husband that the policy would be in effect through age 95 with quarterly premiums of $576.

Unfortunately, the policy expired much earlier. And with quarterly payments of $576 over 26 years coming to nearly $60,000 only to receive no life insurance benefits, this case highlights the need for policyholders to be vigilant when dealing with their insurance company.

Plaintiff’s husband was informed in 2012 that his policy was set to expire in 2013, when he was roughly 77 years old. In a strongly worded letter to USAA sent also in 2012, the plaintiff’s late husband expressed his surprise with the initial representations of his insurance agent that led him to buy the life insurance policy. USAA was now telling him that his policy would expire well before the age he was initially told (95), and that if he wanted to extend the duration of his policy, he would have to make substantially higher quarterly payments. Furthermore, plaintiff’s ex-husband noted potential ongoing misrepresentations:

In [USAA agent’s] conversation with the home office Sept. 7, 2012 decision was made. We could resume $576.00 payments quarterly but the age limit would be reduced to age 87. Ten days later written material came from USAA home office that did not reflect our previous meeting of Sept. 7, 2012. We made an appointment with Jason Proctor, Sept. 21, 2012 at which time he explained USAA wants payments of $8,000.00 yearly to age 87. Either accept those conditions or the policy expires in 2013, which I cannot afford on our fixed income!

USAA later offered plaintiff and her late husband the option to continue with their current $576 quarterly payments, but that he would only retain coverage until age 78. USAA also offered options (with presumably much higher payments) to extend the policy until plaintiff’s late husband turned 80.

It is important to note, that plaintiff and her late husband did not retain any legal counsel or file any suit in 2012 or 2013.

The policy lapsed in January 2016, plaintiff’s husband died in April 2016 and this lawsuit was filed in January 2017, alleging: breach of contract, breach of covenant of good faith and fair dealing, rescission, and unfair business practices along with other claims that were quickly dismissed early on in the lawsuit.

In California, plaintiffs have four years to file claims for breach of contract, rescission, and unfair business practices and only two years for claims of breach of the covenant of good faith and fair dealing.

Plaintiff’s husband passed away in 2016 and the suit was filed in 2017. Therefore, this is well within the time limits on the plaintiff’s claims, right? . . . Wrong.

The court accepted USAA’s argument that the appropriate time to measure the running of the statute of limitations was in 2012, when plaintiff and her late husband were informed of the imminent lapse of their policy. Essentially, the court held that the plaintiffs should have known they had claims when they realized their actual policy was inconsistent with what they had been promised back in 1990 when they purchased the policy.

In foreclosing plaintiff’s recovery on the life insurance policy, the court said:

In the specific context of insurance policies, courts have found that even though the time for an insurer to pay out on the policy has not yet arrived, an insurer nonetheless breaches the policy, and triggers the statute of limitations, when it demands that the insured makes payments inconsistent with the insured's understanding of the policy terms.

This tragic case in one sense highlights the need for policyholders to be vigilant when dealing with their insurer. Furthermore, even if a benefit or claim is not yet due, a policyholder may want to seek legal help so as to not forfeit any potential claims.

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