Recent settlements between the Department of Labor (DOL) and major life insurance carriers have brought attention to the denial of claims due to missing evidence of insurability (EOI). These agreements spotlight the potential liabilities faced by carriers and employers even after collecting employee premiums for coverage.
Employers commonly offer basic life insurance coverage without charge, while employees can purchase additional coverage through payroll deductions. Approval for supplemental coverage often depends on carriers accepting evidence of insurability (EOI) submitted by the insured individual.
DOL Investigations: The DOL’s investigations revealed that carriers, such as Prudential and United, consistently denied claims for missing EOIs despite collecting premiums. Employers, tasked with collecting EOIs and premiums, failed to inform participants about missing documentation, leading to claim denials posthumously.
Joint ERISA Fiduciary Responsibility: The DOL contends that both insurers and employers share ERISA fiduciary responsibility. Failure to administer plans properly, including neglecting documentation collection, confirming eligibility, and providing timely notices, is deemed a breach of fiduciary duty by both entities.
These settlements emphasize the need for transparent communication in the insurance industry. To explore further details on these issues, please download the PDF below. Understanding these reforms is crucial for insurers, employers, and individuals relying on life insurance for financial security.
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