Employer Life Insurance Claim Denied for Missing Evidence of Insurability? What ERISA Beneficiaries Need to Know

Evidence of Insurability Can Be a Requirement for Additional Coverage

Many employers offer group life insurance as part of an employee benefits package.

Some basic coverage may be available automatically. But when an employee wants additional or supplemental life insurance, the plan may require Evidence of Insurability, often called EOI or Evidence of Good Health.

EOI generally involves providing information about the employee's health so the insurance company can decide whether to approve the requested coverage. It may be required when an employee:

• Requests coverage above a guaranteed amount
• Enrolls after the initial eligibility period
• Increases existing life insurance coverage
• Requests certain supplemental benefits
• Applies for coverage for a spouse or dependent

The plan documents should explain when EOI is required and what must happen before the additional coverage becomes effective.

Premium Deductions Can Create Serious Questions About Coverage

One of the most frustrating EOI disputes happens when an employee believes coverage is active because premiums are being deducted from every paycheck. Then the employee dies.

The beneficiary files a claim expecting the elected amount of life insurance, only to be told that some or all of the coverage was never approved because the insurer did not receive or approve the required EOI.

That does not necessarily mean the insurer must automatically pay simply because premiums were deducted. But it can raise important questions.

Was the employee ever told that an EOI was required? Was the form provided? Did the employee receive confirmation showing the higher coverage amount? Who was responsible for noticing that approval was missing? And why were premiums collected for coverage that allegedly did not exist?

Answering those questions can help clarify whether something went wrong during enrollment, underwriting, or administration of the coverage.

An Insurer Should Determine Whether Required Coverage Was Approved

When EOI is required, someone generally needs to determine whether the employee satisfied the requirement before the additional insurance becomes effective. Exactly who has that responsibility depends on the plan.

In some arrangements, the insurance company handles underwriting and decides whether the employee's EOI is satisfactory. The employer may handle enrollment, payroll deductions, or communications with employees.

Problems arise when those systems do not work together.

For example, an employer may begin deducting premiums before the insurer approves coverage. Or the insurer may receive premiums without having a system that identifies whether the employee completed the required EOI process.

These situations do not mean every premium deduction automatically creates coverage. They do show why the entire enrollment process may need to be investigated.

The Employer and Insurance Company May Have Different Responsibilities

Employer-sponsored life insurance can involve several different parties. There may be:

• The employer
• A plan administrator
• The insurance company
• Human resources personnel
• Outside benefits administrators

When a claim is denied, those parties sometimes point at one another. The insurer may say, "Your employer never sent us the EOI."

The employer may respond, "The insurance company was responsible for approving coverage."

For the beneficiary, figuring out who made the mistake can become almost as difficult as challenging the denial itself.

Employee Retirement Income Security Act (ERISA) generally requires employee benefit plans to provide participants with information about how the plan works and establishes fiduciary responsibilities for those who manage or administer covered plans. It also gives participants and beneficiaries rights to challenge denied benefits and certain breaches of fiduciary duty.

Importantly, fiduciary responsibility can depend on the functions a party actually performed, not merely the title listed in a document.

A Post-Death EOI Denial May Be Challenged

A denial based on a missing EOI should not necessarily be accepted without examining what happened before the insured died. Important evidence can include:

• Enrollment forms
• Benefits election confirmations
• Pay stubs showing premium deductions
• Emails from human resources
• EOI forms or notices
• Communications from the insurance company
• The Summary Plan Description
• The complete group life insurance policy
• Underwriting records
• Records showing when coverage supposedly became effective
• Evidence showing what the employee was told about their coverage

For example, a benefits statement showing that an employee had a particular amount of coverage can become important if the insurer later claims that coverage was never approved.

Similarly, years of premium deductions may raise questions about why neither the employer nor insurer corrected the problem while the employee was alive.

ERISA Appeals Can Be an Important Part of the Process

When an ERISA-governed life insurance claim is denied, the beneficiary typically has access to the plan's claims and appeals procedures.

Federal regulations require ERISA plans to maintain reasonable procedures for benefit claims and provide beneficiaries with an opportunity for a full and fair review of an adverse decision. Claimants generally must also be allowed to submit documents and information relating to the claim and obtain relevant claim materials upon request.

That makes the appeal more than simply sending the insurer a letter saying you disagree.

Evidence concerning premium deductions, enrollment confirmations, communications with human resources, missing EOI notices, and the responsibilities of the parties involved may all become important.

ERISA appeals can involve strict deadlines, and beneficiaries may be going up against insurance company professionals who handle these appeals regularly. Missing a deadline or leaving important evidence out of the appeal could affect the ability to challenge the denial later. 

Morgan & Morgan Can Investigate What Happened to the Coverage

Few insurance denials are more confusing than being told that coverage did not exist after an employee paid for it and believed it was in place.

Morgan & Morgan can review the plan documents, payroll records, enrollment materials, EOI requirements, insurer communications, and claim history to determine where the process may have broken down.

If an employer, plan administrator, insurer, or other fiduciary failed to properly administer the coverage, our attorneys can determine whether the denial may be challenged under ERISA and pursue available benefits or other appropriate relief.

Contact Morgan & Morgan today for a free case evaluation. The Fee Is Free™: you don't pay unless we win.

Frequently Asked Questions

What is Evidence of Insurability (EOI)?

Evidence of Insurability is information used by an insurance company to evaluate whether someone qualifies for certain life insurance coverage.

EOI may involve health questions, medical history, or other information requested during underwriting.

Employer-sponsored plans often require EOI when an employee requests supplemental coverage above a guaranteed amount, enrolls late, or increases existing coverage.

Can a life insurance company deny a claim for missing EOI after accepting premiums?

Possibly, but premium payments can make the situation more complicated.

Whether the coverage legally became effective depends on the plan terms, enrollment process, EOI requirements, and actions of the parties involved.

Continued premium deductions do not automatically mean the additional coverage was in effect. However, they may raise important questions about what the employee was told, whether the EOI requirement was properly communicated, and how the coverage was administered. Depending on the circumstances, those issues may support a challenge under ERISA.

What if my employer deducted premiums but the insurer says the coverage never became effective?

Do not assume that ends the claim.

Payroll deductions, enrollment confirmations, benefits statements, EOI communications, and plan documents can help establish what the employee was told and how the enrollment process was handled.

An attorney can review those records to determine whether the insurer properly denied the benefits or whether another party may have failed to fulfill its responsibilities under the plan.

Who is responsible when the employer and insurance company blame each other?

It depends on the plan and what each party actually did.

The employer may handle enrollment and payroll deductions while the insurance company handles underwriting and EOI approval. A plan administrator or outside benefits company may also be involved.

Under ERISA, determining responsibility can require examining the plan documents and the actual roles each party performed. In some circumstances, more than one party may need to be investigated.

Can I challenge an ERISA life insurance denial based on missing Evidence of Insurability?

Yes, depending on the circumstances.

A beneficiary may be able to challenge whether EOI was actually required, whether it was submitted, whether the employee received proper notice of the requirement, whether premiums were improperly collected, or whether a fiduciary failed to properly administer the enrollment process.

ERISA also provides procedures for appealing denied benefits and permits certain lawsuits seeking benefits or appropriate relief for fiduciary violations.

Why should I choose Morgan & Morgan?

EOI disputes can involve multiple parties, complicated ERISA rules, years of payroll records, insurance documents, enrollment systems, and disagreements over who was responsible for making sure coverage was properly approved.

Morgan & Morgan has the resources to investigate that entire process.

If premiums were deducted for life insurance that an employer or insurer later claims never existed, our attorneys can examine what the employee was promised, what went wrong, and whether the denial can be challenged.

We fight For The People™, not the insurance companies. Contact Morgan & Morgan today for a free case evaluation. The Fee Is Free™ promise means you don't pay unless we win.