Was Your New Jersey Life Insurance Policy Canceled During COVID? You May Still Have Rights

A missed life insurance payment can have consequences that extend far beyond a temporary financial setback. When a policy lapses, a living policyholder may lose coverage that is difficult or expensive to replace. If the insured person has died, their family may be denied the financial protection the policy was intended to provide.

That is why New Jersey adopted emergency insurance protections during the COVID-19 pandemic. At a time when widespread job losses, illnesses, business closures, and other disruptions made it difficult for many residents to keep up with their bills, the state required life insurance companies to give policyholders additional time and payment flexibility before canceling coverage.

A certified class action lawsuit now alleges that United of Omaha Life Insurance Company failed to provide those protections before canceling more than 6,000 New Jersey life insurance policies. The court appointed Joseph Mattia, Esq., and Michael Wentz, Esq., to represent the affected consumers.

For policyholders who lost coverage and beneficiaries who were denied death benefits, the lawsuit could provide an opportunity to challenge what happened.

Why New Jersey Created Emergency Life Insurance Protections

Before the pandemic, a traditional life insurance policy in New Jersey generally had to provide a grace period of at least 30 days for a missed premium payment. During that period, the policyholder could make the overdue payment and prevent the policy from lapsing.

But the economic crisis created by COVID-19 was anything but ordinary. New Jersey officials recognized that the existing grace periods could cause residents to lose important insurance coverage at precisely the moment when families were facing widespread financial and health-related uncertainty.

Governor Phil Murphy therefore signed Executive Order 123 on April 9, 2020. The order temporarily replaced ordinary insurance grace periods with longer emergency grace periods. For life insurance policies, insurers were required to provide a period of at least 90 days before canceling a policy for nonpayment.

The order did not permanently eliminate the policyholder’s obligation to pay premiums. Instead, it required unpaid premiums to be divided into installment payments over a period of at least twelve months.

These protections were intended to give policyholders breathing room—not free insurance, but a meaningful opportunity to catch up before losing coverage.

What Is United of Omaha Accused of Doing?

The class action alleges that United of Omaha canceled more than 6,000 New Jersey life insurance policies during the protected period without properly providing the extended grace period and repayment options required by the state.

According to the allegations, affected policyholders lost coverage after missing premium payments even though the insurer should have given consumers more time to pay and an opportunity to repay overdue amounts in installments.

For some consumers, the alleged harm may have been the loss of an active life insurance policy. For others, the consequences may have emerged only after the insured person died and a family member submitted a claim for benefits.

A beneficiary may have received a denial letter stating that the policy was no longer in force because it had lapsed/terminated/canceled for nonpayment. The class action raises the question of whether certain policies should have remained active longer under New Jersey’s emergency protections—and whether benefits were improperly denied because an insurer treated a policy as canceled too soon.

United of Omaha has been accused of wrongdoing, but the allegations have not necessarily been proven. Certification of the class allows the claims of similarly situated consumers to proceed together; it does not, by itself, decide whether the insurer is liable.

Why the Additional 60 Days Mattered

The difference between a 30-day grace period and a 90-day grace period may seem technical. For a struggling family, however, those additional weeks could have changed everything.

A policyholder who missed a premium because of a temporary layoff, reduced work hours, illness, or family emergency may have been able to resume payments within the extended period. An installment option could also have prevented a policyholder from having to pay several missed premiums all at once.

Without those protections, a policyholder could lose years of paid-for coverage after a temporary hardship. Replacing that policy later might require a new medical examination, additional underwriting, and substantially higher premiums. A person who developed a serious health condition might not be able to obtain comparable replacement coverage at all.

For beneficiaries, the stakes may be even greater. A premature lapse could mean the difference between receiving the policy’s promised death benefit and receiving nothing.

How Do I Know Whether My Policy May Be Affected?

The press release identifies several conditions that may determine whether a policyholder or beneficiary is potentially protected by Executive Order 123 and included in the affected group.

You may have a qualifying policy if:

• The life insurance policy was issued in New Jersey.
• The policy was active and in good standing as of March 1, 2020, or was obtained between March 2, 2020, and December 31, 2021.
• The policy entered a grace period between March 1, 2020, and December 31, 2021.
• The policy was canceled or terminated during that grace period.
• The insurance company did not provide the required 90-day grace period.
• The insurance company failed to provide the appropriate repayment options for any premium payments missed during the COVID-19 pandemic.

Meeting one or more of these conditions does not automatically establish eligibility or guarantee compensation. An attorney may need to examine the policy, premium history, notices, lapse date, and other records to determine whether the emergency protections applied.

You may also have questions worth investigating even if you do not remember the exact dates. Many people do not keep insurance documents for several years, particularly after a policy has been canceled or a claim has been denied.

What Could Living Policyholders Recover?

A living policyholder whose coverage was allegedly canceled prematurely may be able to pursue reinstatement of the policy.

Reinstatement could restore the life insurance protection the policyholder previously had, although the precise terms may depend on the policy and the resolution of the lawsuit. The policyholder may also need to address premiums that would have been owed if the policy had remained active.

Restoring an older policy can be particularly valuable when the policyholder’s age or health has changed. Life insurance premiums typically reflect factors present when coverage is issued. A person seeking a new policy years later may face a higher price, reduced coverage, or difficulty qualifying.

The value of reinstatement, therefore, may involve more than simply reopening an account. It may preserve insurance protection that the policyholder can no longer replace on comparable terms.

What Could Beneficiaries Recover?

When the insured person has died, reinstating the policy is no longer the primary issue. Instead, the beneficiary may be able to pursue the death benefits that allegedly should have been paid.

A denied claim should be examined carefully when the insurer’s explanation relies on a lapse or cancellation occurring during the COVID-19 emergency period. The denial letter may not address whether the insurer provided the full 90-day grace period, sent proper notice, or offered a compliant repayment arrangement.

A previous denial does not necessarily mean a beneficiary has no further options. If the policy should still have been in effect under New Jersey law, the beneficiary may be able to challenge the insurer’s conclusion that no coverage existed.

What Evidence Can Help Show That a Policy Was Wrongfully Canceled?

The records surrounding the policy can help establish when premiums were due, when the grace period began, what notices were provided, and when the insurer treated the policy as terminated.

Potentially useful documents include:

• The life insurance policy and any amendments or riders
• Premium invoices and billing statements
• Bank records or canceled checks showing prior payments
• Grace-period notices
• Lapse or cancellation letters
• Correspondence concerning missed payments
• Offers to reinstate the policy
• Documents describing installment-payment options
• Emails or notes from conversations with the insurer
• Death-benefit claim documents
• Claim denial letters
• The insured person’s death certificate

Do not discard documents simply because the cancellation or denial occurred several years ago. Records that seemed unimportant at the time may help establish whether the insurer followed the emergency requirements.

An attorney may also be able to seek records directly from the insurance company when a policyholder or beneficiary no longer has a complete file.

What Should You Do After a Life Insurance Claim Denial?

Begin by reviewing the insurer’s stated reason for the denial. Look for language saying that the policy lapsed, terminated, canceled, or was not in force because premiums were not paid.

Next, identify the date the policy entered its grace period and the date the insurer claims coverage ended. Those dates may help determine whether the policy was affected by the state’s emergency protections.

You should also preserve all written and electronic communications. Avoid altering original documents or relying only on telephone conversations. When possible, keep notes recording when you spoke with the insurer, whom you spoke with, and what you were told.

Most importantly, do not assume that a cancellation notice or denial letter resolves every legal question. Insurance companies make coverage decisions, but those decisions can be challenged when an insurer may not have complied with the law.

Morgan & Morgan Is Here to Help

Life insurance is purchased to protect families from financial uncertainty. Policyholders should be able to expect that insurers will follow the rules governing when and how that protection can be taken away.

If your New Jersey life insurance policy was canceled, lapsed, or terminated during 2020 or 2021, you may be affected by bad faith insurance practices. You may also have legal options if you were denied death benefits after an insured family member passed away.

Morgan & Morgan can review the circumstances surrounding the policy, determine whether New Jersey’s emergency protections may apply, and help you understand the next steps.

Contact Morgan & Morgan today for a free case evaluation. It costs nothing to get started, and The Fee Is Free® unless we win.