August 24, 2005
Cases: Accepting late payments isn't modification
The family of a life insurance policy holder who died after his policy lapsed and before he could reinstate it lost out on their claim to benefits in a recent decision by the Georgia Court of Appeals -- even though the insurer had previously routinely allowed hime to reinstate after such defaults.
The insured, Stephen Ward, had a $250,000 policy with Guideone Life Insurance. He obviously had a problem with deadlines; he missed the payment deadline six times over the course of the policy. The first five times the company allowed him to reinstate, on payment of a late fee and filling out a form. The sixth time he died before he could do so. Ward’s son, after his death, slipped the payment under the door of the insurance agent’s office. Guideone refused the payment and refused to pay. Ward’s wife sued. The trial court found in her favor, holding that Guideone's previous actions in allowing reinstatement had modified the contract to require a notice to Ward before complete cancellation of the policy. No such notice was (or could be) given, since Ward was dead.
Wrong, said the appellate court. There was no notice requirement in the policy, which specifically provided that the policy would terminate a month after the payment deadline. It also specifically provided for reinstatement after that point, if Ward filled out new paperwork showing he was still alive and paid the late fees. Guideone's actions were therefore consistent with the contract, and therefore could not modify it. The policy had lapsed and it was properly terminated. Since Ward was not alive to reinstate it, the plaintiff’s claim failed.
Guideone Life Ins. Co. v. Ward, 2005 Ga. App. LEXIS 874 (August 8, 2005).
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