Department of Labor Settlement Agreements: Key Components Regarding Evidence of Insurability

The Department of Labor has recently announced settlement agreements with two group Life insurance carriers regarding their evidence of insurability practices. These settlements highlight the Department’s focus on the fiduciary duties of carriers when it comes to eligibility for coverage. The Department’s recent settlements come just over a year after its first settlement agreement with another carrier on the same issue.

Evidence of insurability refers to the health criteria that participants must meet to be eligible for their requested amount of group Life insurance coverage. Group Life insurance policies often require evidence of insurability when coverage exceeds a certain amount or when participants enroll late. The Department’s recent investigations found instances where participants did not meet the EOI requirement, yet premiums were collected and claims were denied based on this technicality.

The Department’s settlements with carriers emphasize the carriers’ fiduciary duty to determine eligibility for coverage requiring EOI at or near the time premiums are received. The settlements include requirements related to claims for benefits, living participants who failed to satisfy the EOI requirement, and notices to policyholders. Carriers are prohibited from denying claims solely due to lack of EOI if premiums have been received for a certain period, and they must reprocess denied claims and provide benefits for those denied solely on the basis of EOI.

The Department’s focus on carriers’ practices related to eligibility may extend beyond EOI, as indicated by recent press releases. Carriers should carefully review policy terms related to eligibility determinations, and employers should assess their risk related to administering enrollment and billing processes. Employers may be liable to beneficiaries if they collect premiums for coverage requiring EOI without carrier approval, and carriers may assert claims against policyholders for failing to administer eligibility criteria properly.

In conclusion, eligibility criteria remain a significant issue for group Life insurance carriers and employers, and ongoing monitoring of developments in this area is crucial. The Department’s continued focus on carriers’ practices related to eligibility criteria suggests that further action may be taken in the future. Stay tuned for updates on this evolving issue.