Insurance Law's Notice Requirements Strictly Construed

On October 23, 2013, Justice Ramos of the New York County Commercial Division issued a decision in Schoonover v. Massachusetts Mut. Life. Ins. Co., 2013 NY Slip Op. 32682(U), reminding insurance companies that they ignore the notice requirements of the Insurance Law at their peril.

In Schoonover, the plaintiffs, trustees of an insurance trust established by a now-deceased partner at Skadden Arps, purchased life insurance from defendant Mass Mutual through Skadden. From the date of issuance until the insured's retirement, Skadden paid the monthly charges on the policy. Upon the insured's retirement, Mass Mutual issued a letter of portability. When premiums had thereafter not been paid, Mass Mutual issued non-payment notices to Skadden and then ultimately notices of cancellation to Skadden as well. Justice Ramos granted summary judgment to the plaintiffs, ruling that the notices to Skadden were not sufficient and that the insurer was required to provide actual notice to the actual address of the insured:

[F]orfeiture of life insurance coverage for nonpayment of premiums is not favored in the law, and will not be enforced absent a clear intention to claim that right. . . . In the same vein, an insurer may not depend upon a default to which its own wrongful act or negligence contributed, and but for which a lapse might not have occurred.

Here, the Certificate and the Policy entitle the Insured to a billing notice after he retired from Skadden, and conditions cancellation of the Policy upon the giving of that notice to him, in addition to a pre-lapse or default notice to the owners of the Certificate, the plaintiffs.

(Internal quotations and citations omitted).