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Does a Life Insurance Company Have to Give Written Notice of Cancelling a Life Insurance Policy for Non-Payment of Premium?

Premium notices are a longstanding custom in the insurance industry.  However, the practice of providing notice by itself generally does not bind an insurer to doing so, nor does it alter an insured’s duty to pay.  However, when an insurer has the practice of giving notice of payments for a length of time that leads “the insured to believe notice will be given, the insurer cannot declare a forfeiture without giving notice, or without previously advising the persons who have relied upon receiving notice that the custom will be or has been discontinued.” Couch on Insurance § 71:7.

Drawing a distinction between state statutes that require notice for terminations by an insurer and notice of premium in the event of lapse, one court concluded that failing to send a notice when premium has not been paid does not prevent lapse of the policy, even when a state statute was violated.  Graham-Bingham Irrevocable Trust v. John Hancock Life Ins. Co. USA, 827 F.Supp.2d 1275, 1283 (W.D. Wa. 2011).  It must be noted that the Graham-Bingham court independently relied upon the fact that the notice statute in question, Washington’s RCW 48.102.100 (1)(c), was enacted three years after the policy in question, and could not be incorporated into the policy’s terms, despite the common law rule that “regulatory statutes are generally incorporated by law into insurance policies.”  827 F.Supp.2d at 1283.

Other courts have found that failure to provide statutorily required notice prevents an insurer from treating a policy as lapsed, despite non-payment of premium.  Speziale v. National Life Ins. Co., 328 F.Supp.2d 295, 302 (N.D. NY 2004)(applying New York statute, N.Y. Ins. Law § 3211(a)(1) (McKinney 2004)); affirmed Speziale v. National Life Ins. Co., 159 Fed.Appx.253 (2d Cir. 2005).


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