Gov't: Prudential illegally denied life insurance claims

NEW YORK -- Prudential Financial illegally denied more than 200 life insurance claims despite collecting premiums from plan participants, the Department of Labor said Wednesday, the latest case where a life insurer was found to be denying claims even though the customer had been paying into the plan for years.

Many employers offer what is known as supplemental life insurance as an employee benefit, which allows an employee to pay for additional life insurance coverage out of their paycheck. The settlement between Prudential of Newark, New Jersey, and the U.S. government deals with what is known as “evidence of insurability," a common practice in underwriting supplemental life insurance contracts where the insured is required to fill out a form showing they are in good health before being covered by employer-sponsored supplemental life insurance.

According to the settlement, Prudential collected premiums on some of these participants going back in some cases to 2004, despite not having the appropriate form filled out.

Between at least 2017 and 2020, Prudential would then deny any claims on the life insurance policy, despite collecting premiums, citing a lack of “evidence of insurability” form.

Under the terms of the settlement, Prudential must pay out a life insurance claim if premiums were collected despite having no evidence of insurability, the Department of Labor said.

This is not the first settlement or lawsuit regarding evidence of insurability issues in life insurance. In 2021, the Department of Labor reached a settlement with United of Omaha Life Insurance over a similar case where the company denied paying out a life insurance claim despite the policyholder paying into the plan for years. Last year the Eighth Circuit Court of Appeals ruled in favor of a widower whose was denied life insurance benefits through a policy from Reliance Standard Life Insurance for a similar issue.