Background
A $1 million term policy issued in 2005 was terminated in 2013 for a missed premium. The beneficiaries argued the insurer had not followed new statutory protections against lapse that took effect January 1, 2013. The Court of Appeal held the statutes reached only policies issued after that date.
What the court held
The California Supreme Court reversed. Sections 10113.71 and 10113.72 apply to all life insurance policies in force when they took effect, whatever the issue date. The court relied on the statutes’ language, their legislative history, the uniform notice scheme, and their purpose of protecting owners, including elderly, hospitalized or incapacitated people who may miss a payment. Department of Insurance staff correspondence and form-filing instructions were not the agency’s official interpretation and did not deserve deference.
Why it matters
For California policies, an insurer that says a policy lapsed usually has to show it gave the required grace period and notices, including to any designee. McHugh sent the case back for further proceedings, so what a beneficiary must prove after a notice failure is a separate question. Our lapse and grace periods guide covers the statutes.
Read the opinion
McHugh v. Protective Life Ins. Co., No. S259215 (Cal. Aug. 30, 2021), the court’s own PDF.
Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.