When Linda Byrd applied for a $100,000 life insurance policy with Massachusetts General Life Insurance Company, Massachusetts General’s insurance agent wrote Ms. Byrd’s date of birth as “5/27/67” on the application, making her 27 at the time, instead of her actual age of 33. Ms. Byrd reviewed and signed the application, it was approved, and the policy was issued. The policy subsequently was taken over by Conseco Life Insurance Company.

Years later, after Ms. Byrd passed away, the beneficiary of the policy filed a claim with Conseco. In the course of processing the claim, Conseco learned that Ms. Byrd’s date of birth had been misstated on the application, and that Ms. Byrd actually was 33 years old when the policy was issued.

Conseco sent the beneficiary a letter explaining that it was reducing the death benefit in accordance with the policy’s misstatement of age provision. It then adjusted the benefit to the amount of insurance it would have issued to a 33-year-old female based on the premiums collected, and paid the beneficiary approximately $57,000.

The beneficiary sued, and Conseco moved for summary judgment.

The Policy

The policy provided:

If the age or sex of the insured has been misstated, the cash values, accumulation account and death benefit payable will be that which the most recently monthly deduction would have purchased at the correct age and sex.

Colorado Law

Colorado law requires that all life insurance policies include a misstatement of age provision providing that:

If the age of the insured is misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age.

Colo.Rev.Stat. § 10–7–102(1)(d).

The Court’s Decision

The court granted the insurer’s motion.

In its decision, the court rejected the beneficiary’s argument that the misstatement of age provision was not applicable because there was no evidence that Ms. Byrd intentionally or knowingly had misrepresented her age. The court explained that the beneficiary was equating the “misstatement” required in age adjustment clauses with the knowing misrepresentations required to rescind insurance contracts.

Moreover, the court continued, neither the Colorado law nor the policy’s misstatement of age provision indicated that the face amount of an insurance policy could be adjusted only where the misstatement in age was intentional or the fault of the insured.

Finally, the court rejected the beneficiary’s argument that Conseco should be estopped from adjusting the face value of the policy because the insurer had engaged in blameworthy conduct when it had failed to amend Ms. Byrd’s age after the beneficiary allegedly advised it of the mistake in age, finding that cases cited by the beneficiary in support of his promissory estoppel argument pertained to situations where an insurer had rescinded a contract – which had not occurred in this case.

Accordingly, the court concluded, Conseco was entitled to reduce Ms. Byrd’s death benefits to reflect her true age, and it was entitled to summary judgment on the beneficiary’s breach of contract claim.

The case is Byrd v. Conseco Life Ins. Co., No. 12–cv–2455–WJM–KMT (D. Colo. April 25, 2014). Attorneys involved include: Benjamin Silva, III, Benjamin Silva, III & Associates, PC, Lakewood, CO, for Plaintiff; Steven K. Huffer, S.K. Huffer & Associates, P.C. Carmel, IN, Robert James Bruce, Lawlis & Bruce, LLC, Denver, CO, for Defendant.

FC&S Legal Comment

Other courts have held that age adjustment clauses are applicable regardless of who made the misstatement, and regardless of whether the misrepresentation was intentional. See, e.g., Nat’l Credit Union Admin. Bd. v. Acacia Nat. Life Ins. Co., 60 F.3d 828 (6th Cir.1995) (finding insurance company properly reduced payment where misstatement in age allegedly was due to insurance agent’s negligence).