What You Need to Know
- Protective Life, the respondent, said the termination rules should apply to policies issued on or after Jan. 1, 2013.
- The California Supreme Court concluded that the rules apply to a policy termination process started after Jan. 1, 2013, no matter when the policy was issued.
- Two judges on the court say the majority opinion could change the way applying California laws retroactively works.
A new ruling by the California Supreme Court could help some slow-paying life insurance policyholders keep their policies.
Two judges on the seven-judge court say the ruling also could lead to broader changes when new California state laws apply retroactively.
The court ruled 7-0 Monday that California’s life insurance policy termination law applies to all policies involved in policy termination processes starting on or after the statute’s Jan. 1, 2013, effective date — whether or not the policies were issued before the effective date.
The ruling on the case, Blakely McHugh et v. Protective Life Insurance (Case Number S259215), means that the beneficiaries of the policyholder, William McHugh, may have an easier time persuading California courts to keep a life insurance policy in force.
The case involves a 60-year, $1 million term life insurance policy issued by Chase Life Insurance Company to William McHugh in 2005.
William McHugh named his daughter, Blakely McHugh, as the beneficiary, and Trysta Henselmeier, McHugh’s mother, as a contingent beneficiary.
The policy required William McHugh to pay $310 in premiums per year for 10 years. The annual premium could then increase.
The policy included a provision for a 31-day grace period, meaning that the insurer would give McHugh 31 extra days to pay his premiums before canceling his policy.
McHugh paid his yearly premiums through January 2012 but then failed to pay his premium for 2013. He then fell and became disabled. He died in June 2013.
Meanwhile, a California life insurance policy grace period provision and policy termination notice provision took effect Jan. 1, 2013.
Blakely McHugh and Trysta Henselmeier have asserted that applying the California grace period and policy termination notice provisions to William McHugh’s life insurance policy would keep the William McHugh policy in force and help Blakely McHugh or her mother collect death benefits.
Protective Life — a company that acquired Chase Life in 2006 — argued that the courts should not apply the California grace period and policy termination notice provisions retroactively, in part because the provisions did not include any language indicating that the rules should apply retroactively.
A jury and a state appeals court sided with Protective.
Justice Mariano-Florentino Cuéllar writes, in an opinion expressing the view of the majority, that the California grace period and policy termination notice rules should apply to the McHugh term life policy.