Federal Appeals Court Rules on How to Read a Life Insurance Policy

"Conspicuously missing is any mention of profits and expenses," the judge writes in the opinion.

The judge looks at several suggestions from Kansas City Life about how to interpret the policy and rejects them. Kansas City Life suggests, for example, that its policy wording implies that the company would use a mathematical formula to calculate cost-of-insurance charges that likely would rely on variables other than an individual's sex, age and risk class.

Ordinary purchasers might not know from the policies how COI charges are calculated, but "Kansas City Life still cannot add whatever it wishes to the calculation," because the plain language of the policy indicates that COI charges would be based on the listed factors, Stras writes.

Patrick Steuve, an attorney for the plaintiffs, welcomed the ruling.

"Like policyholders across the country, Kansas policyholders were overcharged by Kansas City Life on their universal life insurance policies for decades," Steuve said. "We continue to litigate lawsuits against Kansas City Life in California and Maryland and continue to receive and evaluate calls from policyholders and agents or advisors in other states."

Representatives from Kansas City Life did not immediately respond to requests for comment. The company has argued in court filings that it did nothing wrong and that Meek's suit should have been barred by state statutes of limitations, or time limits on when people can file suits over alleged injuries.

Universal life insurance: A universal life policy is a kind of cash-value life insurance policy that allocates some of a policyholder's premium dollars to the "cost of insurance," or mortality and administrative costs, and some to the policy's cash value.

Many universal life policies sold in the past were written at a time when interest rates were much higher than they are today. When rates fell, policy cash value often grew much more slowly than insurers, agents or customers had expected.

In some cases, the customers originally thought policy cash values would grow quickly enough to pay the premiums and, in effect, make the premiums vanish. Premiums failed to vanish.

Issuers increased the cost-of-insurance charges to reflect rising costs and make up for the disappointing performance of their own investment portfolios.

Policyholders around the country have filed hundreds of suits against life insurers over universal life COI charge increases, and the settlements announced already have included millions of life insurance policies.

Kansas City Life: The Meek suit is one of at least five purported class-action suits or certified class-action suits filed against Kansas City Life on behalf of policyholders affected by universal life or variable universal life COI charge increases, according to a financial statement that Kansas City Life filed for the third quarter of 2024.

Steuve said his team has obtained three favorable verdicts, for a total of about $50 million, for Kansas City Life policyholders.

Meek Suit details: Christopher Meek, the lead plaintiff in the case covered by the new 8th Circuit ruling, represents a class of about 6,000 people who bought Kansas City Life universal life policies that were active after Dec. 31, 2001, and who incurred cost-of-insurance charges or expenses charges in connection with the policies from June 18, 2014, through Feb. 18, 2021.

Meek bought a flexible-premium adjustable death benefit life policy in 1984. The original death benefit was $60,000. The face amount increased to $165,000 in 1992.

The policy cash value fell to less than $500 in October 2018.

He sued in the U.S. District Court for the Western District of Missouri in 2019.

Because of the drop in policy cash value, "the cash value cannot fund the monthly deduction" for the cost-of-insurance charges, "thereby requiring premiums to be much higher than planned," according to Meek's complaint. "Because of these increased premiums, the Policy is no longer affordable as Plaintiff has aged. Plaintiff does not have other life insurance coverage and Plaintiff likely would not be able to obtain alternative affordable life insurance coverage due to his advanced age and health conditions. In other words, Plaintiff now is effectively uninsurable."

A jury awarded $908,075 to Meek and the other plaintiffs in 2023.

Meek had sought $18 million, and lawyers for the class asked the 8th Circuit appeals court to increase the damages amount. The 8th Circuit declined to increase the award, citing statutes of limitations.

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