MEGA Life Cannot Claim Ignorance of Its Own Guidelines

The MEGA Life and Health Insurance Company cannot claim ignorance of its own guidelines according to a Texas judge who recently ordered the insurer to make good on a life insurance policy.

The case

According to an article in the Birmingham News, a young couple from Alabama took out a life insurance policy in September of 2004 that paid to the surviving spouse 15 times the deceased annual income plus other benefits. Unfortunately, the wife died accidentally in a car crash only three months later. Her husband sought to claim the proceeds of the policy, but their insurance carrier – MEGA Life and Health Insurance Company – refused to pay on the claim. The reason? MEGA alleged that the deceased had stated her income as being $35,000 and that after reviewing the application, MEGA claimed that its underwriting guidelines only allows the company to write life insurance policies for people whose annual income is much higher. In other words, one of MEGA’s underwriters didn’t follow the company’s own guidelines.

Even though the policy was valid and the Mega received the premium payments, it refused to pay – leaving the surviving spouse with nothing. He sued MEGA and a judge agreed that the insurer was liable to pay the proceeds – nearly $1 million – regardless of its underwriting errors.

Bad faith

Insurance companies are required to treat their policyholders in good faith and deal with them fairly. The way in which MEGA handled this claim would be considered bad faith by many industry analysts – especially under these circumstances.

Unfortunately, the insurer has allegedly handled other claims similarly. Along with its sister and parent companies, HealthMarkets, Mid-West National Life and Chesapeake Life insurance companies, MEGA has been the focus of several state insurance department investigations, ordered to pay hefty fines and to return premiums for not adhering to state laws.

In fact, all of the companies scored very low on a multi-state examination – the results of which are available from the Washington State Insurance Commissioner’s website at www.insurance.wa.gov/. The companies were found to be deficient in several areas, including:

  • Adherence to a compliance plan
  • Disclosure of relationships with membership associations and affiliated companies to consumers and policyholders
  • Handling of policyholder complaints and grievances
  • Oversight, communication, monitoring and training of agents
  • Processing and handling of claims made by policyholders

If your insurance company has denied your valid benefits, contact an attorney whose practice focuses in bad faith insurance claims. Consultations are free, without obligation and strictly confidential. To contact a qualified attorney, please click here. We may be able to help.

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