Academic journal article Journal of Risk and Insurance

Federal Court Interprets Wyoming Law as Not Incorporating Life Insurance Sales Illustrations into the Insurance Contract Itself; Policy Language Controls over Contrary Illustrations and Insurer Not Stopped from Invoking Policy Language despite Policyholder Assertion of Having Been Misled by Illustration

Academic journal article Journal of Risk and Insurance

Federal Court Interprets Wyoming Law as Not Incorporating Life Insurance Sales Illustrations into the Insurance Contract Itself; Policy Language Controls over Contrary Illustrations and Insurer Not Stopped from Invoking Policy Language despite Policyholder Assertion of Having Been Misled by Illustration

Article excerpt

Brown v. Royal Maccabees Life Insurance Company, 137 F. 3d 1236 (United States Court of Appeals for the Tenth Circuit, March 3, 1998)(applying Wyoming Law).

A group of plaintiffs sought to bring a class action complaint against the insurer for allegedly misrepresenting the terms of life insurance policies through illustrations of coverage, cash value, and operation that were unrealistic and misleading. Apparently, an error in the program did not take into account surrender charges if the policy was terminated at any time during the first ten years. In particular, the illustrations were alleged to create the impression a policyholder could make one $8,000 premium payment on a $1 million face value policy, cease making premium payments, but continue to enjoy $50,000 of life insurance coverage and a $14,000 cash surrender value after fourteen years. The policy language itself made no such guarantees and included disclosure of the prorated surrender charge for early cancellation of the policy.

The Brown plaintiffs wanted to receive the benefit of the policy illustration. Even if the policy language itself is to the contrary, plaintiffs argued that the illustration becomes part of the application process and the policy itself. They also argued that the insurer is stopped to give the class plaintiffs the benefit of the insurance as outlined in the illustrations even if the use of the illustrations does not formally become the contract between the parties. …

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