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Class Action Filed In Detroit Against Sun Life of Canada Over Disability Insurance

  • Published: 2010-05-27 : Mantese Honigman Rossman and Williamson, P.C..
  • Synopsis: Lawsuit seeks class action status for persons covered under short and long-term disability contracts issued by Sun Life after June 1, 2007 which contained so-called discretionary proof clauses and had their claims denied by Sun Life.

Main Document

The lawsuit alleges that the contract was issued in violation of insurance regulations.

An occupationally disabled woman suffering from severe back injury has filed a lawsuit alleging that Sun Life Assurance Company of Canada violated insurance reforms issued by the State of Michigan's Insurance Commissioner and applicable to disability insurance contracts delivered within the state. The lawsuit seeks class action status for all persons who were covered under short and long-term disability contracts issued by Sun Life after June 1, 2007 and which contained so-called "discretionary proof" clauses and had their claims denied by Sun Life. The lawsuit seeks to overturn all denied claims and require Sun Life to reimburse policyholders for their lost benefits.

The lawsuit was filed by Reyna Allen, a former hourly employee, whose disability claim was denied after several attempts to overturn the denial using Sun Life's mandated appeals process. After Ms. Allen exhausted the company's internal appeals, Sun Life claimed that it was "not satisfied" that Ms. Allen's medical condition had caused a loss of income.

The 2008 disability insurance contract issued by Sun Life to Ms. Allen contained a discretionary proof clause. The lawsuit alleges that the contract was issued in violation of insurance regulations.

Discretionary proof clauses have been the subject of intense scrutiny by state regulators and insurance commissioners. The clauses provide that an insurer will pay a disability claim only if it is "satisfied" with the policyholder's proof. Many insured persons claim that despite extensive proof of medical disability, including surgical reports, treatment records, and doctors' affidavits, Sun Life and other insurers are "never satisfied" leaving them without disability coverage.

On June 1, 2007, the State of Michigan Insurance Commissioner outlawed discretionary proof clauses in all disability contracts delivered within the state. The insurance industry challenged the Michigan regulation, and on March 18, 2009, a federal appeals court decision found that the Michigan regulation was valid and lawful in American Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir. 2009).

"Our suit alleges that discretionary proof clauses have been used by Sun Life and other insurance companies to wrongfully deny valid disability claims for years," said John J. Conway, one of the attorneys representing Ms. Allen.

"The State of Michigan's Insurance Commissioner wisely recognized that insurers who wrongfully deny disability claims were harming Michigan's residents and adding to our economic difficulties. When hard-working people become disabled and have insurance when illness or injury strikes, they should not be forced onto the public assistance rolls," said Mr. Conway.

"The class we seek to represent are people who acted responsibly. They purchased insurance coverage in the event that they became sick or injured. The Complaint alleges that Sun Life wrongfully denied their claims and held policyholders to a higher level of proof than Michigan law requires," said Gerard Mantese, one of the attorneys representing Ms. Allen.

"Insurers are hurting our residents when they are most vulnerable. As a result, everyone in Michigan suffers because these individuals cannot pay their medical bills, their housing payments, or car payments. Often times, these residents file for bankruptcy, their homes fall into foreclosure, and the only place to turn is to public assistance. All the while they had insurance that was supposed to protect them," said Conway.

The case is Allen v. Sun Life Assurance Company of Canada, United States District Court for the Eastern District of Michigan, Case No. 10-12043. The case is before the Honorable John Corbett O'Meara.

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