Colonial Penn Life Insurance, a renowned insurance company, has been at the center of various legal disputes over the years. These lawsuits shed light on the complexities of insurance claims, the intricacies of contractual agreements, and the challenges policyholders face when seeking their rightful benefits.
Two significant cases stand out in recent history. The first involves a contractual dispute with Hallmark Insurance Administrators, where a breach of contract led to a multi-million-dollar verdict. The second case revolves around a tragic accidental death in San Jacinto, CA, where the insurance company denied the claim for accidental death benefits, leading to legal intervention by the Dabdoub Law Firm.
This article aims to delve into the details of these lawsuits, exploring the background, the core issues at hand, and the outcomes. Through these cases, we get a glimpse into the challenges of navigating insurance claims and the importance of understanding policy terms and conditions.
Colonial Penn life insurance lawsuit | Colonial Penn vs. Hallmark Insurance Administrators
Background
- In the mid-1980s, the Marksman Group sought to introduce a new type of major medical insurance policy. Daniel Kubik, an insurance consultant, proposed a collaboration with Colonial Penn Life Insurance. The idea was for Colonial Penn to issue and underwrite the policy, while Markman would handle sales through its existing agents. Additionally, Hallmark Insurance Administrators, a company Kubik intended to establish with Colonial Penn’s financial backing, would manage the policy’s services.
- After initial hesitations, Colonial Penn agreed to the partnership, leading to a series of contracts that defined this relationship. A significant aspect of this agreement was a $1.5 million loan from the Harris Hinsdale Bank, which Colonial Penn guaranteed for the establishment of Hallmark Insurance Administrators.
Breach of Contract
- However, the partnership faced turbulence when Colonial Penn, influenced by its parent company’s directives, decided to withdraw from the agreement. This decision led Hallmark to sue Colonial Penn for breach of contract.
- The jury in the case sided with Hallmark, awarding them a $2.5 million verdict. This amount was determined as the projected profits Hallmark would have earned had Colonial Penn upheld its end of the contract.
Appeal and Verdict
- Unwilling to accept the decision, Colonial Penn appealed the verdict. They argued that the contract only permitted, not mandated, them to offer and underwrite the policy. However, the appellate court upheld the jury’s decision, emphasizing the ambiguous nature of the contract’s language.
Subsequent Developments
- Amidst these legal proceedings, Hallmark defaulted on its $1.5 million bank loan. As the guarantor, Colonial Penn was liable for this amount. To manage this liability, Colonial Penn struck a deal with the bank, which allowed them to defer their obligation on the guaranty for three years. After this period, Colonial Penn honored the guaranty and sought to exercise its rights to sue Hallmark for the loan amount.
Res Judicata Argument
- Hallmark countered Colonial Penn’s lawsuit by invoking the principle of res judicata, suggesting that the matter had already been adjudicated in the previous lawsuit. However, the district court dismissed this defense, leading to a summary judgment in favor of Colonial Penn for the $1.5 million, along with fees and interest.
Other Arguments and Conclusion
- Hallmark presented various arguments, including the interpretation of the stock option agreement and Colonial Penn’s rights and obligations. Despite these contentions, the court’s final judgment favored Colonial Penn, highlighting the complexities of contractual agreements and the nuances of legal interpretations in insurance disputes.
Is Colonial Penn Life Insurance legitimate?
Colonial Penn specializes in selling life insurance policies to older customers, particularly those with health issues or who do not qualify for standard life insurance. Colonial Penn has been in business since 1968, and AM Best rates it as A (excellent) for financial strength, making it a legitimate company. However, individuals should consider some drawbacks when choosing Colonial Penn, as it may not be the best choice for everyone. Colonial Penn life insurance has some pros and cons.
Pros:
You do not need a medical exam. You do not need to undergo a physical exam or blood test to apply for any of Colonial Penn’s policies. People who have pre-existing conditions or do not want to undergo a medical screening can find this convenient and beneficial.
We guarantee acceptance. Colonial Penn provides a guaranteed-issue whole-life policy that individuals between the ages of 50 and 85 (in most states) can purchase, regardless of their health history. This policy can cover final expenses, such as funeral costs, without requiring any health questions or underwriting.
Accumulating cash value. The cash value component of Colonial Penn’s whole-life policies grows over time at a guaranteed rate. If policyholders need money, they can borrow against the cash value or surrender the policy for its cash value.
Cons:
Coverage amounts are low. Colonial Penn offers a maximum coverage amount of $50,000 for its whole life policy and $16,000 for its guaranteed issue policy. You may not have enough money to cover all of your financial needs, such as income replacement, debt repayment, or estate planning. You may need to supplement another policy from a different company or look elsewhere for a higher coverage amount.
Premiums are high. Colonial Penn bases its premiums on the number of units of coverage you buy, not on your age or gender. The company charges $9.95 per month for each unit and offers varying coverage amounts based on your age group. For example, the coverage per unit for a 65-year-old woman would be $1,786, while a 65-year-old man would receive $1,471 per unit. This means other companies that use age and gender as rating factors may charge you less per $1,000 of coverage.
The first two years have a limited death benefit. Colonial Penn’s guaranteed issue policy offers a graded death benefit. This means that if you pass away within the first two years of purchasing the policy (excluding accidental death), your beneficiaries will only receive the premiums you paid plus 10% interest. If you have a serious health condition or die unexpectedly soon after buying the policy, this can be risky.
How does colonial-penn life insurance work?
Colonial Penn is a trusted life insurance provider with coverage options for all ages and needs. Key Colonial Penn life insurance features:
Guaranteed Acceptance Whole Life Insurance: This plan is especially accessible for those 50–85 (in most states). No medical checkup or health questions needed. Purchased units decide coverage, while premiums remain set. This coverage helps cover end-of-life costs and provides everlasting protection.
Colonial Penn offers Easy-Issue Permanent Whole Life Insurance to 40–75-year-olds, balancing accessibility and underwriting. Applicants must answer health questions. The premium rate is steady, and coverage based on age, gender, and state of residence, like the guaranteed acceptance plan. Your family is financially secure for life with this policy.
Simply visit their website, select your state, and choose the plan that meets your needs to get a price. Contact their customer support team at 1-877-877-8052 for more details.
