(CN) - A widow may get to collect $250,000 in benefits on a life-insurance policy she maintained for two years after her husband died, a federal judge ruled.
On the day Barry Smith died, Oct. 1, 2004, Zurich Life offered to insure him for an $885 annual premium.
Smith had been in talks with the company, which subsequently merged with Protective Life Insurance, for a $500,000 policy at $600 annual premiums.
Until the policy was approved, the Smiths were entitled to $250,000 in temporary coverage. "Your new policy will become effective after you receive final underwriting approval and after your first premium is paid," according to the application booklet. "However - prior to the approval and after the medical examination - if you have paid the initial premium you are covered for a special period of up to 60 days."
Though Protective Life claimed that it never received Smith's Premium Payment Options (PPO) form, complete with the paid initial premium, his widow, Rebecca Smith, said she had been "present in the room" when Barry completed the paperwork and entered his credit card information.
"It was the habit of Mr. Smith to either fax or mail documents he had signed on the same day of the endorsement," she claimed.
Smith died of a heart attack eight days after applying for life insurance, and the company left several messages over the next few days offering coverage.
Rebecca Smith called them back on Oct. 27, 2004, consented to the policy at the $885 rate and paid the first premium. She did not disclose that her husband was already dead.
The widow told Protective Life in August 2006 that Barry Smith died, and she filed for benefits in February 2007.
After the insurance company denied her claim in March 2008 and returned all premiums paid with interest, Rebecca Smith sued for breach of contract.
U.S. District Judge James Turk refused last week to grant the insurer summary judgment, finding that "plaintiff has shown that a disputed genuine issue of material fact exists as to whether the defendant received the PPO form."
"In the present case the initial question is what the term 'paid' means under the Temporary Insurance Agreement," Turk wrote. "Defendant argues under Virginia law 'paid' means received. ... As defendant argues, because the defendant did not actually receive the premium until October 29, 2004, twenty days after Mr. Smith's death, the condition precedent of payment was not satisfied prior to Mr. Smith's death and the Temporary Insurance Agreement never became effective."
"Defendant's argument makes an unsupported intellectual leap from 'received' meaning delivering the PPO form to 'received' meaning charging the credit card," the ruling states. "This court can find no authority to support that proposition."
Summary judgment is inappropriate because, "based on plaintiff's evidence, it is possible that a reasonable jury could believe the defendant received the PPO form, thereby entitling Ms. Smith to death benefits under the Temporary Insurance Agreement."
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