Insurers that issue coverage only for insureds within certain age brackets should review their procedures with respect to whether they might be charging premiums for insureds that are not entitled to coverage under the terms of the policy. One example of this is where health insurance companies issue policies that allow coverage for dependants only under a certain age. There are other types of insurance, such as certain kinds of life insurance, that also sometimes have age cutoffs. Some homeowners’ policies limit coverage for personal property of students who are dependants of the named insureds to a certain maximum age, but that may not have any impact on premiums charged.
In Guschausky v. American Family Life Assurance Company, a putative class action pending in Montana federal court against Aflac, the plaintiff purchased health insurance covering her son through age 23 as long as he was a full-time student. The son received medical treatment after turning 24 and the claim was denied because he was over 23. The plaintiff sued for a refund of the premium paid for her son’s coverage, and filed the suit as a putative class action.
The Montana federal court denied the motion to dismiss, concluding that: (1) Aflac’s offer to refund the plaintiff’s premium could not render the case moot, citing case law on “picking off” named plaintiffs; (2) the issue of ERISA preemption could not be decided on the pleadings; and (3) the unjust enrichment claim was not barred by the existence of a written contract because “the policy does not govern the premiums [plaintiff] paid to Aflac for which she allegedly received no benefit in return.”
It is unclear from the opinion whether this was a circumstance where the policy was renewed after the son turned 24, or if the son turned 24 during the policy year but the premium for his coverage was not pro-rated for that year. It’s almost impossible for an insurer’s procedures to be perfect on this type of issue because the insurer might not have a date of birth for every dependant on every policy, or the date of birth might have been entered incorrectly. Prorating coverage for the last year of the insured’s eligibility also may be administratively challenging. But charging premiums for no coverage is something the plaintiffs’ class action bar can seize upon, and is an area that insurers should review carefully.