Eighth Circuit Finds Additional Time to Convert Group Life Coverage Did Not Extend Policy’s 31-day Automatic Death Benefit Period

In Powell v. Minnesota Life Ins. Co., No. 22-2096, __F.4th__, 2023 WL 2174841 (8th Cir. Feb. 23, 2023), the Eighth Circuit Court of Appeals considered whether a letter from an insurance company offering a new period to convert life insurance coverage extended the original 31-day conversion period following termination of group coverage for purposes of the policy’s automatic-death-benefit provision. In this case, Scott Powell worked for Deere & Company until August 31, 2020 when he accepted an early retirement package. Deere informed Scott that he would receive notice from the insurance carrier, Minnesota Life Insurance Company and Securian Life Insurance Company, about how to convert his group life insurance policy into an individual policy shortly after his last day of work. The policy provides that if an employee dies within 31 days of termination, he will automatically receive a death benefit even if he had not yet applied for conversion or paid the first premium. After Scott’s termination of employment, neither Minnesota Life nor Securian sent Scott a conversion notice before he died on February 5, 2021 (without having converted his coverage). On February 24, 2021, Securian Financial sent Scott a letter stating:

Securian Life Insurance has happily protected you and your family as John Deere’s life insurance provider. Due to a recent audit, we discovered you were not provided with your option to keep this coverage when your employment terminated. Unfortunately, due to an error, you did not receive communication about your option to continue coverage after terminating. If you elect to continue coverage, it will be retroactive to the coverage termination date, and premiums must be paid back to that date. …

You have the right to keep some or all of the coverage amount(s) listed above through conversion without answering any questions about your health. If you do not want to keep any coverage, you can let it end on its own. …

On March 16, 2021, Plaintiff-Appellant Kristina Powell, Scott’s surviving spouse, submitted a claim for benefits. The defendant companies denied her claim as well as her appeal. Kristina filed suit against Minnesota Life and Securian under ERISA Section 502(a)(1)(B), asserting that the February 24 letter constituted an extension of the policy’s 31-day period for conversion and that Scott died during that extended period which means the automatic payment of the death benefit is payable. She also filed a claim under ERISA Section 502(a)(3) for breach of fiduciary duty and equitable relief, seeking an order directing the defendants to comply with the conversion provision in the policy and its February 24 letter. The district court dismissed Kristina’s complaint on the basis that the February 24 letter did not alter the terms of the policy and did not extend the policy’s 31-day conversion window. Because Scott did not convert his coverage within 31 days, the defendants properly denied the claim.

The Eighth Circuit agreed with the district court. On the 502(a)(1)(B) claim, the court found that the February 24 letter did not modify the policy because it did not comply with the policy’s requirement that any modification of the terms must be made in writing and signed by the present, vice president, secretary, or an assistant secretary. The letter was not signed by any of these officers so it was ineffective to change the 31-day conversion application deadline. The court also found that even if the February 24 letter had been properly signed, it did not extend Scott’s conversion window. Rather, it offered a new 31-day period during which Scott could apply for conversion and receive coverage retroactive to his last day of work with Deere. But Scott died outside of this new 31-day window so he did not trigger the policy’s automatic-death-benefit provision.

On the Section 502(a)(3) claim, the court found that the defendants’ failure to notify Scott of his conversion right does not constitute a breach of fiduciary duty because Scott’s policy did not require notice and nothing in ERISA requires this notice. Additionally, the court found that the February 24 letter did not misrepresent that Scott’s conversion window would be extended. For these reasons, the court found that the district court properly dismissed the complaint.