Illinois Widow Wins Million-Dollar Insurance Court Battle

May 19--Sherman Kay bought a $2-million life insurance policy in 2001 because he wanted to provide for his aging wife and his blind and disabled adult son.

In the years that followed, the Franklin physician and construction company owner paid $350,000 for the policy -- $4,062 per month.

But when he died in January 2009 after having a series of strokes, the insurance company refused to honor his 82-year-old widow's claim.

The reason: Claire Kay was late with the last payment.

"Their conduct was outrageous," her lawyer, Mayer Morganroth of Birmingham, said Friday.

Without the insurance proceeds, he said, the widow couldn't pay her husband's debts or their mortgage on their home, which she eventually lost.

On Wednesday, a federal court jury in Ann Arbor ruled in a lawsuit that United of Omaha Life Insurance Co. had breached the terms of the insurance contract. By the time Morganroth finishes tabulating hefty interest penalties and attorney fees, he said the damages likely will top $3 million.

The company wouldn't discuss the verdict.

"It is our practice not to comment on litigation," a spokesman for the company's parent, Mutual of Omaha, said Friday. It's unclear whether the company will appeal the decision or try to settle with Morganroth.

According to trial testimony, the Kays had been late on several premium payments and sometimes exceeded the grace period. But the company always accepted the payments and kept the policy in force.

Things changed after their insurance agent alerted the company in August 2008 that Kay was seriously ill, Morganroth said.

In December 2008, court records show, the premium notice arrived after the Dec. 12 due date, and Claire Kay said she didn't see it. After her husband died Jan. 23, 2009, she discovered the oversight and quickly mailed two payments.

Morganroth said the company returned them, telling her the policy was paid in full. Then, it terminated the policy and refused to honor her death claim.

The company countered in court that it sent the Kays three premium notices for the December payment and was willing to accept payment after the 31-day grace period and beyond if Kay were still alive. By the time Claire Kay responded, her husband had died.

The eight-member jury deliberated about four hours after a five-day trial before issuing the verdict.

Contact David Ashenfelter: <a href="mailto:[email protected]">[email protected]

___

(c)2012 the Detroit Free Press

Visit the Detroit Free Press at www.freep.com

Distributed by MCT Information Services