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Mailing of Lapse Notice Can Be Proved By Sufficiently Reliable Computer Records

Mailing of Lapse Notice Can Be Proved By Sufficiently Reliable Computer Records

ERISA and Life Insurance News
(April 19, 2011)
Russell v. Nationwide Life Ins. Co.,
2010 U.S. App. LEXIS 23449 (4th Cir. Nov. 12, 2010)

Russell sued Nationwide to recover death benefits under a life insurance policy issued to her deceased husband. The decedent had an arrangement with his employer under which the employer agreed to pay the policy premiums by deducting them from his salary. In light of that arrangement, the decedent directed Nationwide to change his address of record to that of his employer.

When the decedent’s employment ended, it was understood and agreed that he would assume responsibility for making the premium payments. However, because the decedent failed to notify Nationwide to change his address of record, all billing statements and other correspondence continued to be mailed to his former employer.

Approximately three months after his employment ended, the decedent missed a premium payment. Nationwide then mailed a past due notice to the decedent at the address it had on record – that of his former employer – explaining that the policy would lapse unless payment was received within the grace period. Nationwide never received a payment, and the policy lapsed.

While the parties disputed whether the decedent ever received the past due notice, it was undisputed that he did not pay the premium by the end of the grace period or at any time thereafter.The decedent died approximately seven months after the grace period expired.

A bench trial was held on the sole issue of whether Nationwide mailed, and the decedent actually received, the past due notice required under Virginia law. The trial court determined that Nationwide’s automated billing system, which also generated past due notices, was sufficient to prove proper mailing. Under Virginia law, proper mailing establishes a rebuttable presumption of actual receipt – which Russell failed to rebut.

On appeal, Russsell challenged the trial court’s determination that Nationwide had met its burden of proving proper mailing of the past due notice. The Fourth Circuit noted that “[b]y deciding to rely on auto-generated records stored in a computer system, as opposed to the generation and retention of a hard copy notice, . . . Nationwide has opened itself up to a challenge.”

The Court found, however, that there is no legal requirement to take such precautions and held that “computerized evidence can, as a matter of law, establish proof of proper mailing if it is sufficiently reliable.” The trial court’s decision was affirmed.

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