Thursday, February 6, 2014

No. 28: Phoenix's Denial of a Suspicious Death Claim

PHL Variable Insurance Company and Phoenix Life Insurance Company are operating units of Phoenix Companies, Inc. (NYSE:PNX). In 2005, PHL issued a $1 million policy (No. 40048215) on the life of Ebrahim Alrwazek, who resided in Oakdale, Minnesota. The beneficiary is his spouse, Mounia Zerrhouni. The annual premium payable on November 26, 2011 was not paid. The insured reportedly died on October 12, 2011, in a terrorist car bombing in Baghdad, Iraq.

The Claim Denial
On November 7, 2011, a person who identified himself as Mohsen Noor, the insured's attorney, informed the company by telephone from Morocco that the insured was dead. The company sent claim forms to the beneficiary, who also was in Morocco, and sent follow-up letters in December 2011 and February 2012. On March 1, 2012, the attorney told the company by telephone that the beneficiary was working on the forms. The same day, the beneficiary told the company by e-mail that she had not received the forms. On March 12, 2012, the company sent the forms again by e-mail.

By April 27, 2012, the company had received no documents. On that date, Neal Regels, the company's claims director, wrote to the beneficiary. He denied the claim because of the lack of adequate proof of the insured's death. He also said that, if the insured died while the insurance was in force, the company would pay the death benefit.

On June 25 and August 1, 2012, the company received documents purportedly showing that the insured died on October 12, 2011. However, there was conflicting information about the date of death. Also, the company's investigator provided additional conflicting information.

On January 30, 2013, Regels wrote a two-page letter to the beneficiary. He listed the documents the company had received and described the conflicting information. He again denied the claim because of the lack of adequate proof of the insured's death.

On June 28, 2013, an attorney in New York representing the beneficiary wrote to Regels requesting a complete copy of the policy, including the application and the history of premium payments. The attorney did not receive a reply at that time.

The Lawsuits
On July 7, 2013, the beneficiary filed a lawsuit against Phoenix Life in a New York State trial court. She alleged breach of contract and fraud against a consumer. (Zerrhouni v. Phoenix Life, Supreme Court of New York, New York County, Index No. 652434/2013.)

On September 9, Phoenix Life filed a motion to dismiss the lawsuit on the grounds that PHL, not Phoenix Life, issued the policy. The motion included an affidavit from Regels that "PHL does not maintain in its records a copy of the actual Policy issued," and "a specimen of the Policy form" was attached to the affidavit. Also attached were incorporation papers showing that PHL and Phoenix Life are separate companies, and that the beneficiary therefore had sued the wrong company.

On September 16, the beneficiary filed a second state court lawsuit. This time PHL was the defendant. (Zerrhouni v. PHL, Supreme Court of New York, New York County, Index No. 653204/2013.)

On November 29, despite the fact that the wrong company had been sued, the judge in the first state court lawsuit denied Phoenix Life's motion to dismiss the complaint. The judge said in part:
Here, the four corners of the Complaint state a cause of action as against Defendant for breach of the subject Policy and consumer fraud under General Business Law, §349, and the documentary submissions submitted by Defendant do not flatly contradict the legal conclusions and factual allegations of the Complaint.
On October 9, PHL removed the second state court lawsuit to federal court on two grounds. First, the matter in controversy exceeds $75,000. Second, there is diversity of citizenship between the plaintiff and PHL; the plaintiff resides in Morocco, and PHL thinks she is not lawfully admitted for permanent residency in the U.S. (Zerrhouni v. PHL, U.S. District Court, Southern District of New York, Case No. 1:13-cv-7154.)

On November 22, in the federal court lawsuit, the parties filed a joint status report and discovery plan. The parties do not agree on the beneficiary's request that the court appoint appropriate experts to exhume the body and perform testing to determine whether the body is that of the insured. PHL says the request is premature because it is not clear at this stage of the litigation whether testing is needed. The joint discovery plan provides that the parties will complete discovery by July 2014.

On December 9, in the first state court lawsuit, Phoenix Life filed a motion for a stay. In support of the motion, Phoenix Life mentioned the second state court lawsuit, which PHL already had removed to federal court. Phoenix Life also said:
PHL's denial of the death claim is reasonable. As Zerrhouni is fully aware, PHL believes the insured is not dead and that it is the victim of a scam. PHL has evidence that this is a scam, it has presented some of that evidence to Zerrhouni, and it is developing additional evidence.
The January 30, 2013 letter from Regels to the beneficiary contains what may be the "some of that evidence" PHL presented to the beneficiary. It remains to be seen whether the public will ever see PHL's "additional evidence" that the insured is alive and that PHL is being scammed.

General Observations
The beneficiary's attorney requested a complete copy of the policy, including the application and the history of premium payments. PHL eventually provided only a specimen of the policy, saying the company did not maintain in its records a copy of the actual policy issued. It is hard to believe that the company does not maintain in its records at least the application for the policy and the record of premium payments.

I have long regarded the disappearance of an insured, combined with the problems involved in proving that an insured is in fact deceased, as a troublesome aspect of the life insurance business. For that reason, I think the suspicious death claim discussed here bears close watching.

Meanwhile, because the two-page letter of January 30, 2013 from Regels to the beneficiary contains considerable detail on the company's claims process, I am making it available as a complimentary PDF. Send an e-mail to and ask for the Regels letter.