SANTA FE, N.M. (KRQE) — When the Standard Insurance Company was hired to provide life insurance to New Mexico public employees there was not a whiff of scandal. But what a difference a few years makes.
A 2012 KRQE News 13 investigation found Standard committing misdeeds that is costing the out-of-state insurance company millions of dollars for business practices referred to as coldhearted and shameful.
You need to go back five years. Gene Moser was State Personnel Director. ”I’ve never encountered anything like this. It staggers me,” Moser told KRQE News 13 in 2012.
To Martin Hoefler, it was a matter of life and death. He was a wildland firefighter with New Mexico’s State Forestry Division. Martin bought extra life insurance to provide for his family in case something happened. Tragedy struck in 2012 when Martin died of cancer leaving behind his wife and eight children. Martin Hoefler was just 50 years old.
Then, weeks after Martin’s funeral the Hoefler family received another devastating blow. Instead of mailing a check for $33,000, the Standard Insurance Company refused to pay the death claim. The news came in a cold three-page letter in which Standard said when Martin applied for his life insurance policy he didn’t fill out a required medical form. Standard said, no form, no life insurance. This, despite the fact Standard had been pocketing Martin’s premiums every two weeks for years.
And it’s not just Martin Hoefler. Bob Allard was a state employee working at Heron Lake State Park. “He was the kind of person that would show up early, leave late.” Park Superintendent Anthony Marquez told KRQE News 13 in 2012. “He took great pride in what he did here at the park. He took the job in his late 60’s to provide health insurance for him and his family and worked hard every single day that he came here.”
Bob had been paying his life insurance premiums all along. But when he died, Standard refused to pay Bob’s widow the $22,000 death claim because, the insurance company said, a medical form had not been filled out.
“When I found out that the two employees were denied coverage I was shocked,” General Services Cabinet Secretary Ed Burckle told KRQE News 13 in 2012. “I found it unbelievable that Standard had denied their claim when the two employees had been paying their premiums all along.”
“When a family is expecting that … money … for death benefits and find out that they are not getting anything, I think that’s obscene. (Standard’s) response was immoral. It’s wrong,” Gene Moser said in 2012.
A Class Action Lawsuit
Standard Insurance is headquartered in Portland, Oregon. The firm would not discuss the matter over the phone. And, they wouldn’t talk about it in person either when KRQE News 13 visited the company in October 2012. In a prepared statement, a Standard spokesperson wrote, “The State of New Mexico and The Standard are committed to fully addressing and resolving this situation.”
Standard sold life insurance to 74,505 public employees across New Mexico. KRQE News 13’s investigation found the firm denied more than $200,000 in death benefits to various families holding legitimate policies. In 2012, victims filed a Class Action lawsuit in federal court naming Standard Insurance and New Mexico’s General Services Division as defendants.
“Standard essentially waited until somebody died before they tried to figure out whether or not they were covered,” attorney Robert Hanson said. Hanson represents the victims in the Class Action lawsuit.
“We brought the lawsuit essentially alleging that the state and Standard were misrepresenting to state employees and local public body employees that they were in fact insured when they may have been at risk for having a claim denied,” Hanson said.
Last month, U.S. Magistrate Judge Karen Molzen approved a $2.4 million out-of-court settlement in the Class Action case.
“If you’re a beneficiary of a loved one who has passed away and you find out that your life insurance carrier has denied your death benefits it’s an extremely big deal,” Secretary Burckle said. The New Mexico General Services Department agreed to settle the lawsuit for $100,000.
“The state wanted this issue behind us, to have it resolved. So we felt that adding $100,000 to enable both parties to settle the case was the appropriate action and greatly reduced the state’s future risk,” Secretary Burckle told KRQE News 13.
Secretary Burckle adds, after Standard refused to pay death claims for Martin Hoefler and Bob Allard in 2012, the state General Services Division issued checks to the families to cover the full amount owed under the life insurance policies. “I want (state) employees to know that (New Mexico) always had their back. When we said that we would make any individual whole whose death benefit was denied, we stuck to our word,” Burckle said.
The Standard Insurance Company agreed to settle the Class Action case for $2.3 million.
The good news is that every public employee who paid life insurance premiums to Standard will get a share of the settlement proceeds. The bad news is there are more than 74,000 employees who qualify. Any public employee who had basic life coverage with Standard will receive $5.06. Employees who opted for supplemental life insurance will get checks for $42.05. The first settlement checks are expected to be mailed out in about 30 days.
The Standard Insurance Company no longer has the contract to provide life insurance to New Mexico public employees.
“We have to find a better way to provide insurance coverage and peace of mind for people (who have life insurance) rather than waiting until after somebody has died to figure out whether or not they are covered,” attorney Robert Hanson said. “One would hope that through a multi-million dollar settlement, the executives … of the insurance company would be reevaluating the way that they do business.”
Statement from Standard Insurance for Larry Barker, KRQE
Oct. 31, 2017
- We are pleased that the U.S. District Court for the District of New Mexico granted approval of the settlement in the Brett Woods & Kathleen Valdes et al. v. Standard Insurance Company & the State of New Mexico General Services Department
- Importantly, employees who thought that they had purchased additional life insurance are now covered by the benefits they expected.
- The plaintiffs in this Lawsuit sought remedies from Standard Insurance Company and the State of New Mexico General Service Department (“GSD”) for certain individuals who had paid for additional life coverage through GSD payroll, but whose coverage was ineffective because they never submitted nor obtained approval of evidence of insurability as required by the group life insurance policy administered by GSD.
- Enrollment and premiums under this group policy are administered by the policyholder, not by the insurance company.
- After issues arose with several individuals, we worked with the GSD to ensure that State employees requiring an evidence of insurability first complete that process.
- Prior to reaching settlement of the Lawsuit, agreement was reached between GSD and Standard to provide coverage to those individuals who had paid premiums yet were not insured.
- Statement may be attributed to Bob Speltz, senior director, Public Affairs, Standard Insurance.
- Larry Barker Investigation: State on hook for insurance-deal payouts
- Larry Barker Investigation: ‘Imaginary’ insurance policies cost families
- Order Granting Plaintiffs’ Motion And Memorandum In Support Of Final Approval Of Settlement And Application For Approval Of Attorneys’ Fees And Expenses And Class Representative Incentive Fees
- Class Action Complaint For Breach Of Contract, Breach Of Fiduciary Duty, Unjust Enrichment, Bad Faith, Statutory Violations, Declaratory Judgment And Injunctive Relief 11.20.12