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Sun Life Faces Potential Class Action Over Disability Contracts

Detroit, MI: An occupationally disabled woman suffering from severe back injury has filed a lawsuit alleging that Sun Life Assurance Company of Canada violated insurance reforms issued by the State of Michigan's Insurance Commissioner and applicable to disability insurance contracts delivered within the state.

The lawsuit seeks class action status for all persons who were covered under short and long-term disability contracts issued by Sun Life after June 1, 2007 and which contained so-called "discretionary proof" clauses and had their claims denied by Sun Life. The lawsuit seeks to overturn all denied claims and require Sun Life to reimburse policyholders for their lost benefits.

The 2008 disability insurance contract issued by Sun Life to Ms. Allen contained a discretionary proof clause. The lawsuit alleges that the contract was issued in violation of insurance regulations.
Discretionary proof clauses have been the subject of intense scrutiny by state regulators and insurance commissioners. The clauses provide that an insurer will pay a disability claim only if it is "satisfied" with the policyholder's proof. Many insured persons claim that despite extensive proof of medical disability, including surgical reports, treatment records, and doctors' affidavits, Sun Life and other insurers are "never satisfied" leaving them without disability coverage. On June 1, 2007, the State of Michigan Insurance Commissioner outlawed discretionary proof clauses in all disability contracts delivered within the state. The insurance industry challenged the Michigan regulation, and on March 18, 2009, a federal appeals court decision found that the Michigan regulation was valid and lawful in American Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir. 2009).


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