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Washington Report
August - September 2007
Court rules that burial insurance policy limited to face amount
by ICCFA General Counsel Robert M. Fells, Esq.
On May 22, the Louisiana Supreme Court waded into a controversial area of insurance by deciding whether a funeral home's burial insurance policy obligates it to provide all of the funeral services and merchandise contracted under the policy regardless of the policy's face value.
In Sims v. Mulhearn Funeral Home Inc., the court decided the funeral home's obligation to perform the contract was limited to the face amount of the policy, under the facts in this particular case.
The decedent purchased two policies in 1958 and 1963, respectively, each with a face amount of $500. "Both policies provided that upon the death of the insured, funeral benefits in the face amount of the policies will be furnished, which shall include the following: casket and outside case, burial garments if requested, preparation of the body, funeral coach, arrangement and transportation of flowers, conducting of the funeral, furnishing information to newspapers, cemetery equipment, chairs, use of funeral home ... ."
Following the insured's death in 2003, his widow presented the policies to the funeral director, who applied the total $1,000 in benefits to offset the total cost of the funeral of $5,998.39.
The widow sued the funeral home in a class action for breach of contract and infliction of emotional distress, claiming the entire funeral contract should have been performed for the face value of the policies. The court analyzed the policies using basic contract law stating, "An interpretation of the policies to provide for a complete funeral, at no additional expense, regardless of the amount of coverage purchased, is not reasonable and would lead to absurd consequences."
The plaintiff also challenged as unconstitutional a 2004 state law that clearly limits the liability of burial policies to their stated face amounts. However, the court reasoned that it was unnecessary to review the statute for its constitutionality due to the clear language in the policies at issue in the case.
The Sims decision can be viewed on the ICCFA Web page at www.iccfa.com/docs/wireless060507.doc.
Copyright ICCFA 2007
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