Quote of the Day - Many people buy life insurance and forget about it. What you buy and how much you buy depends upon two things: who you love and who you owe.
When you think of the term "services," do you think that description includes life insurance? Before you ponder that question too long, the Consumer Legal Remedies Act, which is relevant to our inquiry today, defines "services" as follows: "work, labor, and services for other than a commercial or business use, including services furnished in connection with the sale or repair of goods." California Civil Code, § 1761(b).
Sure, some businesses purchase life insurance, but in this situation, Pauline Fairbanks individually bought a universal life insurance policy from Farmers New World Life Insurance Company. Farmers sells what it calls interest-sensitive universal life insurance policies. According to Farmers, the Flexible Premium Universal Life policies were supposed to be "permanent." Farmers told Pauline that she could keep the policy in full force indefinitely by paying a stated premium amount.
According to the Court, "In reality, this premium amount was insufficient to keep the policy in force to maturity."
Pauline filed a class action, and alleged Farmers' policies were misrepresented and that Farmers engaged in deceptive and unfair practices in the design and marketing of the policies. She also alleged these policies were systematically underfunded so that they would lapse before maturity, and that Farmers fraudulently failed to warn policyholders of this possibility.
She sued under the Consumer Legal Remedies Act, assuming life insurance was a service. Farmers got the case dismissed by the trial court, and Pauline appealed.
Simple issue, but the appellate court upheld Farmers' dismissal of Pauline's case. Here's how they looked at it: "Insurance, in contrast, is defined by the Insurance Code as 'a contract, whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.' ... An insurance contract is not something akin to a haircut, a plumbing repair, or a two-year warranty on a microwave oven - it is simply an agreement to pay if and when an identifiable event occurs."
How would you rule? MIPTC looks at life insurance the same way it does as a contract to purchase a microwave. When I turn it on, it better work as promised.