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Ella Mae Rowe says she wanted to cover her children in her life insurance policy. There’s just one problem, she alleges: National Western Life Insurance Co. set up a plan that had her paying on her children for years after they were grown and no longer eligible for coverage, meaning she had no chance for a payout. Rowe — the lead plaintiff in a suit whose class action status was upheld by the 3rd Court of Appeals in Austin, Texas, on Aug. 8 — alleges that the company was set to bill her until she was 103. Yet a rider on the policy paid off only for any of her children who died between the ages of 15 days and 25 years, lawyer G. Wade Caldwell says. That meant Rowe would have to give birth or adopt a newborn when she was 78, he says, to make her premium payment of approximately $30 a year for the child rider worthwhile for that length of time. But J. Roger Williams Jr., a lawyer for Austin-based National Western, which denies all the allegations in the suit, says he believes that Rowe is confused about the policy and about her option to terminate it or modify it when her circumstances changed. Rowe doesn’t see it that way, according to her suit. “When they sold the policy, they would set up in the computer how long to bill a customer,” says Caldwell, a partner in Martin, Drought & Torres in San Antonio. For Rowe, that billing time was set at 60 years, she alleges. Rowe, now 68, alleges she paid only five years too long on the child rider, but it was enough for her to file suit against the insurance company. In March 2000, she sued National Western, alleging breach of contract, fraud, negligent misrepresentation, unjust enrichment and violation of the Deceptive Trade Practices Consumer Protection Act and Article 21.21 of the Texas Insurance Code. Williams says the company’s computer records were set to keep Rowe’s policy active for up to six decades after she took out the policy, assuming she lives that long, and pay off in the event of her death. He says Rowe, like all policyholders, could terminate the entire policy or just the child rider at any time. “The child rider is an important benefit,” Williams says. “It provides coverage for any child the policyholder has or adopts even after application for the policy. Because National Western doesn’t require the policyholder to tell it when there are new children, National Western has no way of knowing when there are no more covered children. It relies on policyholders to tell it when they no longer want the coverage.” Williams, a partner in George & Donaldson in Austin, adds that Rowe’s situation is not typical. The vast majority of policyholders terminate the child rider independently of the entire life insurance policy, he says. CHILD RIDERS The case has been certified as a class action by Judge Paul Davis sitting in Travis County, Texas’ 345th District Court. In a 3-0 decision in National Western Life Insurance Co. v. Ella Mae Rowe, the 3rd Court of Appeals affirmed Davis’ order certifying the class. The court rejected the argument by National Western, which filed the interlocutory appeal, that Rowe failed to satisfy certain requirements for class certification under Rule 42 of the Texas Rules of Civil Procedure. The trial court may decertify or reshape the class to address issues such as reliance, the court said in its ruling. “Our review of the record in this case supports our conclusion that the trial court did not abuse its discretion in certifying the class,” Justice Mack Kidd wrote for the court. “The trial court conducted a thorough certification hearing in which it went beyond the parties’ pleadings in order to examine the claims, defenses, relevant facts, and applicable substantive law of this case in order to make a meaningful determination of the certification issues.” Justices Lee Yeakel and Jan P. Patterson joined in the decision. The case centers on the child riders to life insurance policies sold by National Western and the company’s alleged failure to refund premiums paid by unnamed class members after the coverage ceased on a child’s 25th birthday. Caldwell says the benefit is $5,000. The rider states National Western is not required to pay benefits if premiums are received after coverage terminates, according to the opinion. The opinion noted that National Western has not offered to refund premiums paid after a child turns 25. According to the 3rd Court of Appeals, National Western responded that it should not be responsible for notifying policyholders when coverage terminates on the rider because it doesn’t know the ages of the children. In addition, the insurance company says, it doesn’t require notice if additional children come under the rider’s coverage and some policyholders choose to continue paying to ensure that any children that come along in the future would be covered. Caldwell estimates that there are approximately 21,000 policyholders who took out the child rider and paid a total of at least $3 million in premiums on it. He does not yet know the number who allegedly paid for the rider once all their children passed the age of 25. A trial date has not been set on the case.

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