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Phantom coverage describes situations where premiums are paid—sometimes for months and years—yet a claim is later denied as “not in force” due to eligibility/insurability criteria that were not clearly addressed or communicated before the loss. It often involves missing or incomplete Evidence of Insurability (EOI) steps or similar eligibility checks.
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Phantom coverage often arises from Post-Claim Underwriting (PCU)—in which insurability criteria that should have been evaluated through upfront underwriting are raised only after a loss, despite premiums having already been collected.
DOL & Court Guidance
While there isn’t a statute with a “three-month rule,” practical, regulator-signaled guidance has emerged: during 2023 and 2024, the U.S. Department of Labor announced multiple public settlements indicating that when about 90 days (three months) of premiums have been collected, claims should not be denied solely for lack of Evidence of Insurability (EOI)—which is expected to be vetted upfront. Courts echo the timing duty; for example, the First Circuit recognized a fiduciary obligation to make eligibility determinations “reasonably proximate” to accepting premiums.
The Amara Decision
The Supreme Court’s Amara (2011) decision changed how ERISA cases are fixed. Courts aren’t limited to “plan says no”; they can use equity—reform the plan terms, order make-whole monetary relief, or apply estoppel—where supported by evidence.
Educational only; not legal advice; no attorney-client relationship.