Lapse

The termination or failure of a right or privilege because of a neglect to exercise that right or to perform some duty within a time limit, or because a specified contingency did not occur. The expiration of coverage under an insurance policy because of the insured's failure to pay the premium.

The common-law principle that a gift in a will does not take effect but passes into the estate remaining after the payment of debts and particular gifts, if the beneficiary is alive when the will is executed but subsequently predeceases the testator.

In its broadest sense, the term lapse describes the loss of any right or privilege because of the passage of time or the occurrence or nonoccurrence of a certain event. It is often used by legislatures in reference to governmental concerns. Legislatures may include anti-lapse provisions in statutes to ensure that certain spending programs remain funded from year to year. Lapse also has distinct significance in the law of insurance contracts and wills.

An insurance policy can lapse, or become void, if the insured fails to make payments on it. All states give insureds a grace period, which allows extra time to make a payment owed under a policy. The grace period varies from policy to policy. For example, in Maine the grace period is seven days for HEALTH INSURANCE policies with weekly premiums, ten days for such policies with monthly premiums, and thirty-one days for all other such policies (Me. Rev. Stat. Ann. tit. 24-A, § 2707). The grace period in Maine is thirty days for life insurance policies (§ 2505).

Some statutes on insurance policy lapses provide a small measure of protection against lapse. For example, Maine Revised Statutes Annotated, title 24-A, section 2739 (West 1995), states that no insurance company may cancel a health insurance policy within three months of nonpayment unless the insurer provides the insured with a notice of potential lapse within ten to forty-five days after the premium was due. Section 4751 provides that in the event of a strike by insurance agents, no life or noncancellable health, hospital expense, or hospital and surgical expense insurance policy may lapse owing to nonpayment within thirty days of the strike's inception. This law applies only if the agent is responsible for the collection of premiums and is represented in COLLECTIVE BARGAINING by a labor organization that has been recognized by the state.

A will is a document left by a deceased person, who is called a testator or devisor. A will allocates the property of a testator to living persons. If the intended recipient of a gift in a will (called a beneficiary or devisee) dies before the testator, the gift may lapse. This means that the gift is void and is placed back into the estate of the testator. The property becomes part of the residuum of the estate and may not be disposed of in the manner sought by the testator.

Almost all states have statutes that provide that in the event of a lapse, the gift should go to the issue, or lineal descendants, of the deceased devisee. If the beneficiary has no issue, then the gift is left in the estate of the testator.

In some states the anti-lapse statute applies only to grandparents of the testator and lineal descendants of the testator's grandparents. For example, under the Maine Revised Statutes Annotated, title 18-A, section 2-605 (West 1995), the issue of the deceased devisee may receive a gift intended for the deceased devisee, but only if they survived the testator by 120 hours.