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Life Insurance

It is natural to think you don't need an attorney to collect on a life insurance or accidental death policy. If the person dies, how could the insurance company possibly deny the claim? There are several common issues that come up where they will investigate to avoid paying the policy beneficiary. I have experience obtaining coverage in each of the following scenarios.

MISREPRESENTATION - The policy application will be the first place the insurer looks to see if the questions were answered accurately. They will ask the beneficiary to sign an authorization for the release of the insured-decedent's medical records. Importantly, the records they will obtain are not simply what the insured died of, but also medical records to see what the insured knew and when they knew it. With such information, the insurance company may assert the insured did not accurately answer the medical questions in the application, and seek to rescind the policy by claiming they would not have taken on that risk, or would have charged a higher premium had they known the actual information. 

This is not always fatal to obtaining coverage because Illinois law restricts the insurer from voiding the policy in several important ways. First, the misrepresentation needed to have been made in the application or policy. Second, the misrepresentation will not be a basis to contest and avoid the policy once the policy had been in effect a certain period of time according to statute. After that period ends, the policy becomes incontestable. Third, the misrepresentation had to be material, meaning the insured actually died of what the insurance company is claiming was misrepresented. This means if the policyholder died of a heart attack, a misrepresentation in the application that they had never been diagnosed with cancer is not material.  Fourth, the misrepresentation needed to be within the insured's knowledge, meaning that the medical records may say something the insurer claims shows knowledge of a particular disease, yet the records themselves may only show a test was being performed for that disease without actually showing the insured knew he or she had or was being treated for that disease.

POLICY LAPSE - Often, a term life policy will have level premiums for a certain number of years. Then, after 15 years the premiums go up dramatically but without any increase in the benefit. Those increased premiums often make the entire policy non-economic to keep in force.  In one case I handled, the premiums on a $200,000 policy were $350/month for 15 years, then increased to $2,800/month thereafter. Imagine paying $33,000 in premiums per year for a policy only paying $200,000 in benefits!  In this case, people often let the policy lapse. Other times, the policy will lapse due to late payment of premium, or failure of an automatic withdrawal for insufficient funds.  When a premium payment is unpaid on the pay date, the policy automatically enters a grace period under the law and the grace period is usually incorporated in the policy itself. A grace period allows an extension of 30 days to pay the overdue premium while the policy remains in effect.  If the insured dies within the grace period, the claim must be paid but the overdue premium can be deducted from the benefit proceeds.  

In the case referenced above, we prevailed at the summary judgment stage of litigation. The grace period went into effect due to a failed automatic bank withdrawal. In the middle of the grace period the insurer sent an undated letter withdrawing its consent to pay the $2,800 monthly premium and demanded a quarterly premium of $8,400 to satisfy the grace period.  The federal court judge agreed with us that the date the undated letter was sent established a new overdue premium and therefore a new 30 day grace period. The claim was payable because the insured died within 30 days of the new grace period despite it being outside the original grace period.The insurance company created an extended grace period and was ordered to pay the policy benefit.

See Cooke v. Jackson National Life Insurance Company, 243 F.Supp.3d 987 (N.D.IL. 2017).

There also exists a statute in Illinois that creates a six month grace period following policy lapse during which the policy remains payable upon the death of the insured if the insurance company did not give proper notice using the specific statutory language that the policy would be forfeit without payment.

SUICIDE - Policies often have exclusions for suicide. In that case, they must return all premiums paid.  Often, however, the only one saying it was a suicide is the insurance company. The law contains certain presumptions against death being by suicide. If that is the case, then I can investigate the facts and often litigate whether death was in fact caused by suicide.

ACCIDENTAL DEATH BENEFITS - Some life insurance policies only insure against accidental death.  These policies are often much cheaper because there are so many ways to die besides by accident. In other words, the policy only covers a very unlikely event. These policies often have a list of exclusions such as death caused by intoxication, while in military service, and suicide.  The insurer may deny the claim if alcohol shows up in any post-accident testing.  In that case, the insurer also needs to show the death results from the intoxication because Illinois does not allow exclusions based on "status" of the exclusion, only exclusions based on death being the "result of" the exclusion. These cases can be fact specific, so you likely need an attorney with experience handling them.

Our firm litigated such a claim in DuPage County to a successful conclusion. The insured was driving on a highway when his left rear tire suffered a blowout. This caused his vehicle to lose control, enter a yaw, leave the highway, flip over several times, and kill the insured by multiple blunt force trauma. State Police took a blood sample from the deceased three hours after the accident, which tested positive for alcohol. The insurer denied the claim asserting the alcohol exclusion. The court initially denied the insurer's summary judgment motion because it only asserted the blood alcohol result but without any evidence of how the alcohol caused the death. The insurer then hired several experts to opine that the death was the result of the alcohol. After a four day bench trial, the judge held for the insured, stating in part:

Although at first blush it would seem likely that a BAC of .179 would probably affect driving there is simply no other evidence in this case either directly or circumstantially that would establish the alcohol as direct or indirect cause of death. The defense witnesses essentially conceded that if the BAC result was removed from the equation there would be no proof to support the applicability of the exclusion.

As is the case with many denials of coverage, it was only the insurance company asserting the facts support the existence of the exclusion. If you are unsure whether the denial of your insurance benefits was proper, call me for a free consultation.

OTHER ISSUES - There are too many to list, but there exists all sorts of bases the life insurer will attempt to use to exclude coverage.  In a case I am currently handling, married employees of the same company each had life policies, one providing spousal life benefit on her husband and the other covered the husband himself. The employer is refusing to pay on both policies despite premiums being paid for many years. Where an insurer investigates the claim for an extended period of time without stating what it was investigating, filing suit can often get the the insurer to agree to pay.

CALL TODAY FOR A FREE CONSULTATION - (847) 436-9566 - I am generally available later in the afternoon to discuss your specific issues.  

I can be reached any of the following ways*: 

  • fill out a consultation request,

  • email me at steven@ecoesq.com, or

  • call me at 847-436-9566 (afternoons are preferred)

*Disclaimer: We are not creating an attorney/client relationship by you submitting any initial information. This relationship will only arise through an engagement letter signed by both of us.

© 2006-2020 Steven B. Pollack