Life Insurance

It is natural to think you don't need an attorney to collect on a life insurance policy. If the covered person dies, how could the insurer possibly deny the claim? There are several common issues that come up that the life insurer will investigate to try to avoid paying the policy beneficiary. I have experience obtaining coverage in each one 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, they will also seek all medical records to see what the insured knew and when they knew it. With such information, the insurer may assert the insured did not accurately answer the medical questions, 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 the misrepresentation first needed to have been made in the application. 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 pursuant to statute. Third, the misrepresentation had to be material, meaning the insured actually died of what the insurer is claiming was misrepresented.  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.

LAPSE OF POLICY - 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 continue.  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.  When a premium payment is late, the policy automatically enters a grace period under the law and 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.  In one case I handled, the grace period was in effect due to a failed automatic withdrawal, and in the middle of the grace period the insurer sent an undated letter withdrawing its consent to pay monthly and demanded a quarterly premium be paid to satisfy the grace period.  I litigated that case in federal court and the court agreed the date the undated letter was sent established a new 30 day grace period, making the claim payable because the insured died within 30 days of the new grace period despite it being outside the original grace period.

There also exists by statute in Illinois a six month period during which a lapsed policy is payable upon the death of the insured if the insurer did not give proper notice of the policy being forfeit without payment, and using the specific language of the statute.

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. If that is the case, then we can investigate the facts and 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 many ways to die besides by accident. In other words, the policy does not cover a very likely 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-event testing.  In that case, the insurer also needs to show the death was caused by the intoxication because Illinois does not allow exclusions based on "status," only 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.

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,  but the employer refused to pay on both policies despite premiums being paid for many years.

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

 


© 2006-2019 Steven B. Pollack