Life insurance is one of those things we buy because we want the peace of mind that comes from knowing those we leave behind will be financially protected or buffered if something terrible should happen to us. But more often than you might think, insurance companies find ways to deny claims for life insurance benefits!
In simple terms, Life Insurance comes in two forms: 1) Traditional Life Insurance, and 2) Accidental Death and Dismemberment Insurance.
Traditional Life Insurance is what most people think about when they think of life insurance. This type of coverage will pay a death benefit to the policy beneficiary(ies) when someone dies due to almost any cause, but there are exclusions. Most policies will not pay a benefit for death by suicide within the first two years from the policy purchase.
These policies also usually exclude certain other causes of death from coverage – meaning benefits can be denied – if death is “caused or contributed to by” (or similar language) things like: war, criminal activity, substance abuse (drugs or alcohol), ultrahazardous activities (like skydiving, deep sea diving, car racing, mountain climbing, and similar).
In addition to these exclusions from coverage, insurers can deny death benefits if they learn that the insured made material misrepresentations on his or her insurance application. This usually involves inaccurate questions to health-related questions on the application related to things like smoking, drinking, previous medical issues or diagnoses.
Fortunately, even if there was a misrepresentation on the insurance application, in California and many other states, benefit denial or policy cancellation (aka “rescission”) is allowed only if death occurs within the first two years of policy issuance. This two-year period is referred to as the “contestability period.”
Even though all these exclusions that allow insurers to deny benefits seem fairly straightforward, truth is stranger than fiction, as they say, and circumstances often don’t fit neatly into the little boxes insurance companies might argue they do. More often than not, insurance companies interpret the policy and the facts related to the claim in a way that only favors their decision to deny.
Accidental Death and Dismemberment Insurance is not technically life insurance and instead is usually considered a form of disability insurance. But, since it still pays a benefit upon death caused by an accident, most people think of it as life insurance. The name of the insurance makes it pretty clear that benefits will only be paid if death is caused by an accident.
These policies will not pay benefits if death is caused (often including “or contributed to”) by sickness or disease, or its treatment. The words “caused,” “contributed to” and “accident,” have been interpreted by insurance companies to support claim denials for as long as they have been selling this type of insurance. What if an accident is only a partial cause of death? What if a sickness existed before death, but did not directly cause it? What if because of sickness or disease the insured had an accident, or died from the accident? How do you measure the extent to which illness or some other event may have contributed to the accidental death?
What if the accident does not immediately cause death, which instead occurs weeks or months later? And, concerning the term “accident,” which usually must be “sudden and unforeseen,” what is sudden? When is something foreseeable? Aren’t all accidents foreseeable in at least some ways? Is it not foreseeable that if one climbs a ladder, one might fall off? Sure, but then the question becomes must the fall, or accident have been substantially foreseeable or reasonably certain, or somewhere in between?
These, and a multitude of other questions have been and continue to be the subject of substantial debate. But to be sure, insurance companies always seem to interpret the language and the facts to support their denial of benefits.
The lesson here is to always read the policy carefully, and to then compare it against what the insurance company is saying about both the language of the policy, the policy application, and how either compares to the facts and circumstances of death. Insurance companies often make mistakes.
Further good news is that if an insurance policy language is susceptible to more than one reasonable interpretation, the court will interpret the policy in favor of the favor of coverage. If you disagree, write to the company and explain why you think they are wrong. Always write, instead of calling. Always keep a copy of what you send and send by trackable means so you can prove you sent them something.
Our law firm has handled hundreds of these kinds of cases over the last 30+ years. More often than not, we succeed in establishing that the policies are poorly written, the facts misconstrued, or the insurance investigation was faulty such that benefits must be paid.
We are here to help. If you have questions, feel free to call for a no-cost consultation with no obligation. We can’t analyze your entire case with just a short discussion, but we often find we are able to offer guidance that can lead to positive outcomes without even having to retain a lawyer. And, even if you need us, we are here to fight for you at no charge unless or until we recover benefits for you.
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