Life Insurance Disputes
Paying years for life insurance . . .
And then suffering the loss of a loved one . . .
Only to have the life insurance company refuse to pay a death benefit.
Challenging & Reversing Life Insurance Denials
The Problem. The denial of a life insurance claim can be devastating. But just because a life insurance company denies a death benefit does not mean it was the right decision. In some cases, the denial is wrong. Beneficiaries have the right to sue and challenge it.
The Solution. The lawyers at Sarraf Gentile LLP have decades of courtroom experience and have worked closely with insurance companies — even working for them. Ronen Sarraf previously served as a senior trial counsel at a Fortune 500 insurance company and Joseph Gentile served as a licensed broker for several life insurance companies. We know the product. We know the process. We know how to resolve life insurance disputes.
Free initial consultations.
No fees unless successful.
Why Life Insurance Companies Deny Claims
Life insurance companies advertise themselves as honest, responsible and caring. But make no mistake about it, these are usually companies whose primary interest is to make money for their executives and shareholders. As a result, their primary goal is profit which means earning as much as they can from their customers – people who buy life insurance. This frequently means delaying or outright refusing to pay life insurance claims. While such delays and denials can be warranted, they are sometimes based on bad faith or naked greed, relying on senseless logic or bureaucratic nonsense. As such, they can be challenged and cured.
The Four (4) Basic Types of Life Insurance
1. Term Life – The policy holder pays a lump sum (either monthly or yearly) in exchange for a fixed amount of money to be paid to a beneficiary when the policy holder dies. The policy only provides coverage for a certain period of time, usually ten or twenty years, and a death benefit to the beneficiary when the holder dies. This is the simplest, most readily available and most common form of life insurance.
2. Group Life – Similar to Term Life, except these policies are purchased in bulk, most commonly through an employer or an organization to which one belongs, allowing them to purchase the insurance without individual medical underwriting. Many employers and organizations include a small group life insurance benefit at no charge to their employees or members.
3. Whole Life – This is often referred to as “permanent” life insurance because it is designed to provide coverage for an individual’s entire life rather than for a set period of time, and the payments made by the policy holder not only ensure that a death benefit (a lump sum payment) exists when the holder dies, but that “cash value” accumulates during the life of the policy from which the policy holder may borrow without a tax penalty.
4. Universal (or Variable) Life – This is another form of “permanent” life insurance that provides lifelong coverage while allowing flexibility in premium payments and death benefits. The policy builds cash value, which earns interest based on either a declared rate (traditional UL), an index (indexed UL), or investment performance (variable UL). With variable UL, the cash value is invested in separate accounts similar to mutual funds, meaning returns — and risks — depend on market performance. Unlike whole life (which is more rigid), universal life policies let you adjust contributions and coverage over time, but they can lapse if not funded adequately.
Life Insurance Delays & Denials
Life insurance companies delay and deny claims for many reasons, even when holders have paid their premiums, sometimes for decades. The official-sounding tone of these decisions are designed to intimidate beneficiaries and appear to be the final word. But like any business, insurance companies must comply with the law, can be held accountable and, when faced with a lawsuit challenging their decision, typically bear the burden of proving that they are right to deny it. In other words, rather than proving that the insurance company was wrong, it’s frequently the insurance company that has to convince the judge or jury that a denial was appropriate.
Material Misrepresentation. This is where the policy holder is alleged to have either lied or made an error when completing the initial application and the misrepresentation was “material” (or significant) in that, had the insurance company known the truth, it would have refused to issue the policy. When prospective buyers submit a request for life insurance they must do so with the “utmost good faith” which means the insurance company assumes that the information provided is absolutely honest. It’s not cost-effective for companies to check. Instead, insurance companies investigate the truthfulness of the policy holder’s statements when the beneficiary files for a death benefit. If the company finds that a “material misrepresentation” was made, it may void the policy and deny the claim for payment. However, not all misrepresentations are equal. For example, a lie about whether one smokes is more likely to invalidate a policy than a simple omission of a middle initial in the applicant’s name. Additionally, concealing material information, such as whether an applicant smokes, should only void a policy if the insurance company can demonstrates that the concealment was material and that the policy holder knew that the facts withheld were material when he or she concealed them. Finally, if the misrepresentation is unrelated to the cause of death – e.g., if someone lied about being a smoker but died in a car crash — the insurance company might, rather than deny the claim, reduce the payment to reflect what it would have been had the policy holder answered honestly.
Death During the Contestability Period. Denials for a “material misrepresentation” can only be made if the policy holder dies during the contestability period, which is typically one or two years after the policy is issued. This clause gives insurance companies the right to investigate deaths that occur shortly after the policy is issues as a way to protect themselves against those who only buy insurance when they know that they are going to die soon. Insurance companies will not always deny a claim if the death occurs during the contestability period. Rather, it means the death will be investigated, often leading to delays in payment. Once the policy becomes incontestable, the insurance may still choose to investigate a case in which fraud is suspected. Escaping the contestability period, therefore, is no guarantee that an insurance company won’t deny the claim.
Suicide. Losing a loved one is always difficult, but the shock of suicide presents additional challenges. Unfortunately, nearly all insurance policies exclude death by suicide. This can prevent beneficiaries from recovering a death benefit, although a return of premium payments may be possible. This may appear to be unfair (and cruel) but beneficiaries often can work around the exclusion and obtain some benefits. For example, such “suicide clauses” usually expire after the first or second year of the policy such that beneficiaries may collect a death benefits even in cases of suicide.
Failure to Pay Premiums. A life insurance policy will “lapse,” and frequently be a reason to deny a claim, if a policy holder fails to make a premium payment and the policy’s cash surrender value (applicable only to cash value policies) is exhausted. Thus it is easier to “lapse” a term life policy. Of course, insurance companies must notify the policy holder and allow a grace period — typically 30 days, but sometimes longer, which the insurance company must prove that it honored — in which the policy holder can pay and “reinstate” the policy.
Failure to File a Timely Claim. It’s usually the beneficiary’s responsibility to inform the life insurance company that a death occurred and that a death benefit is owed. The time period in which to file such a claim is detailed in the policy. But this can be challenging, especially if the deceased had multiple policies, including free group coverage from organizations, group coverage through an employee, and private insurance. Depending on the circumstances and the specific state laws, beneficiaries can still recover death benefits, even if a claim is not timely submitted.
Un-Covered Claims. Life insurance policies can include a wide variety of exclusions, such as death from certain activities (e.g., skydiving, mountain climbing, etc.) or causes (e.g., HIV). It is therefore very important to read a policy’s fine print and review it with the broker who sold the policy. Because they are generally unpopular with consumers, insurance companies have shifted away from using exclusions in standard life insurance policies. However, accidental death and dismemberment (AD&D) policies are an exception to this rule and, unlike typical life insurance policies, only pay a death benefit if the policyholder dies in a covered accident.
Fighting Back
Suing an insurance company to enforce their promise to pay a death benefit can frequently resolve these delays or denials. In fact, even the threat of legal action can sometimes convince the insurance company to expedite a payment or reverse an unlawful refusal to pay a claim. Some key factors that come into play when determining whether legal action can be helpful, include:
– The terms of the actual policy and whether it is clearly written
– The advice or comments made by the agent who sold the policy
– The basis for the refusal to pay a claim and whether it is valid when tested
Once a lawsuit is filed, or even threatened, a resolution can sometimes be reached through negotiations. That is because life insurance companies know that litigation carries risk for them. This is especially true in the case of an ambiguous policy – when critical term are missing or unclear. In those instances, life insurance companies face a higher burden of proof. As a result, insurance companies must weigh the odds of settlement over defending a lawsuit in front of a judge or jury.
If a lawsuit is possible, there are steps a policy holder can take ahead of time to improve the chances of success
– Keep a Paper Trail. Document all communications (discussions, phone calls, emails, etc.) with the insurance company representative and send them to your attorney. If the insurance company wants a recorded statement from the policy holder for its records, contact notify your attorney, and have him or her contact the insurance claims representative. Any lawsuit will ultimately be decided based largely on the material evidence, so collecting that evidence as early as possible is key.
– Act Fast. The process of collecting a death benefit can be subject to deadlines. The sooner one acts the better, especially with regard to hiring a lawyer and coming up with a strategy.
– Hire the Best Lawyers. Don’t get lawyers that are good enough. Get the best.
We Can Help: Hire Sarraf Gentile LLP to Represent You
Free Initial Consultations: All initial consultations are free. Period.
Contingency Fees: We only get paid if we are successful and we only get paid a percentage of what we recover. No surprise bills. No hourly rates. No extra charge for that 5 minute phone call.
Experience & Expertise: The attorneys at Sarraf Gentile LLP are accomplished litigators with substantial insurance expertise. We have decades of complex nationwide litigation experience, including litigating many insurance class actions. The attorney at Sarraf Gentile LLP also have substantial insurance-related experience, previously working for large insurance companies — Ronen Sarraf served as Vice President, Senior Trial Counsel, at Fidelity National Financial and Joseph Gentile previously worked as a licensed life insurance agent for several life insurance companies.
We’re Fearless: We’re used to litigating high stakes, bet-the-farm issues. We’ve represented many people in difficult situations, especially when their livelihoods are on the line, against adversaries with nearly unlimited resources. We don’t get intimated. This is not our first rodeo.
We Listen: Many of our clients have become lifelong friends. Over time, our clients have taught us many valuable lessons. We know how important regular communication and updates are to helping us better represent clients and manage their stress levels. We have also learned that empathy isn’t just about being nice. Developing the ability to holistically see a client’s world through their eyes helps us develop better strategies to accomplish what’s best for them. Nothing matters more to us than being able to help those that trust us when they need us.
We Work Hard & Well With Others: Like most litigators, we’re good at fighting and don’t shy away from it. Less common, we value collaboration. For a variety of reasons, many of the cases we’ve handled over the years have been co-counseled with other law firms. We pride ourselves on our ability to work well as part of a larger team. We don’t let ego get in the way of providing the best possible service to our clients. This means that we will happily work with our client’s other counsel — both before & after filing a lawsuit — to ensure that we get the best result.