Purchasing a life insurance policy through your employer is often a work benefit that many take advantage of for lower rates, but when the insurance company denies your claim, all those years of premiums may feel wasted. Before purchasing coverage, it is vital to understand on what grounds the carrier could issue a denial, and what you can do to ensure your beneficiaries still get the death benefits they deserve if you should pass.
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How much a life insurance policy will cover an employee depends on several factors, including the amount of wages they earn. Make sure to get an actual copy of the plan offered by your employer to ensure you fully understand the terms of coverage. Even though you might enjoy the benefit of lower premiums because of the purchasing power your company has, there are numerous ways for insurers to deny claims.
The worker was retired
The insured was on sick leave
The employee was not working full-time
The worker had not been employed long enough at the company
The employer did not deduct or pay the required premiums
The decedent discontinued working for the company and did not convert the policy
The employer did not accurately represent the employee
The insured lost the job and did not port the coverage
Incorrectly completed paperwork
Denials typically occur while your loved ones or other designated beneficiary is still grieving, and the idea of appealing the life insurance company decision is the last thing on their mind. Do not let these large corporations take advantage of this emotional time. Instead, plan to have an experienced claim denial lawyer available to handle their appeal.
A frequent scenario that leads to life insurance benefits denial involves extended illness and long-term disability leave. If an employee becomes seriously ill and can no longer work because of their condition, many times, they must go on long-term disability leave. During this time, disability payments will come from their workplace leave policy, but assuming that their group life insurance coverage is in effect may not be correct.
It is not uncommon for these policies to end after a year of being out on disability since the employee may not qualify as such any longer. However, the insurer and the employer cannot terminate the life insurance policy without notice and must notify the insured of the end date and what options are available.
Quite often, disabled workers can convert their group policy to that of an individual, and sometimes carriers allow coverage to continue past the termination date if the situation meets strict requirements.
It is common practice for employers to offer their staff a group life insurance policy as part of their benefits of employment. This type of plan may be paid for by the workplace, and additional amounts are available for purchase by the employee under optional, supplemental, and voluntary coverages. These policies are a safeguard for surviving loved ones who the worker added as beneficiaries so that they can cover various funeral expenses and cost of living for some time after the passing of the covered employee.
Unfortunately, employer-provided life insurance claims may get denied by the insuring company for one of many reasons, including some of those mentioned earlier. The Employer Retirement Income Security Act of 1974 (ERISA) is a federal statute that regulates life insurance policies provided by employers to employees as part of a larger benefits package. If a claim denial occurs, ERISA sets out the procedural requirements for an appeal according to its law.
ERISA not only sets the standard and regulates how employer-based life insurance policies must operate, but it also demands that administrators of these plans meet four essential components that make up this imposed fiduciary duty:
Act in Accordance with Plan Documents
ERISA fiduciaries must conduct themselves according to the terms of the life insurance benefit documents. The provisions outlined in the plan will always require administrators to follow them unless they violate ERISA law.
ERISA has high expectations of fiduciaries to act not only prudently, but with the skill and diligence, one would expect from an ethical expert in the life insurance industry. This more than just being friendly and compassionate toward plan members and the importance of this distinction makes it of high importance to make sure the fiduciary on your claim is meeting expectations of the law.
The primary goal of ERISA fiduciaries should be acting in the best interest of plan members and beneficiaries. Specifically, administrators should make the providing of due benefits and keeping coverage expenses reasonable.
Diversify Plan Assets
An assigned life insurance policy fiduciary must take steps to minimize unnecessary risks and losses by diversifying plan assets unless it is not necessarily prudent to do so. This also applies if a service provider is responsible for managing these assets, and could include offering a diverse menu of investment options for policyholders to choose from for contribution plans like a 401 (k).
Other rights that ERISA gives an employee is access to their life insurance policy documentation, and other records pertaining to it. This could include premium payment records or a hard copy of the actual plan.
Recognizing an Unfair Life Insurance Claim Denial
If your loved one had an ERISA protected life insurance policy and your claim came back denied, it is critical to speak with an experienced claims attorney to determine if the insurer breached their fiduciary duties.
Consider some of the below practices that a carrier may use when unfairly denying your claim:
There was an extension of coverage by the insurance company without evidence supporting the decision, and then they denied your claim because coverage was a mistake
The decedent became disabled, switched to part-time hours, or lost the job, and their employer did not update their work record
Material misrepresentations of coverage occurred by the employer or the life insurance carrier
The employee submitted a waiver of premium application, but the insurance company still charged premiums after receiving it
The employee did not receive notification about a dependent not qualifying under the policy and still paid premiums for that coverage
A worker did not convert or port their coverage because the employer or insurance company failed to notify them of the option
The employer did not provide a copy of the policy to the plan participants
Regardless of the situation, ERISA permits beneficiaries that receive denied claims to file an administrative appeal for reconsideration, as well as in the appeal process. It is important to note that church-sponsored plans and other related entities do not fall under the jurisdiction ERISA unless elected to be made so.
Additionally, life insurance policies provided or maintained by government agencies to satisfy compliance with unemployment, worker's compensation, and/or disability laws also do not have ERISA protections.
When first receiving a denial of death benefits, many beneficiaries attempt to file an appeal on their own without legal guidance or representation. Filing appeals under ERISA requires strict adherence to procedural rules and law on multiple levels of jurisdiction. Many people try to file an administrative appeal on their own without seeking legal help.
If your claim gets denied, your chosen life insurance claims attorney will first submit an appeal in writing and take the following actions as they relate to your case:
Present new evidence during a new appeal
Take your case to federal court
Sue for breach of fiduciary duty
ERISA also limits what you can do after a claim denial, including:
Suing for breach of contract or bad faith
Take your trial before a jury
No pre-trial discovery
Submit evidence not previously admitted during the appeal process
Because the ERISA administrative appeals process has specified deadlines and procedural rules, it is necessary to determine if your ERISA covered plan requires you to go through up to two rounds of administrative appeals. At that point, you will have met the standard of having exhausted your administrative remedies and can move on to the next steps in the appeal process.
But to better understand how this process works, below is the typical lifecycle of an appeal process under ERISA:
Application for benefits
Receive the insurance company’s final decision
An experienced claims attorney will explain each of the steps in full and how it relates to your case. It is vital to follow these steps, as the courts will reject your claim if you do not first exhaust your administrative remedies.
Your administrative appeal is a critical aspect of your ERISA claim because your legal counsel will be able to submit new evidence for consideration, such as:
Physician letters related to the claim
Reports from experts
This process is long and detailed and can take months, but the insurer will notify you if there is a delay. Do not hesitate to seek out a knowledgeable attorney for guidance during a complicated ERISA claim process.
One of the more critical aspects of producing a successful benefits claim is adhering to ERISA deadlines religiously. If you do not take the necessary steps and act promptly, you could experience delays in your case, or worse, receive an automatic denial.
After you receive a denial on your initial life insurance claim, the clock starts ticking, leaving you with just 180 days to get an administrative appeal filed. After this, your insurer should come back with a response in 90 days, but they do have the ability to request multiple extensions for 30 days each. These requests are open to challenge if there is no justifiable need for an extended time to evaluate your appeal.
After exhausting this administrative remedy, you and your life insurance claims attorney can proceed with filing a lawsuit against the policy carrier for damages.
ERISA typically defers to the statute of limitations outlined in the decedent's plan description, and it has already been running since the date of the qualified loss--the death of the insured. All of your previous efforts in appealing the denial of death benefits have reduced the remaining time on your statutorily limited time period. The time you have left after exhausting your administrative remedies as required under ERISA must now pivot toward your lawsuit.
While ERISA allows the insurer’s statute of limitations to dictate the timetable for the entire claim process, the imposition of shorter limitation periods on beneficiaries is not with absolute discretion. Law makes it clear that this window of time must be reasonable, though this is a broad description. If your plan only permits a year to pursue benefits, and there are only four months left after the initial filing and appeals process, the court reviewing your claim will likely find this ample time to complete the case. This is why retaining an experienced life insurance attorney is critical to success in these cases. They have the resources to obtain the necessary evidence and stay ahead of any deadlines.
If you are a beneficiary whose loved one had a life insurance policy that is now denying you death benefits, do not try to navigate this overwhelming process on your own. With the strict guidelines involved and complicated procedural rules, submitting a claim on your own could cost you everything before you even get to court. If you have already received a denial after submission, it is not too late to get an accomplished ERISA claims attorney involved to assist you.
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