There can be no doubt that social media has drastically changed American culture over the past decade. According to some sources, nearly 80% of Americans now use one or more social media platforms. Most of those people likely engage in social media as a sort of entertainment. Many are completely unaware that what they post on social media is also being consumed by any number of industries that are hungry for the information.
It may be surprising that life insurance companies are becoming one of the hungriest consumers of all the data we share on the internet. As lawyers specializing in the wrongful denial of life insurance claims, however, we’ve seen this practice firsthand. We’ll explain how life insurers use social media later in this article. First, we should explain some of the key concepts behind why it matters in the life insurance industry.
Truth in contracting and material misrepresentations
When you purchase a life insurance policy, you are entering into a legally binding contract with the insurance company. As with any other contract, life insurance policies must be based on truthful information. This concept is perhaps best understood by looking at it from the perspective of a simple sales contract.
Let’s say a car dealer wants to sell a car to Joe. While Joe and the dealer are negotiating a price, the dealer tells him that the car is in perfect working condition and has never been in an accident. Based on that information, Joe agrees to buy the car for $20,000. The dealer writes up a contract that says “Dealer agrees to sell Joe the car for $20,000 and Joe agrees to purchase the car for that amount.” Both parties sign the contract and go on their merry way.
A few weeks later, however, Joe discovers that the car was in a moderately severe crash two years ago. Had Joe known that information, he never would have purchased the car for $20,000. Because the dealer’s lies impacted Joe’s purchasing decision, they are known as “material misrepresentations.” The law deems these misrepresentations to be so serious that Joe may rescind his contract with the dealer and get his money back. The exact same principle applies in the life insurance context.
When you seek to purchase a life insurance policy, the insurance company generally requires that you disclose information about your health and lifestyle. At a base level, the insurer wants to know: (1) do you have any medical conditions that threaten your health?; and (2) do you engage in any dangerous hobbies that increase your likelihood of dying an early death? If you answer no to both of those questions, the insurer is more likely to issue you a policy at a reasonable premium.
But what if, like the car dealer in the earlier example, you are lying to get the insurer to give you a policy you’re otherwise unqualified to receive? Just like Joe, the insurance company can rescind the policy it issued to you. In fact, it can even do so after you die so long as it deems your lies to be “material misrepresentations.” That means that your beneficiaries might never receive the policy payout you intended for them.
In the past, policyholders got away with this sort of thing all the time. For example, an avid skydiver might state on his life insurance application that he never engaged in any dangerous activities. It’s not like his life insurance company was going to follow him around to see what he did with his free time. Unless he actually died in a skydiving accident, the policyholder’s lie was unlikely to impact his life insurance policy.
At least that was the case until social media came around.
Social media as an insurance investigation tool
Social media is completely changing the game when it comes to life insurance claim denials. In cases where policyholders die early in the policy terms, life insurance investigators have begun scouring social media sites looking for evidence of material misrepresentations in the policyholder’s application. They do this because some courts will allow them to rescind a policy (and avoid paying a death benefit) even if the policyholder made a material misrepresentation that was completely unrelated to his manner of death.
Returning to the skydiver example, let’s say that individual passed away in a freak automobile accident just one year after obtaining his policy. At that point, there’s no way the life insurance company has collected enough premiums from that person to cover the large death payout it has to make to his beneficiary. Thus, the insurer is highly motivated to find a way to avoid payment. Given that the accident was covered by the policy, the best way for the insurer to do that is to discover a material misrepresentation in the application.
Remember, a material misrepresentation is one that is so important that the insurer would not have issued the policy had it known the truth. In our example, if the insurance company can prove to a court that: (1) the policyholder lied in his application about skydiving; and (2) the company regularly denies life insurance policies to skydivers, then it may be able to get out of payment.
These days, that means insurance companies are hiring highly-skilled internet investigators to dig through that policyholder’s social media files. Investigators will look at posts not only by the policyholder, but also at posts about the policyholder that were made by friends or acquaintances. If they find pictures or posts about skydiving, it is quite possible the insurance company will be off the hook.
Just because life insurers can use social media to deny claims does not mean they are always right in doing so. If you have received a claim denial on this basis, we may be able to help you avoid rescission of the policy and to recover the benefit you deserve. Call us today for more information. We’re here to help.