If there’s one thing we’ve learned from being lawyers who specialize in the wrongful denial of life insurance claims, it’s that every person’s life story is different. And sometimes, the way a person lives their life ends up having repercussions after they pass away.
In this article, we explore the case of a reclusive man whose way of life had a large impact on the life insurance payout he intended for his niece. Before we get to the particulars of his situation, however, let’s first explore some of the legal principles that were germane to his case.
Contract law and material misrepresentations
Life insurance policies are legally binding contracts between the insurance company and the policyholder. As such, the policies are governed by general principles of contract law. For example, as with any other contract, the law requires that the parties to a life insurance policy be truthful with one another during negotiations.
When it comes to life insurance, the “negotiations” take place when a person who desires to obtain a policy applies for coverage. Depending on the life insurance company, the application process may include a physical examination, a health questionnaire, or both. Simply put, contract law requires that the applicant be truthful throughout that process.
The reason for this is simple. The life insurer decides whether or not to issue a policy based on what they learn about the applicant during the application process. If the applicant tells significant lies, and the insurance company ends up issuing a policy it would not have issued had it known the truth, those lies are known as “material misrepresentations.” If a policy is issued based on material misrepresentations, the insurance company may not have to pay out on the policy after the insured dies.
As the following case illustrates, however, things are not always that simple.
Technically not a lie
The case involved a man named Charles. Charles, as noted above, was rather reclusive. He only left his house to get groceries. Occasionally, if he was feeling extremely unwell, he might also go to the doctor. Even then, he would only go maybe once every couple of years.
The only person he really cared for in life was his niece, Nancy. As Charles started to get up in years, he began to wonder what legacy he might leave for his niece. He figured he probably had about 25 to 30 years left in life. As such, he decided a life insurance policy was a good way to provide for Nancy after he passed away.
Charles didn’t care for meeting with other people face to face. Therefore, he found a life insurance company that would issue a policy based on an extensive written application. He filled out several pages of an online form and within a few weeks’ time, was issued a policy.
One of the questions in the policy application asked if Charles had any significant health challenges, including heart disease, asthma, or diabetes. Charles answered “no” even though he had ventured out of the house about six months earlier to see his physician about the extreme fatigue he was experiencing.
Unfortunately, Charles passed away just about a year and a half after he obtained his life insurance policy. An autopsy report revealed that he died as the result of kidney failure due to untreated Type 1 diabetes.
Life insurance claim denied
A few weeks after Charles died, Nancy submitted a claim to his life insurance company. As part of the claim submission process, Nancy was required to give the insurer a copy of the autopsy report.
About a month later, Nancy received a claim denial letter in the mail. The claims adjuster said the life insurance company was not obligated to pay out on Charles’ policy because he had made a material misrepresentation in his policy application when he denied having diabetes.
In the month between submitting her claim and receiving the denial letter, Nancy had begun cleaning out her deceased uncle’s house. Among his effects, she found years’ worth of unopened mail. Although she didn’t go through all of it, she found several letters from Charles’ doctor’s office that had been mailed to him regularly over the course of the past two years. Each one had a stamp on the outside that read “Urgent – Open Immediately.”
As Nancy opened the letters for the first time, she discovered what was so urgent. During Charles’ last visit to the doctor, he had undergone some blood tests. Those tests revealed that Charles had advanced diabetes and needed to start treatment immediately. Of course, he never did open the letters and, consequently, never knew of his diagnosis. Thus, Charles was not technically lying when he filled out his life insurance application.
When Nancy received the claim denial letter in the mail, she knew she needed to contact an attorney. She found one who specialized in life insurance claim denials and contacted him immediately. After an initial consultation, the attorney thought it was worth a shot to contest the denial on the grounds that Charles lacked any intent to lie to the insurance company. The attorney explained that the law often requires intent for a misrepresentation to rise to the level of “materiality.”
The attorney gathered all of Charles’ unopened letters, along with sworn declarations from his physician’s office about their failed attempts to contact him regarding the diagnosis. The attorney submitted all of this information to the insurance company’s internal appeals board, along with a request for a hearing.
Ultimately, the attorney was able to persuade the insurance company to overturn the claim denial. There simply wasn’t any evidence that Charles had intentionally lied during his application process. Nancy ended up recovering all of the money her uncle had intended for her.Life insurance claim denials can be tricky to navigate. If you or someone you love has had a claim denied recently, please call our office for a free consultation. We’ll give you an honest assessment of your case and fight to get you any benefits you’re entitled to receive. Call today. We’re here to help.