Most people seek out life insurance for financial planning purposes. A young father, for example, might obtain a life insurance policy so that if he passes away unexpectedly, his wife and children will have some level of financial security. It is a solid estate planning tool for those individuals.
Many people, however, receive a life insurance policy as a benefit of employment. In those cases, it is not unusual for a person to be given all sorts of paperwork dealing with the life insurance policy during their orientation for a new job. We’ve all been there. A typical company’s orientation packet can include hundreds of pages.
Moreover, new employees are often expected to fill out that paperwork before they can start working. Unfortunately, that means that things like life insurance policy applications can be filled out hastily. One of the dangers of this situation is that a person has to decide on a policy beneficiary without much forethought. In the hustle and bustle of starting a new job, the policyholder may completely forget to tell his beneficiary that they have been so named.
It doesn’t matter so long as the life insurer knows the name of the beneficiary, right?
Not necessarily. In many states, life insurance companies are under no obligation to independently determine whether one of their policyholders has died. That means that if no one files a claim against that policy, the insurer will never make a payout. This is a great situation for the insurance company. Essentially, it means that it can collect premiums on a policy for years on end and never have to hold up its side of the bargain – payment of the death benefit.
Even when an insurance company does find out about the death of one of its insureds, it doesn’t necessarily mean it is going to pay the claim if there has been a long delay in filing for benefits. Consider the case of a man named Mark. Mark was 32 years old when he landed his dream job at an accounting firm. Even though he had to move half way across the country to begin work, he was excited about the possibilities.
On Mark’s first day at work, he was given a mountain of paperwork to fill out by the Human Resources Department. It included an extensive benefits packet. That packet had dozens of pages of information that Mark was asked to fill out on the spot. Among the information sought by those documents was the identity of the person Mark wished to name as the beneficiary of his new life insurance policy.
At 32 years of age, Mark wasn’t thinking much about death. He was single and didn’t have any kids. His parents had predeceased him. Therefore, in a spur of the moment decision, Mark named Cynthia, a woman he had dated for several years. Though the couple had been broken up for quite some time, she was still the closest person to him. Mark didn’t talk to Cynthia much since he moved to his new state. In fact, he completely forgot about naming Cynthia as his beneficiary and never even mentioned it to her. The only person he did mention it to was his lifelong best friend, John, who basically told him he was an idiot for designating an old flame as his beneficiary.
A tragic end to a short life
About a year after starting work at the firm, Mark was killed in a car accident. Funeral services were held in his new hometown. His friend John flew out for the service but was the only person from Mark’s hometown to attend. Cynthia read about Mark’s death in an obituary in their hometown paper but didn’t have time to make it to the funeral. Not knowing she was Mark’s beneficiary, she never filed a claim under his life insurance policy.
Five years later, John ran into Cynthia at a baseball game. They got to chatting about Mark and the tragedy of his death. Almost casually, John said, “so, how much did Mark’s life insurance policy pay out anyway?” Cynthia was shocked. She had no idea she was the beneficiary. She contacted Mark’s former employer and got information about the policy.
Cynthia filed a claim and was surprised when the insurer denied the claim within weeks. The reasoning it gave for the denial was that Mark had died during the “period of contestability” (within two years of policy issuance). As such, the insurer would normally be able to do an investigation into the circumstances of Mark’s death to make sure he hadn’t lied about an underlying condition in his policy application. Because so much time had passed, the company claimed it couldn’t perform the investigation and, therefore, could not pay.
Even though Cynthia wasn’t terribly invested in the payout, this seemed like a bogus reason for the denial. She contacted a lawyer specializing in the wrongful denial of life insurance claims. The lawyer was very familiar with this insurer and knew from prior cases that it had the capability to discover the deaths of its insureds through the Social Security Administration. In other words, it could have learned about and investigated Mark’s death much earlier.
The lawyer contacted the insurer and scheduled an appeal before its internal appeals board. In that hearing, the lawyer got company representatives to admit they had the capability to learn of an insured’s death and notify an absent beneficiary of their ability to make a claim. They simply hadn’t done so in Mark’s case. Knowing this information would be damning if Cynthia took her case to court, the board decided to settle its dispute with Cynthia by paying her a large portion of the payout due under Mark’s policy.If you have received a life insurance claim denial that just doesn’t seem right to you, please call our firm today. We specialize in this area of the law and can often get beneficiaries the payout they deserve. We’re here to help.