Life insurance seems like a sound financial planning tool for a lot of people. Once a policy is issued, the policyholder pays monthly or annual premiums and, when that person dies, their beneficiary is paid a lump sum. For many people, that death payout is the difference between financial security and financial ruin.
When people are shopping policies, however, they often don’t know what questions to ask the insurer. For example, many people have absolutely no idea what coverage exclusions their policy will contain. Policy exclusions are basically written excuses the insurance company can use to justify denying an otherwise valid claim.
Unfortunately, as lawyers who specialize in the wrongful denial of life insurance claims, we know that life insurance companies often invoke exclusions improperly. They do this for a couple of reasons. First, they know that in many cases, grieving beneficiaries will be too bereft to take up a fight with an insurance company. Relatedly, any time an insurance company can convince a beneficiary to give up a claim like that, its profits are higher at the end of the year. Consequently, invocation of policy exclusions is big business for life insurers.
One of the most frequently misused policy exclusions is the illegal drug exclusion. Most illegal drug exclusions read something like this:
In the event the insured dies as the result of the ingestion of illegal substances, the insurance company will have no obligation to pay any claim against the policy that is submitted by the named beneficiary.
At first blush, that policy language seems pretty clear. If the insured dies and the cause of death is related to the ingestion of illegal drugs, the insurance company doesn’t have to pay. If only things were so easy. This article discusses a rather typical case where an insurance company improperly invoked the illegal drug exclusion to deny coverage.
Recreational drug use
This particular case involved a man in his late 40s named Dennis. Having been in the Coast Guard between the ages of 18 and 38, Dennis was now enjoying early retirement. To supplement his retirement income, Dennis worked as the Harbor Master for the marina where he kept his sailboat. The job didn’t pay much, but he did get benefits like a life insurance policy.
In truth, Dennis’ job as a Harbor Master didn’t take up too much of his time. Thus, he often took to drinking beer and shooting the breeze with some of the local boaters. Every now and again, they’d come up with a reason to have a big party and would end up with 40 to 50 people hanging out in the marina’s little clubhouse.
On one such occasion, somebody in the group brought out a bunch of cocaine. Dennis, along with several others at the party, decided to join in. Throughout the evening, he snorted more than his fair share of the powdered drug.
Sometime around midnight, Dennis and one of his buddies decided to go for a beer run. The other man had not been drinking or doing drugs, so he offered to be the designated driver. When they pulled out of the marina parking lot, witnesses recalled that the fog was so thick that you could barely see your hand in front of your face.
A death with drugs but not as the result of drugs
A few minutes into their drive, Dennis’ friend failed to negotiate a sharp curve and his car veered off the roadway into a steep ravine. The car rolled several times before coming to a stop some thirty feet below. By the time first responders arrived at the scene, both men were dead.
A few weeks following the accident, Dennis’ sister Katrina (the sole beneficiary under his policy) submitted a claim to his life insurance company. The instructions for submitting a claim required her to submit a death certificate, autopsy report, and police report. Katrina gathered all of these documents from local authorities and submitted her claim. She didn’t anticipate any problems.
A month later, however, Katrina received a claim denial letter in the mail. According to the insurance company, it was invoking the illegal drug exclusion because Dennis died with cocaine in his system. At first blush, the denial made sense to Katrina. She was too distraught and too exhausted to put up much of a fight.
Luckily, a close friend suggested that Katrina talk to a lawyer specializing in the wrongful denial of life insurance claims. He listened to her situation and then reviewed all of the documents she submitted with her claim. Those documents revealed that the insurance company’s reliance on that policy exclusion was completely bogus.
First, although Dennis had ingested an illegal substance the night of his death, it could not be said that the cocaine was the cause of his death. Moreover, even though he died in a car accident while under the influence of cocaine, his driver was completely sober at the time the car veered off the road. The police report regarding the accident verified as much. The cocaine was simply unrelated to Dennis’ demise.
Consequently, the lawyer filed an administrative appeal with the insurance company. After reviewing his appeal documents and conducting a hearing on the matter, the appeals board agreed that it was inappropriate for the insurance company to have relied on the illegal drug exclusion in this instance.
Unfortunately, this kind of claim denial occurs all the time. To make matters worse, most people never get around to hiring a lawyer who specializes in life insurance claim denials to help out. They just accept the improper denial and, in many cases, walk away from hundreds of thousands of dollars that are owed to them.If you have had a life insurance claim denied on this or any other basis, please feel free to call us to discuss the circumstances of your claim. We know all the tricks the life insurance companies use to avoid making valid payouts. Call us today. We’re here to help.