A lot of people think life insurance companies are just like charitable organizations. On some level, this makes sense. After all, when life insurance works as it should, it can provide the financial security needed by people who have survived the death of a loved one.
As lawyers who specialize in the wrongful denial of life insurance claims, however, we see things differently. In fact, more often than we'd like to admit, life insurance companies deny perfectly valid claims. They do so using vague policy language drafted by their own lawyers and seemingly intended to give them a way out of paying later claims.
One justification life insurers often employ to deny a claim is the “inherently dangerous activity” exclusion included in most policies. What the exclusion Basically says is that if the insured dies while doing something dangerous, the insurance company is relieved from paying out on a claim. These days, most policies specifically define what they consider to be dangerous. SCUBA diving is almost always listed among those activities.
Of course, many people are avid SCUBA divers. Does that mean they simply cannot get life insurance? Not necessarily, but it does mean that they may have to pay more for their policy then people who do not share in their interests. Just because someone pays more for a policy, however, does not mean that they will get the coverage they expect it if they pass away while engaging in that hobby.
This article explores one such case. It is a perfect example of how life insurance companies will manipulate policy language in an effort to avoid paying claims even from those customers who have paid them the greatest amount of premiums over the years.
A SCUBA diver and a dad
The case involved a gentleman named Frank. Frank was married to his wife Joan and together they had two children. From the time he was a teenager, Frank had been an avid SCUBA diver. SCUBA diving was a part of every vacation that the family took and Frank even took several solo vacations each year to pursue his favorite hobby.
Knowing the dangers of the sport, Frank and Joan made a point of obtaining a life insurance policy on Frank's life. The policy, which named Joan as the sole beneficiary, was worth $500,000. As Frank was applying for the policy, he made a point of being honest with his insurance broker about his SCUBA diving hobby. He knew that meant he would probably have to pay higher premiums, but it was worth it to him to have peace of mind regarding his family's financial security.
One insurance company eventually offered Frank a policy, but his premiums were more than double what he would have paid if he did not have such a dangerous hobby. Frank and Joan didn’t mind the extra premium payments, they were just happy to have Frank insured given that he was the sole breadwinner in the family.
An unexpected tragedy
One spring, Frank was on a SCUBA diving trip in the Cayman Islands without his family. He considered himself lucky to be part of a volunteer expedition set to explore a shipwreck off the coast. The expedition was not for novice divers. In fact, Frank had to go through a lengthy application process to become part of the expedition. Frank passed with flying colors and was made a part of the team. They planned to undertake five such expeditions over the course of two years.
During the second week of the initial expedition, Frank participated in a morning dive with approximately eight other divers. It was to be their deepest dive of the trip. Everything was going smoothly when Frank suddenly headed for the surface ahead of the other divers. They were worried about his rate of ascent, but knew he was experienced and figured he had a reason for heading back to the boat early.
Unfortunately, Frank’s quick ascent caused a condition known as the bends, or decompression sickness, which ultimately led to his death. His family, friends, and colleagues on the ship were obviously shocked and devastated.
Despite her grief, John was grateful that the couple had decided to pay extra for a policy that would cover frank's death in the event he died during a SCUBA diving accident. She dutifully submitted a claim to the insurance company and never thought for a moment that her claim would be denied. Shockingly, that's exactly what happened.
Notwithstanding Frank’s additional coverage for SCUBA diving, the insurance company stated that it had to deny the claim. According to the insurer, the fact that an experienced diver like Frank died of the bends was proof that he intended to cause his own death. Given that the policy contained a suicide exclusion, the insurer claimed it was compelled to deny a death payout on that basis.
Joan hired an attorney specializing in the wrongful denial of life insurance claims. He immediately saw the claim denial for what it was – a bogus attempt to deny money to a rightful beneficiary. Per the policy terms, the lawyer demanded arbitration to contest the claim denial.
At arbitration, the lawyer presented evidence that was contrary to the notion that Frank had committed suicide. He had never been treated for (or even suspected of) depression. He had numerous future trips planned, including a Disney trip with his kids one month after his death. There was no suicide note, no discourse in his family, no financial troubles. The lawyer also presented evidence of other experienced divers who had died of the bends. In other words, this kind of death occurring with an experienced diver is rare, but it happens. That, the lawyer argued, is what Frank paid extra for. Eventually, the arbitrator sided with Joan and awarded her the full policy benefit, with interest.If you have received a bogus claim denial recently, please call us to discuss your case. We specialize in this area of the law and would love to help you.