Many people today use life insurance as an estate planning device. It makes perfect sense. Policyholders can pay relatively small premiums now in exchange for a relatively large payout to their beneficiaries at the time of death. In addition to standard coverage, many people also choose to add what is known as an accidental death and dismemberment (“AD&D”) rider to their life insurance policy.
An AD&D rider basically provides additional coverage in the event the policyholder passes away as the result of an accident. Typically, the payout amount is three times what would be paid out under the standard policy. So, for example, if a policyholder had coverage for $100,000 but also had an AD&D rider, his beneficiary would receive $400,000 at the time of his death. That's $100,000 under the standard policy, and an additional $300,000 under the rider.
In light of the fact that AD&D riders pay out such large sums, insurance companies don't tend to favor them. They issue these riders based on the fact that, statistically, very few people actually die in accidents. Knowing this, the insurance companies gladly collect additional premiums for adding these riders, while rarely having to make payouts under them.
Moreover, when a policyholder does die in an accident, the insurance companies often claim that the manner of death was no accident at all. This is true even when police reports an eyewitness accounts clearly suggest the death was accidental.
This article explores one recent case where an insurance company fought tooth and nail to reject a claim made under an AD&D rider only to lose out in court.
A snake in the grass
The policyholder in this case, a man named Mike, was an avid outdoorsman. As often as he could, Mike would travel to remote locations to hike and camp. For months, he had been looking forward to a trip to the Sonoran Desert in southern Arizona. When he got there, he was beside himself with all the natural beauty.
Unfortunately, Mike’s elation did not last long. A few days into his trip, Mike stumbled over a small boulder alongside a trail. The movement of the rock upset a rattlesnake den that was just below the rock. Several snakes scurried out from under the rock and bit Mike’s lower legs numerous times. To add insult to injury, several of the bites were thought to have been made by young rattlesnakes whose venom tends to be much more poisonous than that of their older brethren.
Mike was life-flighted to a nearby hospital but the amount of poison in his system proved to be too much. He passed away within a day of receiving the snake bites.
Are snakebites accidental?
A couple weeks after Mike's death, his wife Jane made a claim for benefits under his life insurance policy, as well as his AD&D rider. Though she didn't give it much thought at the time she made the claim, it seemed to her that death by a snake bite that occurred during a hike was purely accidental.
The insurance company didn't see it that way. While the company agreed to pay the benefit due under Mike’s standard policy, it refused to pay the amount due under the AD&D rider. According to the insurance company, a snake bite was not the type of accident Mike’s policy envisioned. Rather, the letter explained, AD&D riders were reserved for things like car accidents or skiing accidents. Ultimately, the insurance company decided that Mike’s death was the result of poisonous venom and not the result of any accidental occurrence.
When Jane received the letter, she could not believe her eyes. The first thing she did was look up the definition of the term “accident” on the internet. There, she found the following definition of the word: “an undesirable or unfortunate happening that occurs unintentionally and usually results in harm, injury, damage, or loss.” In Jane’s mind, that was precisely what happened to her husband.
Jane’s next internet search was for a lawyer specializing in the wrongful denial of life insurance claims. When she talked to the lawyer, she was relieved at the breadth of his knowledge in this area. In fact, he told her of another recent case where an insurance company tried to deny coverage under and AD&D rider when the policyholder died from malaria as the result of a mosquito bite.
The lawyer knew that the court in that case had rejected the insurance company’s argument that such a death was not accidental. The case had been big news in insurance law circles, so he was fairly confident Mike’s life insurance company would be aware of the ruling and aware that it would need to comply with current law. What the insurance company was counting on was that beneficiaries like Jane would never find out about that ruling.
Within a week’s time, Jane’s lawyer had contacted lawyers for the life insurance company. He reminded them of the recent mosquito ruling and even sent them a copy of the court's decision in that matter. In light of that ruling, Jane’s lawyer argued, it was very unlikely another court would consider a fatal snake bite to be anything but an accident. He gave the insurance company ten business days to overturn the denial of Jane’s AD&D claim, or he was going to file a lawsuit.
Ultimately, the insurance company agreed to pay Jane the full amount Mike had intended for her to receive. The parallels between Mike’s situation and the mosquito case were simply too strong and the insurance company knew it would be a futile exercise to fight the issue in court.
The sad part about the situation is that life insurance companies issue these bogus claim denials every day. Far too many people just accept their decision without taking the time and effort to contact a lawyer specializing in this area.If you have received a recent claim denial that doesn’t seem right to you, please give us a call. We’re here to help.