For many years, our law practice has focused almost exclusively on contesting the wrongful denial of life insurance claims. Through the years, we have seen life insurance companies dream up just about every excuse in the book to try to deny valid claims.
They do this, of course, because life insurers don't get rich by paying out on every death claim. Instead, they make the most money when they deny the most amount of claims. That is why life insurance companies pay armies of attorneys to craft policy language giving them the best chance of avoiding payment.
One way they accomplish this is by including several policy exclusions that relieve the insurance company from its obligation to pay out on otherwise valid claims. You may have heard of one or more of these policy exclusions. Some common ones include the suicide exclusion, the inherently dangerous activity exclusion, and the illegal drug exclusion.
That final exclusion -- the illegal drug exclusion -- is the one we're discussing in today's article. While the insurance company’s claim denial was not shocking in the case at issue, it just goes to show that these companies will always push the limits in order to try to get away with denying a claim.
A rare, but legal, use for peyote
Peyote is a hallucinogenic drug derived from a cactus plant that grows principally in Mexico and the southwestern part of the United States. For centuries, the drug has been used for religious ceremonies by people indigenous to these regions. It has also gained some notoriety from non-religious users who take the drug for its psychedelic properties and effects.
In the 1960s, the United States government criminalized the use of peyote. This lead to several lawsuits from religious users of the drug, claiming that the ban on its use violated their 1st amendment right to religious freedom. Ultimately, those religious users prevailed, and peyote remains legal today – but only if used by certain recognized religions and only under very narrow circumstances .
As you might suspect, today’s article focuses on a life insurance claim denial involving the legal use of peyote.
The man at the center of the case was a life insurance policyholder named bill. Bill was an accountant who lived in the American Southwest. He was a member of a local Native American tribe by birth. He was also an elder in the tribe’s formal church which was one of the few churches allowed to legally use peyote in its ceremonies.
Of course, Bill had a life insurance policy that contained an illegal drug exclusion. Specifically, the policy stated that if Bill died with a detectable level of any illegal substance in his system, the insurance company could deny a claim against his policy even if his death was not directly related to that drug. Truthfully, it was a pretty standard illegal drug exclusion.
One spring, Bill participated in a ceremony with other elders in his church that included the ritualistic use of peyote. The ceremony was an overnight affair, and Bill did not get in his car to head home until the morning following the ceremony. In other words, he was not driving under the drug’s effects.
Nonetheless, as Bill drove toward his house, he failed to negotiate a sharp turn, his car careened off the highway, and Bill was killed instantly. An autopsy report following Bill’s death revealed the presence of peyote in his system. A police report concerning the accident noted that Bill had been driving on his way home from the religious ceremony which likely included peyote use.
A predictable (but wrongful) claim denial
Bill's wife Sally submitted a claim for life insurance benefits shortly after Bill's death. As required, she also submitted a copy of his death certificate, the autopsy report , and the police reports from the scene. Roughly one month later, Sally received a claim denial letter in the mail. The letter said:
The autopsy report on the insured noted the presence of peyote (an illegal substance) in the policyholder’s blood at the time of death. Police reports also noted the policyholder had recently attended a religious ceremony where peyote was likely used. This brings the policyholder’s death within the illegal drug exclusion of the policy. Accordingly, the claim is denied in its entirety.
Sally saw one glaring problem with the insurance company’s claim denial justification – Bill’s use of peyote had not been illegal. As a paralegal, Sally knew the importance of having a good attorney on her side as she entered battle with the insurance company. Therefore, she contacted a colleague who specialized in the wrongful denial of life insurance claims.
The attorney immediately saw through the ruse that was being created by the life insurance company. With a modest amount of research, the insurer could have discovered that Bill was one of the few individuals in the United States for whom peyote use was legal. Instead, it decided to simply deny Sally's claim in hopes that she would walk away from the money owed to her.
Within a few days, the attorney sent a sharply written letter to the insurance company with proof of Bill’s membership in the tribe and his position as an elder in the church. For good measure, the attorney included copies of cases holding that peyote use was, in fact, legal for certain segments of the society (including Bill).
The insurance company quickly saw that it was facing an uphill battle and decided to overturn its claim denial decision. Within a few weeks’ time, Sally had been paid the full policy benefit. Although the particular circumstances of Sally's case are admittedly rare, it is not unusual for a life insurance company to improperly rely on an illegal drug exclusion in denying a claim.If you have had a life insurance claim denied based on similar policy exclusions, please call our firm today. We have these policy decisions overturned all the time and we're happy to help you get the money your loved one intended for you.