Denied Life Insurance Claim After Reinstatement? The High Cost of Misrepresentation
Life insurance is built on trust—and that trust begins with the information submitted on the application. When a policy lapses and the policyholder seeks reinstatement, insurers typically require confirmation that the insured is still in good health. Unfortunately, even unintentional omissions during this process can lead to devastating consequences. A recent case involving a denied $1.2 million life insurance claim shows how easily things can unravel when a reinstatement form contains incomplete or misleading information—especially about health conditions.
The Case: A Brain Tumor and a Denied $1.2 Million Claim
In this case, a life insurance policy originally issued in December 2006 lapsed just four months later, in April 2007, due to nonpayment of premiums. Seeking to reinstate the policy, the insured submitted a reinstatement application on April 20, 2007, along with the overdue payments. As part of the reinstatement process, he was required to confirm that his health remained unchanged from the time of the initial policy issuance. He also needed to disclose his most recent medical treatment and its findings. On the form, he stated that his last medical visit was in February 2006, with normal results. What he failed to disclose was far more serious: just days before submitting the reinstatement application, he had seen a neurologist and undergone an MRI, which revealed a large, aggressive brain tumor. He died not long after. When his widow submitted a death benefit claim, the insurer launched an investigation and ultimately denied the $1.2 million payout, citing material misrepresentation.
Why the Insurance Company Denied the Claim
The insurer’s denial was based on a legal concept known as material misrepresentation—the idea that had the true health condition been disclosed, the insurer would not have approved the reinstatement at all. By withholding information about the recent neurological treatment and brain tumor diagnosis, the insured compromised the integrity of the reinstatement process. While the widow argued that a valid contract had been reestablished once the insurer accepted the payment and reinstatement paperwork, courts often defer to insurers in such cases if the misrepresentation is deemed material. The insurer contended that the acceptance of payment did not obligate them to reinstate a policy that was applied for under false pretenses.
Key Legal Issues in Reinstatement Denials
Life insurance reinstatement isn’t automatic. When a policy lapses and the insured seeks to reactivate it, the insurer typically requires evidence that the insured remains insurable. This may include:
Signed declarations of continued good health
Medical questionnaires or updated records
Confirmation that no significant diagnoses, symptoms, or treatments have occurred
If the insured submits false or incomplete information, insurers may later rescind the reinstated policy and deny any claim—particularly if the death occurs soon after reinstatement. Courts tend to side with insurers when the omission involves serious conditions like cancer, heart disease, or neurological disorders, especially if those conditions were discovered before reinstatement and not disclosed.
FAQ: Life Insurance Claim Denials After Reinstatement
What is a reinstatement in life insurance?
A reinstatement occurs when a lapsed policy is reactivated after missed payments. The insurer typically requires proof that the insured’s health hasn’t changed since the policy was originally issued.
Can a life insurance claim be denied after reinstatement?
Yes. If the insured misrepresented or failed to disclose a change in health during reinstatement, the insurer can deny the claim and rescind the policy.
What counts as a material misrepresentation?
A material misrepresentation is a false statement or omission that would have affected the insurer’s decision to issue or reinstate the policy. Serious medical diagnoses are often considered material.
Does the insurer have to return the premiums if they deny the claim?
In many cases, yes. If a policy is rescinded due to misrepresentation, insurers typically return the premiums paid. However, they won’t pay the death benefit.
Is accepting the premium enough to confirm reinstatement?
Not necessarily. Insurers often treat reinstatement as conditional—meaning they may accept the payment while still reviewing health disclosures. Acceptance of money alone does not always mean the contract is binding.
What happens if the insured died shortly after reinstatement?
The insurer will likely investigate the reinstatement form and any recent medical history. If it discovers an undisclosed condition, the claim may be denied—even if the death occurred days later.
Can reinstatement claims be challenged in court?
Yes. Courts may review whether the insurer followed its own procedures and whether the insured’s disclosures were accurate and complete. Legal challenges often succeed when the insurer overreaches or fails to clarify the reinstatement terms.
Does the contestability period reset after reinstatement?
It can. Some policies include language that restarts the contestability period following reinstatement. This gives the insurer two more years to challenge the validity of the policy.
What should I do if my claim was denied after reinstatement?
Contact a life insurance attorney immediately. These cases are highly fact-specific, and legal representation can dramatically improve your chances of overturning the denial.
Do you charge upfront fees?
No. We work on a contingency basis, which means you don’t pay unless we recover benefits on your behalf.