Given that our law firm has built its entire practice around the wrongful denial of life insurance claims, one might presume that there are dozens of reasons why a life insurance company would deny coverage. In truth, however, there are less than 10 solid reasons why claim denials can be issued. Learn more about insurance lapse.
One of the reasons a claim can be validly denied is if the policyholder failed to make premium payments as required by the policy. Even then, the insurance company is required to give proper notice of the payment default and an opportunity for the insured to make up the missed premiums before it can simply cancel a policy.
Nonetheless, life insurance policies are cancelled for non-payment all the time. Sadly, this often comes as a shock to policy beneficiaries who had no reason to suspect premium payments were not being made while the policyholder was alive. Often, when a beneficiary receives a claim denial based on lapsed payments, they are tempted to simply walk away from the claim. They do this assuming the insurance company is always correct in its assessment that premiums were not paid.
Things are not always as easy as they seem. This article explores a case where a policy lapsed for non-payment notwithstanding the policyholder’s best efforts to make sure premiums were paid while he was on an extended vacation.
Best intentions for a responsible life
Sean was the type of guy people described as an adventurer. Whether it came to his personal life , his professional life, or his travels, he always seemed to be taking a bit of a risk. The strategy worked out well for Sean, however, because by the time he was in his late 30s, he had amassed enough wealth that he was able to take a two-year sabbatical from work.
Notwithstanding his success, Sean also had several bills that he was responsible for paying every month. One of his monthly responsibilities was the premium payment on a life insurance policy worth $2.5 million. Sean had named his sister, Judy, as a beneficiary just in case anything ever happened to him.
Due to Sean's adventuresome nature, it didn't surprise anyone when he announced that he was going to spend his two-year sabbatical traveling the globe. He planned to spend a great deal of time off the beaten path and away from traditional civilized society. That meant that, among other things, Sean would be away from all electronic communications for months at a time.
Planning for this, Sean hired someone to pay his bills for him while he was on vacation. To start with, he set up a special checking account with enough money to pay his regular obligations for a year. He also made out detailed instructions about which bills were to be paid on which date.
The woman Sean hired to write checks from that account was asked to make sure Sean did not have any late payments while he was traveling. In retrospect, Sean’s biggest mistake was failing to properly vet this woman before he hired her. You probably already know where this is going.
The first leg of Sean’s trip was to include the longest period of time where he was not reachable by phone, email, or text. For six months, Sean planned to traverse the jungles of Southeast Asia – far away from electronic communications.
Shortly after Sean left for this leg of his trip, the woman he hired to pay his bills emptied his bank account. As you might imagine, she never paid a single one of Sean’s bills. Nor did she collect any of Sean’s mail, which was another duty he had hired her to perform while he was gone.
As a result of her malfeasance, Shawn's life insurance policy lapsed due to non-payment. Even though the company had mailed Sean notices of non-payment and a cancellation notice, neither Sean or anyone acting on his behalf ever received those notices. Sean simply assumed everything was being taken care of by the woman he hired for that purpose.
Sadly, just days after finishing the first leg of his trip and returning to a metropolitan area, Sean was hit by a car and killed.
What do you mean, no policy?
Once she received all the official documentation concerning her brother's death, Judy filed a claim for benefits with Sean’s life insurance policy. Her brother had been clear during his life that he wanted to provide for her and make her life easier if anything should ever happen to him. Thus, he had provided Judy with all of the information she needed to make a claim if that day ever happened.
within 2 weeks of submitting her claim , Judy received a claim denial letter in the mail. It read simply, “Claim denied. Policy cancelled due to non-payment.” This, of course, surprised Judy and prompted her to do a little digging. She quickly discovered that her brother had been swindled by the woman hired to pay his bills.
Not knowing what to do, Judy hired a lawyer specializing in the wrongful denial of life insurance claims. Along with the police, he was able to piece together a criminal prosecution of that woman. Among the evidence that came to light was the money Sean reserved for his bills, and the detail instructions he had left regarding payment. Those instructions made monthly reference to Sean’s life insurance policy premiums.
The lawyer presented all of this to the life insurance company’s appeals board. He requested that the claim denial be overturned, given Sean’s innocence in missing the payments. Ultimately, the attorney negotiated a deal where Judy was given the full policy payout, minus the amounts that should have been paid to the life insurer had Sean’s instructions been carried out. It was a great result from a terrible situation.If you have had a life insurance claim denied – even because the policy was purportedly cancelled due to non-payment – call our office today. Often circumstances warrant a much better result than an outright denial. Let us see if we can help you.