Despite what the life insurance company tells you when denying your claim, if they in any way violated the terms of the policy or practiced in bad faith, you have cause to sue. Denials should never be taken at the insurer's word when filing for death benefits as a designated beneficiary.
One should also consider pursuing a lawsuit under circumstances where claims were not paid promptly. The carrier is not responding to inquiries regarding the benefit request, or the policy itself gets wrongfully canceled. Fortunately, there are many legal avenues available to claimants who are struggling with getting their life insurance company to process a rightfully filed claim.
Why Do Life Insurance Companies Deny Claims?
One of the biggest questions many claimants ask is why claims get denied in the first place. The answer is a long list of excuses that covers everything from suspected fraud to simple informational errors that carriers take advantage of to avoid a payout.
The examples below are just a small sampling of the numerous reasons for the denial to occur, whether correct or not.
Errors in the claim paperwork
Bad faith tactics
If you are dealing with the loss of a loved one or business partner and want to learn more about suing the insurer after exhaustive efforts to get a payout, don’t let their tactics wear you down to the point of giving up. You have rights and recourse under your state laws to demand that the policy carrier follow through on their contracted responsibilities.
How Soon Should One Sue the Life Insurance Company?
When life insurance companies create a contract with a consumer, there is a provision that promises "good faith and fair practices." These terms are making a commitment to the insured that the insurer will do everything in its power to always protect their client's rights and benefits under the policy and to carry out its contracted duties to the letter. The specifics of what constitutes those duties vary depending upon the governing state.
There are bad faith practices that life insurance carriers must avoid, and these are similar demands in all 50 states:
Delaying or refusing a payout despite clear liability
Purposely delaying a claim investigation or performing it inadequately
Claim denials after the contestability period because of an application misstatement
Delaying a claim decision by specified state or policy deadlines with good reason
Issuing a claim denial without proper explanation or inadequate cause
For those who are dealing with a stubborn life insurance company that wrongfully denied a claim, a lawsuit may be the next step needed. Generally, hiring an experienced attorney with expertise in this area of law is a must to have any chance of success. Doing so before ever submitting a claim will also help ensure all paperwork is in order and that the circumstances of the decedent's passing are clear. Legal counsel can also stop any bad faith practices that might occur and negotiate more aggressively with the carrier.
What Legal Actions are Available to Beneficiaries with Denied Claims?
Because each state has specific laws and procedures that regulate life insurance companies in their jurisdiction, this will affect the type of lawsuits one can file after receiving a denial. A few examples of the types of cases that one can bring against insurers include:
Breach of contract
Unfair trade practices
It is critical to speak with a reputable life insurance attorney with a demonstrated record of success against death benefit claim denials. Not only can they better explain what rights a beneficiary has after being denied, but what damages may be awarded by the court if the insurance company had acted on bad faith.
What Should One Do to Prepare for a Lawsuit Against a Life Insurance Company?
Before ever considering a suit, being prepared ahead of time for the potential of filing one is a smart approach for any policyholder or their beneficiaries of a life insurance policy.
Consider the following tips to make sure one is ready for a possible claim denial and a possible suit against their insurer:
Have several copies of the death certificate and original policy application available.
When speaking with a claims representative, use caution when speaking to them about the facts of your case as they are likely recording the call and will use the information against you.
Keep track of all correspondence and communications with the insurer and its representatives.
Retain a life insurance claims attorney before filing a death benefits claim
Taking these steps will help prepare your case ahead of time if a lawsuit becomes necessary at any point during the processing of a life insurance claim. You can be sure that the insurer has a team of lawyers on hand to frustrate the process in every way possible, so preparation is vital.
Do Not Fight the Life Insurance Company Alone
Processing the death of a loved one is challenging enough without the additional burden of trying to get much-need death benefits from a life insurance company determined to issue a denial. If you feel like you have hit a wall and are worried you won't receive the payout owed you, contact a knowledgeable life insurance claims attorney right away.
Attempting to file an appeal to denial is a complicated process, especially if the policy falls under the Employee Retirement Income Security Act (ERISA) guidelines and governance. Time is of the essence in many of these cases, and an experienced lawyer can ensure the insurance company won't be able to run down the clock and make a lawsuit impossible.