If you look back at the course of social politics in America over the last two decades, you will notice that transgendered individuals have gained a great amount of social and cultural acceptance in a relatively short period of time. Though they continue to struggle for some basic rights enjoyed by other people, by and large the status of being transgendered in the United States is a much better prospect then it used to be.
Nonetheless, these individuals still face struggles in certain areas of life and business. One thing that remains a battle for transgendered persons is obtaining insurance coverage on par with that available to other people. Life insurance is no exception. Thus, it is no surprise that people who have had sex reassignment surgery sometimes do not want to reveal their original gender when they are in the process of applying for life insurance.
This raises some interesting legal questions. This article explorers one such case and how it was handled by the insurance company, the transgendered individual, and her lawyer.
The law of material misrepresentation insurance
Before we get into the facts of the case, it is a good idea to discuss the legal concept of material misrepresentations. At the end of the day, life insurance policies are nothing more than written contracts between the policyholder and the insurance company. Accordingly, life insurance policies are governed by basic principles of contract law.
One of those principles is the requirement that parties to a contract be truthful with one another when they are negotiating terms. Telling a lie in order to receive a favorable contract is highly disfavored in the law. If one party tells the other party a lie in order to get that second party to sign off on the terms of a contract, and the lie is so significant that the second party would never have signed the contract had they known the truth, the lie is said to be a “material misrepresentation.” That is an important designation because it allows that second party to later avoid its obligations under the contract.
This is also true in the context of life insurance policies. If it policy applicant tells a lie in order to obtain a policy she was otherwise ineligible to receive, the life insurance company may not be obligated to pay out any claims submitted against the policy after the insured dies. A frequent example of this arises under the following circumstances: (a) a person decides to apply for life insurance; (b) the life insurance company requires them to fill out a health questionnaire asking if they have any significant medical conditions; (c) the person replies that they do not; (d) in truth, however, they know they are suffering from a devastating disease such as cancer or diabetes.
If the life insurance company discovers their deception after that person passes away , it can refuse to pay out any claims submitted against that person's policy. It seems like a simple concept but sometimes the waters can be muddied.
Is it untruthful to fail to disclose your gender at birth?
The case at hand involves a woman named Marcia. Marcia applied for a life insurance policy when she was 46 years old. By that time, she had undergone successful sexual reassignment surgery. Although she had been born a male, she was now living her life entirely as a woman. In fact, she had even gone so far as to have her birth certificate changed to reflect her current gender.
When Marcia filled out the health questionnaire required to obtain a policy, she noted, as the questionnaire asked, that she was a female. The questionnaire did not ask whether she had ever had another gender. So, Marcia didn't say anything about her former life. The life insurance company granted her a policy worth $700,000. Marcia named her friend Cindy as the sole beneficiary under that policy.
Sadly, Marcia died in an automobile accident at the young age of 47. Cindy submitted a claim for death benefits to Marcia’s life insurance company a few weeks later. One month after that, Cindy received a claim denial letter in the mail. The letter stated that the insurance company had done an internal investigation into the circumstances of Marcia’s life and death. During the course of the investigation, the insurance company discovered that Marcia was not born a female. The letter claimed that Marcia's failure to disclose this fact constituted a material misrepresentation that relieved the insurance company from making a payout under the policy.
Time to get a lawyer
Cindy was an experienced paralegal and she knew something wasn't right about this claim denial. She contacted a colleague who was an attorney specializing in the wrongful denial of life insurance claims. She explained the circumstances and sent the attorney all of the relevant documents pertaining to the claim denial.
The lawyer explained that while the case was no slam dunk, there was a chance they could overturn the claim denial. The lawyer quickly set about to find prior case law dealing with the legal status of transgendered persons and any requirements they might have to reveal their former gender. He discovered that Marcia’s legal act of changing her gender to female on her birth certificate was significant enough, in this context, to deem her a female.
Moreover, the attorney gathered all sorts of evidence showing that females have a much better survival rate as they age than men. In other words, by becoming a female, Marcia had actually increased her chances of living longer – something that benefited the insurance company. This made the claim denial reasoning bogus.
During an appeal in front of the insurance company’s internal review board, the attorney was able to convince the insurer to overturn its claim denial decision. Although the company may have had a slim chance to prevail in court, it didn’t want the bad publicity that might accompany a lawsuit.If you have recently received a life insurance claim denial that doesn't seem right to you, please call our office today. Our attorneys are here to help you through this difficult time.