Life Insurance Lawyer Hawaii
Whether you reside in: Kaneohe; Waipahu; Kailua; Hilo; Pearl City; East Honolulu; or Honolulu; our life insurance attorneys who live and work here in Hawaii are here to help resolve your delayed or denied life insurance claim.
When you pay more for life insurance, you should be covered
If your hobbies cost you higher premiums, your beneficiaries should be protected
It goes without saying that life insurance companies, like most for-profit businesses, exist for the sole purpose of making money. One of the key strategies they employ for doing this is to collect the highest premiums possible from policyholders, while paying out the fewest amount of claims when those people die.
As attorneys who specialize in contesting the wrongful denial of life insurance claims, it never ceases to amaze us just how underhanded life insurance companies can be in carrying out this strategy. One of the best examples involves the interplay between two provisions that are used in almost all life insurance policies – the “inherently dangerous activities” clause and “intentional self-harm” clause. This article explores how life insurance companies manipulate those provisions to try to deny completely legitimate claims for death benefits.
Inherently dangerous activities
On some level, none of us are shocked that life insurance companies exist to generate revenue. Thus, it is understandable that they charge increased premiums for policyholders who have a greater chance of dying early in life than others.
A prime example of this involves what life insurers call “inherently dangerous activities.” As the name suggests, inherently dangerous activities are sports, hobbies, or other activities that put a person in somewhat regular danger of being seriously hurt or killed. They include things like downhill skiing, skydiving, SCUBA diving, motocross racing, and rock climbing.
Life insurers would go broke quickly if they treated people who engage in these activities like they treat all other policyholders. While the actual risk of dying from these activities may not be extreme, the truth is that people who engage in these hobbies die more frequently than their peers who abstain. Consequently, life insurance companies require policy applicants to reveal their participation in such activities when they are applying for insurance.
Once it comes to issuing a life insurance policy for these individuals, the insurance company charges higher premiums because of the greater risk of being injured or killed during an “inherently dangerous activity.” That seems logical.
What people expect in return, however, is that insureds who have: (a) truthfully revealed their participation in inherently dangerous activities; and (b) paid higher premiums to be insured notwithstanding those activities, will have their beneficiary’s death benefit claims paid without exception. Unfortunately, that is not always the case.
The intentional self-harm loophole
Life insurance companies do not make the payment of claims that easy. To the contrary, they purposefully write-in other policy provisions that will help them deny death benefits regardless of the policyholder’s payment of higher premiums due to their dangerous hobbies.
Specifically, life insurers consistently try to deny valid claims based on what they refer to as “intentional self-harm” clauses. A real-life example from a case out of Alaska illustrates this scheme perfectly.
A 49 year-old man named Tom sought a life insurance policy after he married his wife Rita. The policy application asked Tom if he participated in any dangerous hobbies. Tom truthfully responded that he was an avid skydiver, averaging some 50 jumps per year.
The life insurance company issued Tom a policy, but they charged him nearly 40% higher premiums than other men his age. The justification for the high premiums was that skydiving is “inherently dangerous.” Thus, according to the insurance company, Tom was at a greater risk of death than other men his age. Tom understood this and paid his increased premiums without fail each and every month.
Three years into the policy term, Tom was at a skydiving event in southern Alaska. While performing what was intended to be a routine skydive, Tom’s parachute failed to open. On that particular jump, Tom was not wearing a backup parachute. Tom died as a result of the fall. Several weeks later, his wife Rita submitted a claim for death benefits with Tom’s life insurer. Because Tom had paid so much higher premiums due to his skydiving hobby, Rita was certain the claim would be paid.
An unexpected denial
Much to Rita’s surprise, a claim denial arrived in the mail some two months later. It contained the following justification for the denial:
While we understand and agree that the policyholder paid increased premiums due to his skydiving hobby, that does not require us to pay death benefits in every instance. Please note policy provision 22.4 which specifically excludes coverage if the insured engaged in intentional self-harm.
We note that at the time of his death, the insured was skydiving without a reserve parachute, which is common within the sport. From this failure to maintain even the most basic safety guidelines of his sport, we presume that the policyholder took intentionally unsafe acts to hasten his own death. As such, we must deny coverage under provision 22.4.
Life insurance companies play this game all the time. They allow a policyholder to pay high premiums in exchange for the unfettered right to engage in dangerous hobbies, only to deny death benefits based on a claim of “intentional self-harm” if the insured dies during one of those events.
Fortunately for Rita, a friend suggested she contact an attorney specializing in the wrongful denial of death benefits. After reviewing her file, the attorney agreed to take Rita’s case against the life insurance company on a contingency basis. The also attorney agreed that the claim denial seemed bogus, and sued the life insurer on Rita’s behalf.
Ultimately, the court agreed that Rita was entitled to the full death benefits, plus interest. In its ruling, court noted that Tom had specifically asked for (and paid higher premiums for) a policy that would cover his participation in skydiving. It also noted that there was no external evidence of Tom’s intention to harm himself. These two factors persuaded the court to side for Rita.
We have dealt with scenarios like these over and over through the years. If you have had a claim denied based on similar circumstances, please give us a call. We’re here to help.
- Number one is a misrepresentation on the application. This typically involves failing to disclose a medical condition. However, we can get over this hurdle the majority of the time.
- A lapse of a life insurance policy is probably second most common. What happens is that the insured gets sick and misses a payment or two. These are tough, but often we can get these claims paid.
- Probably third is the type of death exclusion. This could be a suicide or it could be a self-inflicted injury. Murder is another exclusion. Health again can fall under this exclusion. We often win suicide exclusions as we cite case law that the death was actually accidental.
- A very common exclusion is the alcohol exclusion. The insured may have been killed in a car crash, but the autopsy revealed alcohol in the person’s system. We have many legal briefs to combat this exclusion.
- Heroin and opiates or illegal drug exclusion is one of the biggest now. With the opioid crisis, there are tens of thousands of deaths.
- Prescription drug overdose exclusion may involve an overdose of medicine or taken medicines that are contraindicated.
- An ex-spouse being cut off from life insurance benefits is a big one. We actually have a half dozen ways to get over this hurdle.
- Having a spouse not listed as a beneficiary is another reason for denial
- Having a child not listed as a beneficiary is one too.
- Having only a primary beneficiary who is deceased is another.
- On an AD&D (accidental death and dismemberment) life insurance policy, a fall not being considered an accident is extremely common.
- The insured’s age not being correct on the initial application is a reason for denial.
- Having the wrong social security number listed is common.
- An autoerotic asphyxiation exclusion is an easy one for us to beat.
- An omission on the application is a big reason for denying a life insurance claim, but we have legal briefs to this effect.
- Not providing the required documents to the insurance company after death is a reason.
- Information which is argued to not be correct is one.
- When there is a dispute between two or more beneficiaries, an interpleader may occur, and we always get these resolved quickly.
- A beneficiary not named is a reason for not paying it out.
- A life insurance policy may be transferred from one company to another by the employer which causes major problems.