Life Insurance Lawyer Illinois
Whether you reside in: Cicero; Elgin; Peoria; Springfield; Naperville; Joliet; Rockford; Aurora or Chicago; our life insurance attorneys who live and work here in Illinois are here to help resolve your delayed or denied life insurance claim.
How life insurance companies capitalize on mistakes
Be careful when you fill out your life insurance application
It shouldn’t come as a surprise that consumers are expected to be truthful when they are filling out applications for life insurance. Indeed, life insurance companies rely greatly on such information when deciding: (a) whether to issue a policy to the applicant at all; and (b) if so, what price the premiums should be set at. After all, life insurers would never make money if they charged every person the same amount in premiums.
This makes perfect sense from a business perspective. People with significant health risks (think smokers, older individuals, or people with serious illnesses) have to pay higher premiums. This is because they are statistically more likely to die sooner than younger, healthier individuals. Given that this balance of risks is so imperative to the relationship between the life insurer and the policyholder, life insurance companies can sometimes avoid paying out policy benefits if they discover that an insured lied during the application process.
But what happens if the applicant makes a mistake in the application? How does this impact the insurer’s responsibility to pay a death benefit when that policyholder dies? One recent case provides guidance for how courts would handle that sort of situation.
Entering the wrong age on a life insurance application
The case at hand involved a woman named Sue. Sue was a human resources executive for a large electronics manufacturer. As such, she received a generous benefit package that included life insurance policies for Sue, her husband, and any of her children (including adult children if Sue paid extra premiums).
Always a planner, Sue took out policies for the whole family. This included Sue’s 32 year-old daughter, Miranda. Miranda was recently divorced and had two small children to care for. It was Sue’s hope that the kids would receive the $350,000 death benefit if anything ever happened to their mother.
The insurance applications were not terribly detailed. They basically asked for each insured’s name, age, residence address, and some general information about smoking, drinking, and drug use. Sue filled out the application for each member of her family, and simply asked them to “sign on the bottom line” when she was done.
Sue was in a big hurry when she filled out the application forms. She also had a slight case of a condition called dyscalculia. Dyscalculia is very similar to dyslexia, except sufferers get numbers mixed up instead of letters. Sue mostly had her condition under control, but every now and again she had a slight hiccup.
It turns out that Sue may have experienced one of those hiccups when she was filling out the life insurance application for Miranda. On the line that asked for Miranda’s age, Sue wrote “23,” when in fact Miranda was 32 at the time the application was submitted. Miranda did not notice the mistake when she signed off on the application. Likewise, no one at the life insurance company noticed the mistake, even though elsewhere on the form, Sue correctly stated Miranda’s date of birth.
Thereafter, policies were issued for everyone in Sue’s family and premiums were faithfully paid.
An unexpected demise & surprising turn of events
Three years later, Miranda was killed in a tragic boating accident. The whole family was devastated. Nonetheless, Sue managed to get it together just enough to file a claim for death benefits from the life insurance company on behalf of Miranda’s children. As part of that process, Sue was required to submit a copy of Miranda’s death certificate.
Not long after the claim was submitted, Sue was shocked to receive a claim denial letter in the mail. Not only that, the insurance company filed a lawsuit asking the court to rescind the insurance policy it had issued on Miranda. In its pleadings, the life insurance company claimed the policy was based on a lie – specifically, that Miranda stated she was only 23 at the time the policy issued when, in fact, she was 32. The insurance company claimed that had it known Miranda’s true age, it never would have issued her a policy.
Faced with a lawsuit that basically accused her of fraud, Sue furiously sought out a skilled attorney. On the recommendation of a local law professor, she ended up with an attorney specializing in the wrongful denial of life insurance claims.
The attorney immediately recognized that the insurance company was simply playing one of the regular games life insurers play to avoid paying death benefits. Specifically, the company was trying to make a simple and innocuous mistake on the application into a “material misrepresentation” that justified the denial of an otherwise valid claim.
To counteract those games, the attorney made two key arguments: (1) there is not a statistically significant difference in the risk of death between 23 and 32 year-olds; and (2) given that Sue correctly put Miranda’s date of birth on the application, the insurance company had reason to know Miranda’s true age when it issued the policy.
Ultimately, the court agreed with Sue’s attorney and ordered the insurance company to pay Miranda’s children the full death benefit, plus interest. Of particular importance to the court was the fact that the insurance company collected premiums for years without ever questioning the discrepancy on the application surrounding Miranda’s true age. Only when she died did the company claim that discrepancy was material to its business.
There are a couple things to be learned from Sue’s case. First, you can never be too careful when it comes to filling out life insurance applications. Secondly, just because a life insurance company denies a claim for benefits does not mean that decision is correct.
If you are facing a similar situation with a life insurance claim denial, please call us. Contesting wrongful denials of life insurance policies is our principal focus and we would be happy to help you get the benefits your loved one intended for you.
- 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.