Life Insurance Lawyer Indiana
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Life insurance and the issue of illegality
Life insurers often misuse the provision excluding coverage for deaths resulting from illegal acts
Most people understand the basics of a life insurance policy. The policyholder pays premiums to the life insurance company. In exchange, the life insurer pays the policyholder’s beneficiary when the policyholder dies. Of course, insurance companies would go broke if they had to pay a death benefit every time one of their insureds passes away.
Consequently, life insurance companies have created policies that are full of exclusions. Exclusions absolve the insurer from paying a death benefit if the insured dies in certain ways that are defined within the policy. For example, a life insurance policy might contain exclusions for suicide, undisclosed medical conditions, or inherently dangerous activities.
One exclusion that life insurance companies like to invoke is the illegality exclusion. These provisions come in many forms, but they basically say that the insurance company is not obligated to pay a death benefit if the insured dies while engaging in an illegal act. One obvious example would be where the policyholder was shot to death while in the middle of trying to kill someone else.
Not all cases are so clear cut, however. This article explores one recent case out of Michigan where a life insurance company tried to improperly invoke an illegality provision in order to deny a claim. Fortunately, the beneficiaries retained an attorney who specializes in the wrongful denial of life insurance claims. As a consequence, the beneficiary was ultimately paid the death benefit his wife intended for him.
Illegal use of alcohol?
The case involved a 34 year-old woman named Erin. Erin had a life insurance policy that she received as a benefit of her employment with a large law firm. The policy called for a $2 million payout upon her death. Erin named her husband, Trent, as beneficiary under the policy.
It also contained several policy exclusions. Among them was an exclusion that relieved the life insurance company from its obligation to pay a death benefit if Erin died as the result of the “illegal use of alcohol.”
Sometime around Christmas in 2014, Erin went to a holiday party sponsored by her law firm. While there, she consumed several cocktails. This was unusual for Erin as she was not a regular drinker and certainly not a heavy drinker. Some of her colleagues noticed that she was getting a bit tipsy and implored her to take a cab home that evening.
Given that Erin’s judgment was impaired, she decided to drive herself home. Around 9:00 that night, she got behind the wheel of her BMW and headed for her condo, which was located some 35 minutes from the party. Fifteen minutes into her drive, Erin lost control of the car going around a curve. She wrapped her BMW around a telephone pole and forced two other cars off the road.
By the time paramedics arrived at the scene, Erin was already dead. The autopsy would later reveal that Erin was driving with a blood alcohol level of 0.11%. This was just slightly above the legal limit of 0.08%. Her family, friends, and colleagues were devasted to learn of the news. This was especially true for her husband, Trent.
A surprising life insurance claim denial
Shortly after Erin’s death, Trent made a claim for death benefits under Erin’s life insurance policy. Approximately one month after he submitted the claim, he received a unequivocal claim denial in the mail. The insurance adjuster who penned the letter was concise in her reasoning for the denial:
While we are sympathetic for your loss, we regret to inform you that we are unable to pay a policy benefit at this time. Your wife’s policy excluded coverage in the event her death resulted from the “illegal use of alcohol.” Given that Erin died while driving under the influence of alcohol (and with a blood alcohol level above the legal limit of 0.08% in Michigan), we have no choice but to deny your claim at this time.
Trent was devasted by this news. Shortly before Erin’s death, he had given up his career as a doctor to pursue his life-long dream of becoming an artist. Erin’s policy would have allowed him to continue pursuing that dream – which is something he and Erin very much wanted. A friend suggested Trent contact a lawyer specializing in the denial of life insurance claims.
There was no illegal use of alcohol
Fortunately, the attorney immediately spotted the flaw in the life insurance company’s reasoning. Erin didn’t die from the “illegal use of alcohol.” Given that she was well above the drinking age of 21 and drinking at a private indoor gathering, her consumption of alcohol was perfectly legal.
What Erin arguably died from was the illegal use of a motor vehicle while under the influence of alcohol. Erin’s life insurance policy, however, did not exclude coverage under those circumstances.
With Trent’s approval, the attorney took Erin’s life insurance company to court. Ultimately, Trent prevailed and was awarded the full policy benefit, with interest. The court completely agreed with Trent’s attorney that Erin had not engaged in the “illegal consumption of alcohol” and that, consequently, the life insurer’s invocation of that provision was wrongful.
Unfortunately, Trent’s experience is far from unusual. Even in instances where insurance companies know their claim denial reasoning is faulty, they will deny claims anyway. This is because they know that many grieving beneficiaries are simply too depressed to take on a fight against a large insurer.
As attorneys who specialize in the wrongful denial of life insurance claims, we see this behavior by insurance companies day in and day out. We’re not fooled and we’re not intimidated by their tactics. To the contrary, we’ve built a successful track record of contesting claim denials just like the one outlined in this article.
If you have recently had a life insurance claim denied on the same or similar bases, please don’t hesitate to contact us. 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.