Life Insurance Lawyer New York
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Does undisclosed alcoholism prevent life insurance payouts?
It is a stark reality of modern life that many people turn to alcohol and other substances in order to dull the stressors of daily living. For some people, substance use quickly turns into substance abuse. In truth, however, very few people actually seek medical treatment for drug and alcohol abuse.
In part, this resistance to seeking help may be due to embarrassment. People don’t like to admit that they have problems. Indeed, while some people do seek the help of a medical professional for substance abuse, they may still hide the problem in other areas of their lives. As one couple in Montana found out recently, this sort of hiding can lead to a whole host of other problems.
Our firm specializes in the wrongful denial of life insurance claims. Thus, this article explores the potential consequences that can arise when a policyholder (or the applicant for a policy) fails to disclose alcoholism or other substance abuse to his or her life insurance company. While the case we’ll discuss ended up favorably for the policyholder and his beneficiary, this issue is getting more and more attention from life insurers and the courts.
A “forgotten” detail in a policy application
A man named Joel and his wife Sara had a home loan with a local bank in Montana. When the couple sought to increase the amount of that loan, the bank required that each of them obtain a life insurance policy that would cover the full amount of the loan if one of them were to die before the loan was paid off.
Joel and Sara agreed to obtain the required life insurance policy. In fact, they completed the insurance application inside their local bank branch with a bank officer verbally asking them questions about their health and other factors that might impact their insurability. Truthfully, the application was quite short compared with other life insurance applications. The bank officer asked each individual two key questions:
Have you been hospitalized or sought the advice of a physician for any medical condition during the last three years?
Have you ever been diagnosed with or treated for heart disease, lung disease, kidney disorders, high blood pressure, cancer, tumors, or diabetes?
Both Joel and Sara answered “no” to each question. If either had given a “yes” answer, the application would have required the banker to elicit additional health information. Given the couple’s firm denials, however, the banker simply asked each individual to sign a statement swearing that the answers they had given were truthful to the best of their knowledge.
A few weeks later, the life insurance company issued $100,000 policies on both Joel and Sara. Each policy contained a “period of contestability” of two years’ duration. Essentially, that meant that if either person died within two years of the policy issuance, the insurance company had a right to dig into their past medical records to determine whether they had lied in their policy application. At that time, no one believed that policy language would ever become an issue for the couple.
An unfortunate ending
Just over a year and a half after Joel and Sara received the life insurance policies, Joel died as the result of a self-inflicted gunshot wound to the head. A police investigation and autopsy led authorities to believe that Joel had shot himself accidentally while he was highly intoxicated. Indeed, Sara admitted to police that Joel had been drinking beer for approximately 10 hours before the tragic accident occurred.
Notwithstanding her devastation, Sara gathered all the paperwork necessary to submit a claim to the couple’s life insurance company. The full claim submission included the following:
Police reports, which included Sara’s witness statement
The autopsy report, which revealed that Joel was suffering from an enlarged liver, and
The coroner’s report, which listed Joel’s official cause of death as “accidental self-inflicted gunshot wound due to extreme alcohol intoxication.”
Given that Joel’s death occurred during the period of contestability, the life insurance company decided to do a full investigation into Joel’s medical history before they would issue a decision on Sara’s claim. During that investigation, the insurer discovered that one year prior to the date of the couple’s life insurance application, Joel had sought medical treatment for alcoholism.
In light of this information, the life insurer denied Sara’s claim for benefits. The company contended that: (a) Joel had lied in the insurance application when he said he had not sought the advice of a physician for “any medical condition” during the three years prior to the application; and (b) had the insurance company known the truth about Joel’s alcoholism, it never would have issued him a life insurance policy.
Although the reasoning for the denial made sense to Sara, she still sought the advice of an attorney who specialized in the wrongful denial of life insurance claims. It’s a good thing she did. The attorney took the life insurance company to court and made two key arguments: (1) that Joel didn’t consider his alcoholism to be a “medical condition” that had to be disclosed; and (2) that if the insurance company found alcoholism to be a sufficient reason to deny coverage, it would have listed it among the conditions in the second question on the application.
Based on those arguments, the court sided with Sara and awarded her the $100,000 death benefit, plus interest, which she then used to pay off the loan to the bank. Sara remarked at the close of the case that she had no idea how she would have ever paid off the loan without the court’s ruling.
As lawyers who specialize in the wrongful denial of life insurance claims, we know that Sara’s case is not unusual. If you are facing a claim denial that gives you the least bit of pause, call us today. We’ll assess your case and do our best to get you the death payout 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.