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Legal Issues in Life Insurance Claims


It's hard to believe, but the last thing you might expect to happen is an insurance company denying your death benefits under a life insurance policy. Believe it or not, but this happens all the time and insurance companies, under certain situations, can and will deny a death benefit claim. In this article, we briefly explore the issues involved when an insurance company fails to make payment of proceeds of a claim. If you are a beneficiary under a policy, here are some things you should be aware of:

Contestability. The insurer has the right to deny payment under a claim during the "contestable" period. Stated simply, if the insured (the person who bought the policy) dies within less than 2 years after the policy was issued, the company can investigate the insured's responses on the application for insurance. Typically, the company will request to review the medical records of the insured. If the insurer discovers that the applicant misrepresented his or her medical condition, or omitted pertinent information, it can deny payment. The law allows insurance companies to take such action. Even if the denial occurs, however, it doesn't mean that the beneficiary doesn't have recourse. Certain arguments may be available to the beneficiary to counter the denial of the claim.

Materiality. In general, for a company to deny payment under a policy, the misrepresented or omitted fact must be material in nature. A particular fact is "material" if, had it been fully and correctly disclosed on the application, the insurer would have either denied coverage or provided coverage to the insured under different terms. Unfortunately for the beneficiary, it is not difficult to prove that the fact at issue was material.


Knowledge and Belief. To assess whether the applicant made a material omission or misrepresentation on the application, the lawyer for the beneficiary must examine the application itself. Many applications contain language which requires the insured to attest to his or her "knowledge and/or belief" that the information provided is accurate. Such language is critical because it may impose a tougher burden on the company to prove that a misrepresentation was made. For example, if the insured stated he did not see a doctor in the last 5 years, even though his medical records indicated otherwise, and his statement was made honestly and not with an intention to deceive, arguably there is no misrepresentation.

Disclosure of Information to the Agent. In some situations, the insured might have disclosed information about his medical condition to the agent, and the agent failed to transmit that information on the application. In such case, the company may be legally charged with having knowledge of such information. For this reason, it is important to go over the application process carefully with your attorney.

If your claim for life insurance proceeds has been denied, you may take the following steps to pursue your rights:

1) Contact an attorney who is familiar with insurance law.

2) Ask the attorney if he charges on an hourly basis or contingency fee. If he or she charges hourly, find out the hourly rate. If he or she charges a contingency, find out what the contingency fee is.

3) Ask the attorney to provide you with a copy of the fee agreement.

4) Ask the attorney whether your claim is viable and, if so, what arguments and defenses might be raised.

5) Ask the attorney if he or she will try to settle your claim before litigation or if he or she will sue immediately.

We believe that by taking the steps noted above, you will be informed in prosecuting your claim against the insurance company.

This article was written by attorney Joe Rosen. Joe specializes in handling life insurance and other insurance related claims on behalf of claimants against insurance companies. He can be reached at 561-988-3083 or at http://www.rosenlawboca.com



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