As attorneys who specialize in the wrongful denial of life insurance claims and accidental life insurance claims we often think we've seen just about every excuse life insurers could possible come up with for denying a valid claim. Inevitably, however, the insurance companies prove us wrong by issuing yet another bogus claim denial that stretches the bounds of plausibility.
Life insurance claims adjusters don't issue these illicit claim denials because they are trying to work on their creative writing skills. In truth, they are under a great deal of pressure to deny valid claims. This is because each time a life insurance company can avoid a policy payout, the insurance company shows greater profits at the end of the year. Under this never-ending pressure to generate maximum profits, claims adjusters manufacturer false justifications for claim denials hoping that grieving beneficiaries won't have the emotional wherewithal to question their decision.
This article examines one case where an insurance company devised a truly creative, if not downright dishonest, justification for denying a large payout. Indeed, given that the policyholder at issue in this particular case had an “Accidental Death and Dismemberment” (“AD&D”) rider in place, the insurance company was desperate to avoid payment.
For those of you unfamiliar with AD&D riders, they typically pay out three times the amount owed under the main policy if the insured dies in an accident. Let’s say, for example, that an insured with a $500,000 policy dies in automobile accident. The policy would pay his beneficiary the $500,000, plus an additional $1,500,000 under the AD&D rider. Those are expensive claims for life insurance companies and, as this case illustrates, ones they try very hard to avoid.
A freak accident at the gas pump
The insured in this particular case was a man named Fred. Fred was a retired from the electrical workers’ union. For 20 years, he had had a life insurance policy that was provided to him as a union benefit. As with most policies, Fred was required to fill out a health questionnaire before the life insurance company would agree to insure him.
Among other things, the questionnaire asked whether Fred was a smoker and whether he had any significant health conditions. At the time he filled out the questionnaire, Fred truthfully answered “no” to both questions. In fact, that answer remained truthful up until the day Fred died.
Indeed, it was ironic that a cigarette played a pivotal role in Fred's death. A few days before his 72nd birthday, Fred stopped at a local gas station to fill his tank. Like most gas stations, there was quite a bit of gas and oil leakage on the ground near the tanks. This particular gas station seemed to have several little pools of gasoline, rather than little wet spots.
While Fred filled his tank on this fateful day, a man walked out of the mini-mart attached to the gas station and flicked a lit cigarette onto the ground. The cigarette immediately ignited gas that had spilled onto the ground. The flames quickly progressed up the hose Fred was using to fill the tank.
Within milliseconds, the entire scene exploded in fire and Fred was burned to death. As you might imagine, emergency personnel were quickly on scene and reports were generated by both the police and fire departments. After full investigation, both departments concluded that: (1) the fire had been caused by a lit cigarette; (2) surveillance video revealed that a man leaving the mini-mart, and not Fred, had been the one to toss that cigarette on the ground; and (3) that man did not intend to start a fire but rather just flicked the cigarette down absent-mindedly.
An unbelievable claim denial
Shortly thereafter, Fred's widow, Mary, filed a claim for life insurance benefits against his insurance company. Specifically, she made claims against his regular policy as well as his AD&D rider. Shockingly, a letter came in the mail a few weeks later where the life insurance company purported to deny both claims.
As to Mary’s claim under the principle policy, the insurance company claimed that: (a) Fred may have been smoking at the time of his death; (b) he had claimed he was a non-smoker in his policy application; (c) that claim was a material misrepresentation; and (d) because the insurer never would have issued the policy had it known Fred was a smoker, it didn’t have to pay out a death benefit now.
As for the claim under the AD&D rider, the insurance company claimed that whomever threw down the cigarette on the day of the incident “intended” to start a fire. As such, the insurer explained, Fred’s death was not an “accident” and AD&D coverage had to be denied.
After reading the letter a couple of times, Mary decided to call an attorney specializing in the wrongful denial of life insurance claims. She thought to herself that perhaps if the insurer had denied one claim or another, she may have just accepted the decision. But giving 2 seemingly nonsensical claim denial justifications in one letter was too much for her to bear.
Mary's attorney reviewed the case and immediately agreed that the insurance company was acting in bad faith. Within a week he gave the insurance company notice of his intent to file a lawsuit on Mary's behalf. He gave the insurance company 30 days to change its denial decision before he was going to file the case with the court.
Predictably, 29 days later, Mary's attorney received a phone call from the life insurance company. They claimed that an internal review panel had fully studied the police and fire department reports concerning Fred's death and had reached the conclusion that the death was covered by his principle policy as well as his AD&D rider. Mary received a check for the full policy amount just 10 days later.
If you have received a life insurance claim denial that seems unreasonable, please do not hesitate to contact our office. As in Mary's case, many claim denials can be overturned simply by having an attorney show the insurance company the error of its ways. Call today. We're here to help.