Denied AIG Life Insurance Claim for Misrepresentation? How We Recovered $300,000 for Our Client
Our life insurance attorneys recently secured a $300,000 settlement from AIG after the company denied a life insurance claim based on “material misrepresentation.” The denial occurred after the insured’s death, with AIG alleging that the policyholder had failed to disclose key medical information on their original application. In response, the insurer declared the policy void from inception—meaning they claimed the policy never existed and refused to pay any benefits.
Despite this aggressive position, our legal team launched a detailed investigation, requested the insurer’s full claims file, and analyzed every document the insured had submitted. We uncovered evidence that the alleged misrepresentation had no bearing on the cause of death and would not have altered the insurer’s decision to issue coverage. Through a combination of strategic negotiation and legal pressure, we reversed the denial and recovered the full $300,000 death benefit.
This case is more than a win for one family—it’s a powerful reminder that life insurance companies do not have the final word. When a claim is denied based on misrepresentation, legal recourse may still exist. With an experienced life insurance attorney, beneficiaries can challenge the denial and often secure the benefits they were promised.
Why Life Insurance Claims Are Denied for Misrepresentation
Life insurance companies deny claims for many reasons, but one of the most frequently cited is “material misrepresentation.” This term refers to an alleged false statement or omission made by the policyholder on their original application for coverage. Common examples include failing to report a health condition, minimizing alcohol or tobacco use, or leaving out a prescription drug. Sometimes the errors are genuine mistakes. Other times, they result from confusing questions or misunderstandings during the application process.
When the insurer reviews a claim—especially if the policyholder died within the first two years—they often comb through the application in search of discrepancies. If they find anything they can argue is inaccurate, they may attempt to rescind the policy entirely and return only the premiums paid. This tactic saves them from paying large death benefits and is often used even when the so-called misrepresentation had no connection to the death.
The Contestability Period: A Window of Risk for Beneficiaries
Nearly every life insurance policy includes a contestability clause. This provision gives the insurer the right to review the policyholder’s application and void the policy if they uncover misstatements within the first two years of coverage. During this period, any cause of death—natural or accidental—can trigger scrutiny.
Insurers take full advantage of this window. If the insured dies during the contestability period, the company will often delay the claim and conduct a detailed investigation into the insured’s background, medical history, and application answers. They may even subpoena medical records or pharmacy databases to build a case for denial.
However, not all errors justify rescission. For a misstatement to be considered “material,” the insurer must show that they would not have issued the policy—or would have issued it with different terms—had they known the truth. If the mistake had no impact on the risk or pricing of the policy, it should not result in denial.
Misrepresentation vs. Fraud: Why Intent Matters
Even if a policyholder made an error on their application, that doesn’t necessarily mean the insurer has the right to deny the claim. The law distinguishes between innocent misstatements and intentional fraud. Once the contestability period expires, insurers are generally prohibited from voiding a policy unless they can prove that the misrepresentation was made with the intent to deceive.
Proving fraud is a high bar. The insurer must demonstrate that the policyholder knowingly gave false answers in order to obtain coverage. Innocent mistakes, forgotten details, or unintentional omissions are not enough. In our recent case against AIG, we showed that the alleged omission was not only immaterial but was also likely the result of miscommunication or oversight—far from the level required to establish fraud.
Frequently Asked Questions About Life Insurance Denials for Misrepresentation
What does “material misrepresentation” mean in a life insurance policy?
A material misrepresentation is a false or incomplete statement on the life insurance application that would have changed the insurer’s decision to issue coverage or determine the premium. Not every misstatement is considered material. The insurer must show that the truth would have altered their underwriting decision.
Can an insurance company void a policy after the insured dies?
Yes—but only under certain conditions. If the policyholder dies within the contestability period (typically the first two years), the insurer can investigate and may attempt to void the policy for misrepresentation. After that period, they must prove fraud to deny a claim.
What is the contestability period in life insurance?
The contestability period is usually the first two years from the policy’s effective date. During this time, the insurer can rescind the policy if they uncover material misstatements in the application. Once this period ends, the policy is generally incontestable, except in cases of fraud.
Does the misrepresentation have to relate to the cause of death?
Not necessarily—but if the misstatement had nothing to do with the risk being insured, courts may view the denial skeptically. For example, failing to disclose a mild condition that had no connection to the death is unlikely to justify denial.
What if the insurer claims the policy is “void from inception”?
That phrase means the insurer believes the policy was never valid due to fraud or material misrepresentation. However, insurers don’t have the final word. Legal counsel can challenge that determination and compel payment if the facts don’t support the denial.
Can beneficiaries appeal a denied life insurance claim?
Yes. Most life insurance policies include a formal appeal process. Beneficiaries can submit new evidence, legal arguments, and documentation to dispute the insurer’s decision. If the appeal is unsuccessful, legal action may be necessary.
How can a lawyer help with a misrepresentation-based denial?
An experienced life insurance attorney can assess whether the alleged misrepresentation was actually material, gather evidence to support your claim, and negotiate directly with the insurer. In many cases, insurers are more willing to settle once they face legal opposition.
Is there a time limit to dispute a denied life insurance claim?
Yes. Each state has statutes of limitations for filing lawsuits related to denied insurance benefits. These limits vary, so it's critical to act quickly after receiving a denial.
What if the policyholder made a genuine mistake on the application?
Genuine mistakes or unintentional omissions are often not enough to justify denial—especially if the policy is beyond the contestability period. Legal arguments can be made that the mistake was not material or was the result of ambiguity in the insurer’s questions.
Can an insurer deny a claim for something the policyholder forgot to mention?
Only if the omission is deemed material and falls within the contestability period. Forgetting to report a minor illness or resolved condition is rarely enough for denial unless it significantly impacted the insurer’s underwriting decision.