Life insurance claims denials during the contestable period can be extremely frustrating for beneficiaries. The contestable period is a time frame, typically two years, during which the insurance company can investigate and challenge claims based on issues such as misrepresentations made on the application or the insured’s medical history. During this period, insurers may attempt to deny claims for a variety of reasons, and it is not uncommon for beneficiaries to sue the insurance company to contest these denials. Below, we explore the most common reasons that lead to lawsuits filed against life insurance companies regarding contestable period denials.
Misrepresentation on the Application
One of the most common grounds for contestable period denials is the allegation of misrepresentation. Insurance companies often claim that the insured made false statements or omitted important information on the application, which they argue renders the policy invalid. However, beneficiaries may challenge these denials if they believe the alleged misrepresentations were unintentional, immaterial, or did not contribute to the insured’s death. For example, if the insured accidentally omitted minor details about their medical history that did not affect their overall health or the cause of death, beneficiaries may argue that the misrepresentation should not result in a denial of benefits.
Ambiguous or Vague Policy Language
In many cases, the language of the life insurance policy itself can be ambiguous, making it difficult for beneficiaries to understand the terms and conditions of the contract. Vague or unclear policy language often leads to disputes about the validity of contestable period denials. For instance, an insurance company might interpret a clause in a way that benefits them, while beneficiaries might interpret it differently. This lack of clarity can result in lawsuits, where beneficiaries argue that the insurance company’s interpretation of the policy is unreasonable or unjust.
Medical History and Cause of Death
During the contestable period, life insurance companies frequently deny claims based on the insured’s pre-existing medical conditions or the cause of death. However, these denials can sometimes be incorrect or unfair, especially if the insurer’s assessment of the medical history or cause of death is inaccurate. Beneficiaries may sue if they believe the insurer failed to correctly evaluate the medical records or overlooked crucial information that would have supported the claim. For example, if the insured had a medical condition that was stable and unrelated to their cause of death, beneficiaries could argue that the denial was unjustified.
Failure to Properly Investigate the Claim
Insurance companies have a legal obligation to thoroughly investigate claims before denying them. If an insurer denies a claim during the contestable period without conducting a proper investigation or gathering sufficient evidence, beneficiaries may file a lawsuit for negligence or bad faith. For example, if the insurer does not request or review critical medical records or fails to interview relevant witnesses, they could be accused of denying the claim unfairly without fully understanding the circumstances surrounding the death.
Unreasonable Delay in Processing Claims
Another common reason for lawsuits is when life insurance companies delay the processing of a claim, especially during the contestable period. Beneficiaries may sue if the insurer takes an unreasonably long time to process a claim, causing financial hardship for the beneficiaries or exacerbating the emotional stress of an already difficult situation. Insurance companies are expected to act in a timely manner, and if they fail to do so, it may be grounds for a lawsuit based on breach of contract or bad faith.
Failure to Notify Beneficiaries About the Contestable Period
Life insurance companies have a duty to inform beneficiaries about the contestable period and its implications clearly and transparently. If an insurer fails to notify the beneficiaries about the contestable period and its restrictions, they may be held accountable for a lack of transparency. Beneficiaries may sue for violation of contractual obligations or for failing to uphold the insurer's duty to fully disclose critical terms and conditions of the policy.
Improper Rescission of the Policy
In some cases, insurance companies may attempt to rescind the policy altogether during the contestable period, claiming that the insured provided false or incomplete information on their application. However, beneficiaries may challenge these rescissions if they believe the insurer is wrongfully trying to void the policy. In these cases, beneficiaries may argue that the insurer failed to follow the proper legal procedures for rescission or that the information provided on the application was accurate and did not affect the outcome of the claim.
Breach of Contract
Breach of contract claims can arise if the insurer denies a claim during the contestable period without valid reasons or proper justification. In such cases, beneficiaries may file lawsuits alleging that the insurance company did not honor the terms of the policy. If the insurer does not adhere to the contractual terms—such as providing coverage for certain causes of death or honoring specific policy exclusions—beneficiaries may take legal action to enforce the policy and secure the benefits owed to them.
Bad Faith Practices
Bad faith insurance practices involve actions by an insurance company that intentionally harm or deceive the policyholder or beneficiary. This includes denying a claim without valid reasons, delaying the processing of a claim to avoid payment, or using unfair tactics to minimize the payout. If a life insurance company engages in bad faith practices, beneficiaries may sue for damages in addition to the death benefits. Bad faith claims are serious and can result in punitive damages if the insurer’s conduct is found to be egregious.
Failure to Adhere to State Regulations
Life insurance companies must comply with state-specific regulations that govern contestable periods and claim denials. If an insurance company fails to adhere to these state regulations, beneficiaries can file lawsuits based on statutory violations. State laws are in place to protect consumers, and any violation of these laws could lead to legal consequences for the insurer, including penalties and damages.
Our Life Insurance Lawyers Fight Denials and Win!
If you’re facing a life insurance claim denial during the contestable period, it's important to remember that you have legal rights. Our experienced life insurance lawyers have a track record of successfully fighting back against denials, and we can help you navigate the complexities of contestable period claims. Whether the issue is a misrepresentation, failure to investigate, or a breach of contract, we’re here to assist you in getting the benefits your loved one intended for you. Contact us today to discuss your case, and let us put our expertise to work for you.