For decades, our law firm has focused exclusively on contesting the wrongful denial of life insurance claims. We've reviewed thousands of cases and seen insurers twist policy language into pretzels in their effort to avoid paying beneficiaries. One of the most commonly misused tactics involves citing so-called “illegal drug exclusions.” These clauses are designed to void coverage if the insured had illegal substances in their system at the time of death—but insurers often apply them far too broadly, even in cases where the substance use was lawful or unrelated to the cause of death.
A recent case we handled serves as a powerful example of just how far insurance companies are willing to stretch these exclusions. The facts of the case were unusual, but the underlying tactic—using technicalities to deny a claim and hope the beneficiary gives up—is one we see all the time.
The Religious Use of Peyote—and a Predictable Denial
The case involved a policyholder named Bill, an accountant and respected elder in his local Native American church. As part of his spiritual practice, Bill occasionally participated in religious ceremonies that included the ritualistic and legally protected use of peyote—a hallucinogenic plant used in Native American spiritual rites. Although peyote is classified as a Schedule I controlled substance under federal law, its use is explicitly legal for members of certain federally recognized tribes and religious organizations, thanks to First Amendment protections and federal carve-outs.
One spring, Bill participated in such a ceremony. The event took place overnight, and he didn’t drive home until the next morning. Tragically, on the drive back, Bill failed to navigate a sharp turn and was killed in a single-vehicle crash. His autopsy revealed the presence of peyote in his bloodstream, though there was no evidence that it impaired his driving at the time of the accident.
When Bill’s wife, Sally, filed a life insurance claim, she included all the required documents: the death certificate, autopsy report, and police records. About a month later, she received a denial letter. The insurer claimed that because peyote—a federally controlled substance—was present in Bill’s system, his death triggered the illegal drug exclusion in the policy. As a result, they refused to pay the death benefit.
The Flawed Logic Behind the Denial
Sally, a paralegal by trade, immediately recognized something wasn’t right. Bill’s peyote use was entirely legal under federal and state law due to his religious affiliation. The insurance company had apparently conducted no investigation into whether the use was lawful or whether it contributed to his death. It had simply seized upon the word “peyote” in the autopsy and used that as a convenient excuse to deny the claim.
Fortunately, Sally knew how to respond: she contacted an attorney who specialized in life insurance disputes. Upon reviewing the documents, the attorney saw that the insurer had likely acted in bad faith—intentionally ignoring relevant legal context and hoping that the grieving widow wouldn’t challenge their decision.
The attorney responded immediately. He submitted proof of Bill’s tribal affiliation, his role as an elder, and documentation from prior federal court decisions upholding the legal use of peyote in religious ceremonies. He reminded the insurer that the illegal drug exclusion applied only when the drug use was unlawful—something clearly not true in this case.
The Insurer Reverses Course—But Only After Being Pressured
Faced with legal precedent, indisputable evidence, and the threat of litigation, the insurance company quickly backed down. They reversed the denial and issued the full policy benefit to Sally—along with interest. But had she not known how to respond or had she hesitated to consult an attorney, the outcome could have been very different.
This case highlights a troubling trend: insurers routinely deny claims based on illegal drug exclusions, even when the use of the substance was not illegal or had no bearing on the cause of death. These denials are not based on law—they’re based on the assumption that most people won’t fight back.
How Insurers Misuse Illegal Drug Exclusions
The “illegal drug exclusion” is often written to sound absolute. Most policies state that if the insured had a controlled substance in their system—regardless of whether the substance caused the death—the claim may be denied. But courts have consistently held that context matters. Here’s what beneficiaries should understand:
Legal exceptions exist: Religious use, medical prescriptions, and state-level legality (such as medical cannabis) can all undermine the insurer’s justification for denial.
Causation is critical: Even if a substance was present, the insurer must often prove that the substance contributed to or caused the death.
Bad faith denials can be challenged: If the insurer fails to conduct a reasonable investigation or misapplies policy terms, they may be liable under state laws prohibiting unfair claim practices.
What to Do If Your Claim Was Denied Due to Drug Use
If your loved one’s life insurance claim was denied based on drug use—or if the denial letter cites an illegal drug exclusion—do not assume the insurer is correct. These exclusions are highly nuanced, and insurers often bet on your lack of legal knowledge. But with the right legal support, many of these denials can be overturned.
Our firm handles cases just like this every day. We know how to scrutinize policy language, challenge unlawful denials, and present the evidence that insurers hope you won’t find. Whether your claim involves a prescription drug, marijuana, or a unique case like religious peyote use, we’re here to help.
If you've received a life insurance claim denial based on an illegal drug exclusion—especially when the drug use was lawful or unrelated to the cause of death—contact our firm today. Your consultation is free, and we only get paid if we recover money for you. Don't let the insurance company get away with twisting the law to avoid honoring your loved one’s policy.