Legal Issues Relevant to the Denial of a Life Insurance Death Benefit

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

While many people are aware that insurance companies can make obtaining policy benefits extremely difficult, fewer people may be aware that insurance companies often deny death benefits to beneficiaries under a life insurance policy.  Despite the enormous emotional trauma and financial hardships experienced by surviving family members following the death of a breadwinner, life insurance providers often deny death benefits.  Below is an overview of the most common legal issues that arise in situations where insurers deny death benefits to life insurance beneficiaries.

Fraud/Non-Disclosure/Misrepresentation: When beneficiaries file a claim (during the contestability period of a policy), for death benefits following the death of the insured, insurance companies conduct a review of information provided on the policy application.  If the information on the application is inaccurate or relevant facts are withheld when answering questions and completing the application for insurance, the insurance company might refuse to pay the claim based on misleading, omitted, or false responses.

Materiality of the Information: Although responses provided by the insured when completing a policy application must be accurate, complete and truthful, this does not mean that the insurer can deny coverage for any discrepancy or mistake no matter how insignificant.  The insurer cannot justify such a denial unless the inaccurate or withheld information is “material.”  A judge will consider the information material if the policy would not have been issued, or the insurer would have insisted on different terms had the insurer been aware of the true facts.

Disclosure of Relevant Information: Although an insured may have informed his or her insurance agent about a medical procedure, serious illness, or lifestyle factor, the agent might fail to communicate this information to the insurance company during the application process.  This is a good reason why a life insurance applicant should carefully review the responses completed by the agent prior to signing a life insurance application.  If you note errors or omissions by the agent during this review, you should speak up so the application accurately reflects your responses.  

Belief and Knowledge: Many insurance applications only require the applicant to certify the information is accurate based on his or her “belief and knowledge.”  When this language is present in the application, the insurance company might face a tougher task in using information in the application to deny coverage.  While an honest mistake or oversight might still justify the denial of a death benefit, a court might reject this position if the insured had no intent to deceive the insurer.

Contestability Period: One of the most important issues in terms of an insurer challenging the payment of a death benefit involves the timing of the policyholder’s death.  When a policyholder passes away less than two years after coverage was issued, the insurance carrier has the right to investigate the responses in the application for purposes of identifying non-disclosures and misrepresentations.  Cooperation with the insurance company is required during the contestability period.  The insurer will examine medical records for information regarding illnesses, injuries, or other medical issues that indicate the insured omitted or misrepresented facts about his or her medical condition.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

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