Few things are more heart wrenching and demoralizing than receiving a denial from a life insurance company. Life insurance claim denials usually come at the worst of times, when a beneficiary and his or her family are still grieving the loss of the policyholder. Typically, a life insurance denial comes in the form of a “denial letter” from a life insurance company, in which the life insurance company will usually identify and list the reasons why the death benefits are being denied. By far, the most common reason for denial asserted by life insurance companies is a “material misrepresentation.”
What is a Material Misrepresentation in a Life Insurance Claim?
The most common tactic used by life insurance companies to deny a life insurance claim is by accusing the deceased policyholder of making a “material misrepresentation” on the life insurance application itself. However, under Louisiana law, a denial based on a material misrepresentation can only be made if the deceased policyholder died within two years of the policy being issued; this is known as the “2-year contestability period.”
Also, under Louisiana law (La. R.S. 22:860), in order to deny a claim for material misrepresentation, the insurer must prove the following:
- The deceased policyholder made a misrepresentation or false statement;
- This misrepresentation was material, meaning that the life insurance company would not have issued the policy if it had been aware of the misrepresentation; and
- This misrepresentation was made with an intent to deceive the insurance company.
The Louisiana Supreme Court has held in numerous cases that although the statute (La. R.S. 22:860) as written requires that a false statement bars recovery only if it is made with the intent to deceive or it materially affects the risk, Louisiana law and courts require both factors.
So, when a deceased policyholder dies while he or she is still within the 2-year contestability period, the life insurance companies will launch an investigation to find any false statement or error made by the decedent. This means an extensive review of medical records, employment records, background checks, death records, insurance records, statements, and other records. And usually, due to the complex and extensive nature of the life insurance application process (not to mention the tons of “fine print”), the insurer can find at least one error made by the decedent when completing the application. Then, the life insurance company will promptly deny the beneficiary’s claim – just like that – and send out a denial letter with a check for a refund of the premiums paid. (Note: do not deposit this refund check!)
Thus, if a deceased policyholder dies while he or she is still within the 2-year contestability period, the life insurance company will scour the records for an error or misrepresentation and then simply deny the claim. However, this is entirely improper because the life insurance companies fail to properly consider (1) whether the life insurance company would have issued the policy if it had been aware of the misrepresentation, and (2) whether the deceased policyholder had made the misrepresentation or error with an intent to deceive the insurance company.
So, again, the misrepresentation must be a “material” misrepresentation. The test for materiality (whether a misrepresentation is “material”) is whether knowledge of the true facts would have resulted in the life insurance company not issuing the policy at the rate issued. More specifically, “material” within the meaning of Louisiana life insurance laws that allow the life insurance company to void a policy based on a material misrepresentation in an application means that the statement must have been of such a nature that, had it been true, the life insurance company either would not have written the policy or would have written the policy only at a higher premium rate.
A good example of a material misrepresentation in a life insurance claim would be if an insurance applicant failed to reveal in his life insurance that he had brain cancer. In other words, if he answered “no” to a life insurance application question, “have you ever had cancer?”. This failure to answer correctly is, in fact, a misrepresentation because the answer is false. However, it is also a “material” misrepresentation because (as the life insurance company’s underwriting guidelines will reveal) the life insurance company would not have written the policy if it had known that the applicant had brain cancer.
But if the misrepresentation had been instead about a single sprained ankle, then this misrepresentation would NOT have been a “material” misrepresentation because the life insurance company would have written the policy even if it had known about the sprained-ankle. Also, keep in mind that it makes no difference if the applicant died because of a heart attack instead of brain cancer; so long as there was a material misrepresentation (regardless of the cause of death) and the death occurred within the 2-year contestability period, then the life insurance company will try to deny the claim on the basis of a material misrepresentation.
What is the Contestability Period in a Life Insurance Claim?
In terms of Louisiana life insurance claims, a contestable period (or a contestability period) is a 2-year period following the issuance of a life insurance policy in which the insurance company can “contest” the policy. So, if a life insurance policyholder dies within two years of signing the policy, then he or she dies within the “contestable period,” and the life insurance company will essentially “contest” or challenge whether it needs to pay out the policy. So, when a deceased policyholder dies while he or she is still within the 2-year contestability period, the life insurance companies will launch an investigation to find any false statement or error made by the decedent in the efforts of denying the claim. There is no time limit for such an investigation, and, at the direction of the insurance companies, these investigations tend to be lengthy and intrusive.
If the life insurance company cannot find any errors or misrepresentations, then the insurance company must pay the death benefit claim, even if the policyholder passed away on the same day that he or she took out the policy. But typically, due to the complex and extensive nature of the life insurance application process (not to mention the tons of “fine print”), the insurer can find at least one error made by the deceased policyholder when completing the application. Then, the life insurance company will promptly deny the beneficiary’s claim and send out a denial letter with a check for a refund of the premiums paid. (Note: do not deposit this refund check!)
In Order to Avoid Paying a Claim for a Material Misrepresentation in Louisiana, the Life Insurance Company Must Prove that the Policyholder Intended to Deceive the Insurance Company.
Under Louisiana law, regardless of whether a misrepresentation was “material,” a life insurance company still has the burden of proving that the deceased policyholder made a misrepresentation with an intent to deceive the insurance company. Louisiana law holds that an intent to deceive is determined from the surrounding circumstances indicating the insured’s knowledge of the false representation on a life insurance application and his recognition of the materiality of the misrepresentation. Again, the test for materiality is whether a knowledge of the facts would have resulted in the life insurance company not issuing the policy at the rate issued. An intent to deceive may also be determined from circumstances that create a reasonable assumption that the insured recognized the importance of the misrepresentation.
Proving a person’s intentions can be extremely difficult, but proving the intentions of a deceased person can be near-impossible. Nonetheless, the life insurance companies will try to do so with circumstantial evidence. However, if a lawsuit must be filed, Louisiana law is clear that a case involving intent from circumstantial evidence can almost never be dismissed before trial; thus, if the insurance company wants to win the case, they will need to prove to a jury that the deceased policyholder was an intentional liar, which can be extremely difficult and come off as offensive and insulting.
A Life Insurance Company Cannot Deny a Claim for a Material Misrepresentation If It Had Enough Information to Discover the Misrepresentation on Its Own
Though there is little that beneficiaries themselves can do upon receiving a denial for misrepresentation, there is much a qualified, experienced life insurance attorney can do, even besides refuting the materialness and intent requirement listed above. Basically, an experienced life insurance attorney can directly challenge the insurer by showing that it is in no position to deny a claim when its own actions actually prohibit a denial for a material misrepresentation.
To begin with, Louisiana law is clear that “notice of facts which would cause a reasonable person to inquire further imposes a duty of investigation upon the insurer, and failure to investigate constitutes a waiver of all powers or privileges which a reasonable search would have uncovered.” Further, “an insurer has an affirmative duty to verify, through a reasonable investigation, whether a claim was actually excluded from coverage, and when an insurer chooses to resist its contractual obligation based upon a supposed defense, which a reasonable investigation would have proved to be without merit, it acts at its peril and renders itself liable for statutory penalties and attorney’s fees.” Issues that require the determination of the reasonableness of acts and the conduct of parties under the facts and circumstances of the case cannot ordinarily be disposed of by summary judgment.
For these reasons, a life insurance company must pay out a life insurance policy if it cannot prove that neither it nor its life insurance agent could have found out about the policyholder’s medical condition through its own investigation based on the information the policyholder provided, or through the Medical Information Bureau (MIB) documents authorized by the policyholder. Also, the listing of the name of a medical provider on a life insurance medical examination is sufficient to prevent denial by a life insurance company based on medical information from that provider. Last, a life insurance company must pay out a life insurance policy if it cannot prove that neither it nor its life insurance agent knew about the policyholder’s medical condition.
What an Experienced Life Insurance Attorney Can Do for You
Hiring a qualified, experienced life insurance attorney can be one of the best decisions a denied beneficiary can make, especially when a beneficiary has been denied because of a material misrepresentation. When a life insurance company fails to keep its promise to pay the death benefits rightfully owed under a life insurance policy, an attorney can take the following actions:
- Handle the entire life insurance company’s claim denial appeal process.
- Review and investigate all the reasons for a claim denial.
- Review and investigate all of the life insurance policy documents, initial application, medical questionnaire, medical records, and other documents.
- Investigate the facts underlying the alleged reasons for the denial.
- Determine and gather the necessary documents and information in order to convince the life insurance company to reverse its decision.
- Compel the life insurance company to pay out the life insurance claim.
- File a bad faith life insurance lawsuit when the life insurance company refuses to pay.
- Retain a proper life insurance expert, if necessary, for litigation and trial.
Additionally, if a life insurance claim has been denied specifically for a material misrepresentation, an experienced life insurance attorney can take the following steps to recover the proceeds for a beneficiary:
- Review the deceased’s life insurance application to check closely for inconsistent answers and answers that reveal an undisclosed medical condition, either of which would prevent the life insurance company from denying the claim since they knew or should have known of the conditions.
- Obtain the life insurance company’s underwriting guidelines to determine whether any error or misrepresentation was, in fact, material.
- Depose the insurance company’s underwriter to determine whether any error or misrepresentation was in fact material, to assess mortality as a factor in underwriting decisions, and to find subjectivity in the underwriter’s decisions.
- Depose the insurance agent to determine if the application was handled correctly, or if the agent knew of any error or inconsistencies, or paraphrased questions.
- Check the Medical Information Bureau (MIB), which is an insurance company-sponsored database used by most insurance companies to log medical information about insurance applicants, since if there are any conditions listed on these MIB records, then the life insurance company cannot deny based on these conditions.
- Contact the treating physician of the deceased in order to understand if the deceased’s condition would have had an effect on the deceased’s mortality.
- Discover other similar individuals’ life insurance policies and applications from other individuals to see how those claims were handled.
Finally, one of the most important actions a trusted life insurance attorney can do is threaten a life insurance company with a lawsuit that includes assessing bad faith penalties and attorney’s fees against the life insurance company, especially if the filing attorney has a successful track record in these types of actions. Very often, in order to get what a beneficiary rightfully deserves, the beneficiary needs to have an attorney threaten the insurance company with consequences that are twice as bad.
Let New Orleans Legal Overturn Your Material Misrepresentation Life Insurance Denial
At New Orleans Legal, we understand the immense financial and emotional destruction that a denied life insurance claim can cause. It is heartbreaking for a grieving family to receive a denial letter after their loved one has paid premiums for the peace of mind to know that this family would be taken care of. If your life insurance claim has been denied, please call attorney Peter Diiorio at New Orleans Legal, LLC, to start to process of making things right by getting you your life insurance proceeds. We know how to overturn a life insurance denial for a material misrepresentation.
Mr. Diiorio of New Orleans Legal, LLC is an experienced Louisiana life insurance claim attorney representing insureds and beneficiaries in life insurance claim disputes against life insurance companies. Mr. Diiorio is happy to handle your case on a contingent fee basis, which means that all legal fees are taken at the end only if there is a recovery of life insurance proceeds for you. Please contact us now at (504) 897-5580 to schedule a free face-to-face, Zoom, or telephone consultation, and let us handle the life insurance company for you.
