Over the past couple of decades or so, people throughout the United States have come to depend on their employers for many types of insurance coverage. Of course, there is no question of that when it comes to health insurance, but it can also refer to life insurance as well. In fact, among the most popular parts of the typical employee benefits package given by employers for compensation is the group life insurance plan, which often eliminates the need for a personal life insurance plan and can save employees a lot of money.
Providing Benefits Comes with Responsibility
Unfortunately, many employers seem unaware that providing employees with benefits, such a group life insurance plan, means they have taken on a significant responsibility to the employees who sign on.
The denial of a life insurance claim is extremely rare; less than one percent of all claims, according to those in the know. (Source) However, even though only 0.7 percent of all claims are denied, if you are one of them, the effect can be devastating. Because too many policyholders have been caught between a rock and a hard place when they’ve relied on employer-provided group life insurance, many states have passed laws requiring employers to disclose virtually everything about their group life insurance plan t every employee who accepts the benefit. For example, in many states, employers must tell terminated employees of their ability to convert their group life insurance plan to an individual plan after they leave their employment.
The ability to convert a policy is often extremely important to terminated employees, especially those who have underlying health conditions that could make it difficult for them to obtain a personal life insurance policy. To be able to simply convert the policy without having to undergo a thorough medical examination is often a critical consideration for such ex-employees and their families. It can also be a major consideration when they take the job.
Why Insurance Companies Deny Some Claims
There are actually a number of reasons why a life insurance carrier may deny a claim. Among the most common reasons cited for a claim denial can include an insured individual passing away within the first two years of the policy’s start date. Another might be that the insured made material misrepresentations when they answered questions about their health during the application process.
During that process, the insured is usually required to answer questions regarding their health, weight, age, income, and even prior criminal history, and if the insurance company finds any material misrepresentation in that information, they may deny your claim. A key element of that is the ‘material” part. In order to deny a claim for misrepresentation on the part of the covered employee, the false information must be material to the reason for the denial in order to justify it.
In many cases, however, a denial happens because the employer failed to do something they should, like pay the premium. In many cases, they allow the premium to lapse. Even if the policyholder/employee thinks they has insurance, the insurance company is likely to disagree. In most cases, insurance companies will use a policy lapse to deny a claim. If they’ve paid the premium on time for ten years, if your employer fails to pay one month for any reason, the insurance carrier will allow the policy to lapse and deny a claim.
Another major reason for denial is because the claim falls under an exclusion. Quite often, insurance carriers are quite specific when it comes to what they won’t cover, and if the employee’s situation falls under one of the exclusionary provisions in the policy, they will often use that exclusion to deny the claim.
If an employer fails in their duty to provide reasonable notice of life insurance policy changes or even termination, that employer may be liable to the employee for any and all damages that result from that failure. These damages can include the loss of wages and benefits during the notice period, minus salary the employee may have earned from alternate employment during the same period.
Death Claim Denials
A denied death claim happens when the life insurance carrier advises the policyholder that they will not pay their claim. In many cases, the insurance carrier will send the policyholder/employee a refund of their premiums and advise them that the policy was rescinded, which is another way of saying the claim was being denied.
This denial usually means the insurer sent you a letter with the exact reason the claim was denied, which is useful because it tells the insured what they will have to overcome if they decide to appeal the denial.
The most common reason cited for denials of life insurance claims is that inaccurate answers regarding health were given on the application. Whereas the insurer may have conducted an investigation of the information, they often deny a claim with the assertion that the insured failed to disclose some of their medical history.
Because medical claims denials tend to be very complex, it is not recommended that people handle such appeals on their own. They should instead hire a specialist; an attorney with the knowledge and the experience to help you get through the process of proving your case in a way that gets you the results and the compensation you’re entitled to.
Employers’ Obligations When It Comes to Group Life Insurance
The responsibility for administering the company’s benefit plan typically falls on the shoulders of the employer’s Human Resources Department. That usually means they have the responsibility of explaining the terms of coverage to new employees, and to inform all employees of any changes in the group policy. They also have an obligation to make sure all employees get a copy of the policy and are always fully informed of their rights and eligibility requirements.
They are also responsible for overseeing the payment of all life insurance premium after the payroll department withdraws it from the employees’ paychecks. If any employee opts to enroll in the company’s group life insurance policy, they have the right to receive a copy of that policy, even if the employer doesn’t want to because no one reads them anyway. An employer cannot withhold a copy of the full policy and expect to avoid liability. Regardless of state law, employers are never off the hook when it comes to providing all employee members with copies of the group life insurance policy. In most cases, the failure to provide a copy can attach liability to the employer, should an employee’s claim be denied. If an employee never received a copy of their life insurance policy, how can they be expected to know its terms?
Why Employers Are Increasingly Liable for Death Claims Denials
These days, it is no longer unusual for an employer to be held liable when a life insurance carrier denies a life insurance claim. In fact, many attorneys have developed a practice of representing beneficiaries of employer-based life insurance policies whose claims have been denied.
If you feel you have been wrongfully denied a claim on a life insurance policy that was part of a benefits package from your employer, there is much to consider. There are many possible scenarios in which the investigation of the denial could point to several potentially liable parties, including the employer, depending on circumstances.
There are actually many circumstances in which an employer can be held liable for a wrongly denied life insurance claim. Among those examples include the following:
- The employer misrepresented the group insurance start date.
- The employer misrepresented the policy’s eligibility requirements.
- The employer failed to notify their insured employees of the portability or conversion options available after an employee is terminated.
- The employer failed to submit certain forms to the insurance company, such as the fully completed and signed waiver of premium or evidence of insurability forms.
An employer also may be held as liable if the employee’s claim denial was based on his expired eligibility for the group insurance policy, even though he employer continued to deduct premiums for a time. There also have been many cases in which an employer was found liable for misrepresenting the status of an employee’s coverage when they were on leave for a long-term disability, or when they told an employee their insurance was in full force when that wasn’t the case. Employers have also been found liable for misrepresented the level of coverage for a dependent who wasn’t actually covered, or even how insurance benefits were calculated.
Put simply, there are many ways an employer can be considered liable for a wrongfully denied life insurance claim. However, state and local laws advise employers of their duties when they decide to provide employees with a group life insurance policy. There is no excuse for any employer to not understand how things work. Despite that, many claims are wrongfully denied because an employer failed in their duty to do certain things.
There is no question that employers who provide life insurance coverage to their employees as part of an overall benefits package are facing a large increase in the number of claims as a result of their negligence in the handling of issues related to the denial of life insurance claims by the insurance carriers’ adjusters.
In most states, employers must notify terminated employees of their right to convert in less than a month after termination; in some states, the deadline is 15 days or less. There are only one or two ways that an employer can fulfill this requirement. They can either give them the written notice in person or they can mail it to the former employee’s last known address before the deadline. If an employer fails to notify their former employee before the deadline, the former employee must be given additional time to convert their life insurance.
What most experts cite as the most common reason employers have so often been held liable for the wrongful denial of life insurance claims is based on their obligation to extend coverage even after an employee’s employment has terminated their employment. Unless there is something in writing to the contrary, most employment contracts include an implied provision in which termination is only allowed for just cause or with reasonable notice, which is a timeframe that can vary widely among employers. That is because it is dependent on several factors related to the employee’s ability to find comparable employment, including their age, length of service, and level of responsibility.
What Happens When a Policy Lapses or is Canceled?
After the employer has been paying premiums on their group life insurance policy, there may be a time when a policy lapse occurs. When that happens, the insured will receive a notice giving them 60 days to make a large premium payment to catch up the policy or the policy will be canceled. With other types of insurance, the amount the insured has to pay is a static amount.
However, with life insurance, the premiums are usually variable, which means the amount that must be paid to keep the policy in force is often so vague, it is the cause of many policy lapses and cancellations. That is because the premium is not the same as the cost of coverage. When a life insurance policy is new (for the first few years, anyway), what you pay will be higher than required. However, in your later years, your premiums will be less than the cost of coverage. If you are paying less than the cost of coverage, the insurer will deplete the cash value of the policy to make up for any shortage. Once they have taken all of your cash value, then the policy will lapse.
In such a situation, the insured will likely want to appeal that lapse, which will require them to read through the policy, especially the terms and conditions. These will explain how charges and fees can be deducted from the policy every year. That policy must be described in detail for the insured and the insurance company is required to comply with every word of it.
In one case, an insured person found that their insurance company had violated the policy terms by charging increased policy charges for 22 years. That’s why, in every appeal, it is necessary to first obtain the Annual Reports for your policy for as long as possible, in order to find out how much the insurance carrier has been taking in fees and charges over the years. If the amount of money taken from the policy is not accurate, you can use the information to appeal the lapse in policy. Of course, if that seems too complicated for you, you’re not alone. Most people need help making a case against an insurance company with deep pockets.
The thing is, while insurance carriers market themselves as caring people who help a family through the most difficult time in their lives, the real story is that they are there to make money, and one of the best ways to do that is to pay out as little as possible when claims are made. It’s always a better idea to hire an attorney to file a case on your behalf than to try to do it all yourself.
What to do in Cases of Life Insurance Fraud
Life insurance fraud, like other types of fraud, happens when the insured receives a promise in which there is no basis in truth. In most cases, that means he insurance company made a promise to the policyholder to get them to buy a policy, even though there is no basis for that promise. However, this type of fraud can also apply to an employer, if they issue employees a life insurance policy and make a promise or an assertion that they either don’t know is possible, or that they know is false. Life insurance fraud can lead to the loss of money paid in premiums or the denial of a life insurance claim. On the other hand, a successful appeal can lead to a complete refund of premiums and the full payment of the death claim. That is why it is very important to seek the facts and discover which party or parties were negligent.
To prepare an appeal for life insurance fraud, it is important to gather evidence of all statements made by the insurer or the agent that enticed the insured to entice them to buy the policy. Perhaps you have a brochure, an illustration, or maybe even a note written on the back of a card. Then, you will have to contact the insurer’s Compliance Department, and explain how those statements induced you to buy the life insurance policy in the first place.
What to Know About Contestable Life Insurance Claims
Sometimes, a contestable life insurance claim will happen. And too often, an insurer will take more time and effort to investigate that type of claim than they did to approve the policy in the first place. There is a contestability clause in every life insurance policy, and they came into existence as a way to make life insurance companies seem more trustworthy to the public at large.
There is a built-in irony to almost all contestability clauses in life insurance policies. When a claim is made before the policy is two years old, the claim will usually be paid without question. However, if the policy is more than two years old — even if it’s only by one day — the insurance company will be thoroughly investigating for any inconsistencies they can find.
The first thing you will have to do when facing a contestable claim is to establish a timeline and determine whether or not the contestable period is over. If it is contestable, the insured should carefully comply with the requests made by the insurance company, while at the same time being aware that insurers are under very strict limits on what they can request.
Because of all of the above reasons, it pays to do your homework. And because appealing a denial is such a complicated idea, you should hire an attorney who specializes in life insurance claims appeals.
At the time an insurance company would deny your life insurance claim, a loved one has died and no one should ever deal with an insurance company on their own. Insurance adjusters have one thing in their job description at times like these, and that is to limit the company’s payout, since that is a key driver of their profit.
Don’t try to do this on your own. The insurance company will have a team of lawyers on their side, so you should be prepared. An experienced and knowledgeable life insurance attorney can negotiate on your behalf, so you don’t have to. Just make sure they have experience and a good reputation before you agree to hire them, and you will get the peace of mind and the settlement you deserve. They will find out who’s responsible for the denial and get you the compensation you’re entitled to, from whichever party is responsible.
