Our lawyers have assisted clients with a variety of life insurance claim denials and coverage disputes. These fall into several broad categories: Obtaining/Keeping Coverage, Disability Waiver of Premium Claim Denials, Benefit Payment Disputes, and Insurance Company Rescission Efforts to Void or Invalidate a Life Insurance Policy
An insurance company may terminate life insurance coverage due to procedural mishaps, such as a late or lost premium payment or a failure to return a conversion application within the required time frame. Our attorneys may be able to gain reinstatement of “lapsed” coverage where, for example, payment was received within the policy’s grace period, a missed payment was lost or delayed through no fault of the policyholder, or payment should have been effected through contractual provisions for policy “loans.” Where the employer’s notice of conversion rights was itself late, the employee may in some circumstances be excused for filing a late application for conversion coverage. If you’ve lost your life insurance coverage through lateness, non-payment, or similar inadvertent procedural defects, our lawyers will defend your right to restoration of that coverage.
Disability Waiver of Premium Claim Denials:
Many life insurance policies and plans provide that coverage will continue, without cost, if the employee or policyholder is disabled. This disability waiver of premium benefit may be denied for any number of reasons, including late claim filing, failure to convert to individual coverage during the waiting period, failure to establish disability, etc. If your insurance company has denied your disability waiver of premium claim, our attorneys will fight to successfully appeal and overturn that denial.
Life Insurance Benefit Payment Disputes:
Life insurance companies may also deny or reduce benefits at the time life insurance policy proceeds are claimed. The insurer may argue that the life insurance policy excludes benefits because the employee or policyholder had a pre-existing medical condition, or died as a result of suicide, intoxication, self-inflicted injury, war, or hazardous recreational activities. Or the insurer may argue that the policy lapsed for non-payment. Insurer and beneficiary may dispute whether benefits have been properly calculated and paid in full, whether proper designation of beneficiary forms were submitted, whether payments were made to the correct persons, and other matters. If a life insurance company has denied or reduced the payment you understood you would be receiving under a life insurance policy, our lawyers can evaluate your claim and fight for any additional benefits to which you are entitled.
Insurance Company Rescission Actions:
In some cases, a life insurance company may seek to void a policy it has already issued. This is known as “rescission.” Rescission is usually sought by an insurer based on allegations that the policyholder provided incorrect answers to questions on the policy application. Because the application is a pre-condition for issuance of the policy, a successful rescission argument serves to invalidate the policy ab initio (“from the beginning”), as if the policy never existed. Insurers may seek to rescind the policy at any time, during the policyholder’s lifetime or after a claim has been filed because of the policyholder’s death.
Rescission, however, is not automatic. Just because an insurer says the policy is invalid doesn’t mean that it is. Generally, in New York, an insurer must send a letter to the policyholder or beneficiary explaining the reasons for rescission and enclosing a check constituting a full refund of the premiums paid for the policy. The recipient of such a letter should be aware that cashing the refund check can be construed as acceptance of the rescission and can undermine the party’s right to later challenge the rescission. If rescission is refused by the policyholder or beneficiary, the life insurance company must generally file a lawsuit, or “rescission action,” to obtain a court judgment that rescission is legal and proper under the facts and circumstances of the case.
Defenses to rescission run the gamut from technical or procedural defects to more substantive disagreements about the correctness of the information reported on the policy application. In New York, a policy application must be attached to the original policy for statements in that application to thereafter be binding and enforceable against the policyholder or the policyholder’s beneficiaries. An insurer’s proven failure to attach the application to the original policy can result in swift dismissal of a rescission action. Consequently, it is extremely important to carefully preserve an insurance policy in its original state. This includes staples and bindings, as these can be proof that the policy (with or without application) is in its original, pristine and untouched condition as delivered to the policyholder by the insurance company. Failure to tender the refund check may also constitute a procedural defect, preventing rescission.
In New York, a purported misstatement must generally be “material” to the risk. This means that the undisclosed or erroneous information must be more than trivial. The insurer must generally demonstrate that the information at issue would have caused it either to refuse the policy application, altogether, or to issue a different policy (for example, to charge a higher premium, or to include a rider excluding coverage for certain specified conditions).
Under New York law, the erroneous information must be an actual and unambiguous misstatement. In order to constitute a “misstatement,” the application must have included a clear question and the applicant must have provided a clearly erroneous response. An applicant is not required to volunteer information. Moreover, if a question is unclear and the applicant’s response was accurate under a reasonable reading of the question, this will not be viewed as a misstatement in most cases.
The timing of the insurer’s rescission action is also important. In New York, an insurance company may generally rescind a life insurance policy in the first 2 years regardless of whether a misstatement was intentional or fraudulent. An unintentional, or “innocent,” misstatement may be the result of a faulty memory. Or, a treating physician may not have fully disclosed a medical condition or diagnosis to the applicant. Whether innocent or intentional, misstatements in the application may generally support a successful rescission action so long as it is commenced within the first 2 years. Most New York life insurance policies contain an “incontestability” provision that, after 2 years, bars rescission based on policy misstatements (whether innocent or intentional). In other words, such policies become “absolutely” incontestable after 2 years: the insurer cannot challenge the policy based on any application misstatement. This is to promote early investigation and challenges against life insurance policies, so that policyholders and their beneficiaries are not subjected to such challenges later, perhaps after the policyholder is dead and no longer able to directly defend his or her responses to the application questions. This is in contrast to disability income policies, where incontestability provisions may either be absolute or partial, at the election of the insurer. Absolute incontestability provisions in disability insurance policies operate in the same fashion as those in life insurance policies. Partial incontestability provisions, in contrast, generally provide that after 2 years, the disability insurance policy becomes incontestable as to innocent/unintentional misstatements, but that an insurer may rescind a disability insurance policy if it proves that misstatements were made intentionally and/or with fraudulent motivations.
Faced with an insurer’s rescission claim and allegations of policy application misstatements, you may be unsure about what to do and whether there is any recourse. Given the many defenses potentially available, you should carefully consider your options. If a rescission check has been offered, you should investigate your legal rights before depositing the check. Cashing the check may be viewed as your agreement that the policy is void and unenforceable. Our lawyers stand ready to review your insurance company’s rescission allegations and assert all appropriate defenses to protect your life insurance investment.
Mark Scherzer Law :: Life Insurance Claim Denials :: Life Insurance Rescission :: New York Long Term Disability Lawyers
New York ERISA and Private Insurance Lawyers (including New York County, Bronx County, Kings County, Richmond County, Queens County, Nassau County, Suffolk County, Rockland County, Westchester County, Putnam County, Orange County, Sullivan County, Ulster County, Dutchess County, Delaware County, Greene County, Columbia County, Albany County, Rennselaer County, Clinton County, Jefferson County, Oneida County, Schenectady County, Otswego County, Saratoga County and St. Lawrence County)