Theories of Recovery and Denied Life Insurance Claims

Posted on August 15, 2016

DiGeorge Life Insurance Law (www.DiGeorgeLifeInsuranceLaw.com) has successfully handled cases where our client had initially used another law firm to fight a denied life insurance claim only for their firm to also be denied. If their attorney is not able to get a policy paid, most people give up and stop pursuing the claim. Although it can be disheartening to receive repeated denials on a life insurance policy that should be paid, persistence often does pay off. There are many cases where getting a second opinion is the first step in getting a denial overturned.

In reviewing cases where another law firm had been hired by the client, we often see that the first attorney framed their legal argument incorrectly or failed to draw the correct inferences from subtle bits of information. In demanding that the policy be paid they did not put forth a winning “theory of recovery”. Establishing the correct theory of recovery is everything when it comes to getting a life policy paid. Obviously there are many life insurance claims that are rightfully denied. This blog, however, is referring specifically to those clients that have legitimate claims, but are still unable to get the policy paid. These clients have good cases; and, as the beneficiary, they are entitled to the policy being paid. Nevertheless, for any of a thousand possible reasons, the life insurance company is refusing to pay.

Establishing a winning theory of recovery means leaving the life insurance company no wiggle room to avoid its contractual liability to pay the claim. On the other hand, demanding payment based upon the wrong theory of recovery almost always guarantees a denial. In fact, insurance company claim agents are thrilled when the client or their attorney asserts the wrong theory of recovery because they will respond to the argument that’s put forth and avoid addressing the circumstances that would establish their legal liability to pay. If you, or your attorney, do not clearly establish the insurance company’s legal liability to pay the claim, the life insurance company is not going to do it for you.

Many life insurance cases turn on key dates. Did a policy lapse for nonpayment? Was a lapse notice sent? Was a payment or partial payment made and accepted before the grace period expired? When did the grace period expire? We recently saw a case where there was a pending lapse for nonpayment and then a payment was made and accepted by the insurance company. Based on the facts of the case, there were two potential dates that could have been argued as being the expiration date of the grace period. The attorney involved wrote a letter demanding payment from the insurance company, but instead of framing his legal argument on one of the two possible dates, he picked a third date as the expiration of the grace period. Unfortunately, there was no way this third date could have been legally correct and the insurance company promptly sent the lawyer another denial on a case that should have been paid.

When someone becomes aware that they are the beneficiary of a life insurance policy, they usually try to file the claim directly with the life insurance company. It seems simple enough, but it is amazing how many things can and do go wrong as the insurance company examines every possible way out of the contract. An alarming number of completely legitimate life insurance policies are never paid out. Good data is hard to find, but it is believed that the majority of term life policies are never paid. It’s not difficult to understand that the life insurance companies will look for every possible opportunity to avoid paying out the policy.

If you run into trouble getting a claim paid, discuss your situation with an attorney who understands the nuances of life insurance practice. Even a good attorney can easily get tripped up if they don’t have significant experience looking at these cases. If you used an attorney who was unsuccessful, we recommend that you let another lawyer review your file. It can’t hurt to get a second opinion. It is possible that you really did have a good case, but the theory of recovery was wrong.