14 March 2014 0 Comments

Is there an attorney in the house?

shutterstock_164503736In my previous entry I discussed two actual situations in which applicants for life insurance did not bind the offer they received from the insurance company and ended up dying with no insurance in force.  Did the estate of either of these individuals have a case for suing the insurance company and/or agent to recoup death benefit proceeds that were denied?

Whenever an insurance claim is denied it seems as though the call goes out, “Is there an attorney in the house?” and a suit for recovery and damages often follows.  Since I am not an attorney I offer no legal opinion regarding these two cases, but only report what actually transpired.

In the first scenario, where the applicant was issued a policy, but didn’t pay the initial premium because he didn’t like the offer, no legal action was pursued. Since the deceased was an attorney who had previously been an agent, it’s likely that there was no recourse possible for the beneficiaries.  It would have been tough to argue that he didn’t understand how to bind coverage.  It was clear that no coverage was in force since the premium had not been paid.  Had the applicant merely paid the first premium he would then have had the free look period in which to consider the offer without incurring any obligation and the insurance company would have been on the hook.

In the second case the applicant not only didn’t pay the premium because there was an extra  charge due to irregular blood work found on the medical exam, but he then visited his own doctor whose further testing revealed a previously undiagnosed cancer.  The insurance company then withdrew their offer of any insurance.  In this case after the applicant’s death the beneficiary filed a law suit against the insurance company and the agent, but the defense prevailed and no benefits were paid to the plaintiffs.  A very instrumental factor in this decision was that the agent had written the applicant a letter stating that he should not discontinue his old policy until the underwriting process was complete for the new policy and that he should bind the insurance company’s initial offer before digging for reasons to support his suspicion of an incorrect diagnosis.

Here are the lessons to be learned:

  • If the insurance company will accept a premium payment with the application when it’s submitted, pay it.
  • Accept and pay for any offer before providing any other underwriting data.
  • Check with your agent about how to use the policy’s “free-look” provision if you still want to find a better deal.
  • Finally, if a claim is denied it isn’t a bad idea to consult with an attorney who is experienced in life insurance claims to see if you have a case.

Coming up…some tips on how to establish a good relationship with an insurance agent.

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