Losing a close loved one is a challenging experience. In addition to grieving over a loved one’s death, surviving family members must also worry about paying off their loved one’s remaining debts and financial obligations, including burial and funeral expenses, both of which may be costly.
When an individual has an ERISA life insurance policy, many survivors expect sufficient coverage when their loved one passes away. Sadly, however, that does not always happen, and insurance companies employ many reasons to try and deny life insurance benefit claims.
When you think about it, it is undoubtedly to the insurance company’s advantage to use every means at their disposal to avoid paying life insurance benefits. After all, a life insurance company—or any insurance company, for that matter—only receives income when insured individuals make their monthly premium payments. However, insurance companies stand to lose a significant amount of money when they have to pay out a sizable life insurance claim to one or more designated beneficiaries following an insured’s death.
In some cases, insurance companies will look for loopholes in the insurance policy language to try and deny a claim for benefits. While some reasons for a claim denial are valid and logical, others are arbitrary and capricious.
If you are the beneficiary under a life insurance policy and the insurance company recently denied your claim, you may have legal options that you may consider. An experienced ERISA claims attorney in your area can review the insurance policy language with you and determine whether the life insurance company rightly or wrongfully denied your claim for insurance benefits.
If the claim denial was unlawful, your attorney can help you take the appropriate legal action against the insurance company by filing an administrative appeal, or if that appeal is unsuccessful, by filing a lawsuit directly against the insurance company in the federal court system. Finally, your attorney can address all of your legal questions and concerns along the way and help you make both informed and intelligent decisions in your case every step of the way.
The Federal ERISA Statute
The acronym ERISA stands for the Employee Retirement Income Security Act of 1974. Congress officially enacted this federal statute in September 1974. As such, it is part of the United States Code (U.S.C.).
ERISA provides minimum standards for various types of pension plans and employee benefit plans, including life insurance policies, that companies in the private sector issue to their employees.
Under the purview of the ERISA statute, companies must follow specific established standards, provide plan beneficiaries with certain information—including financial information—at regular intervals, and allow beneficiaries and plan participants access to the federal court system to address particular grievances. When an aggrieved beneficiary files an administrative appeal with the insurance company and/or a lawsuit in the federal court system, and they prevail, they may be entitled to recover the various benefits they deserve.
Like many federal statutes, ERISA can be difficult to interpret, navigate, and understand. The language and sentence structure of these statutes is exceptionally complex for the average person to comprehend.
If an insurance company denies you the benefits you deserve under an ERISA life insurance plan, an experienced ERISA attorney can explain your legal rights to you and can apply the various components of the ERISA statute to your case and circumstances.
Why Do Insurance Companies Routinely Deny Life Insurance Claims?
ERISA life insurance companies frequently look for any excuse in the book to deny a claim for benefits.
One common reason why an insurance company might deny a life insurance claim is for non-payment of premiums. A life insurance policyholder has a legal right to know when they must make their premium payments and, more importantly, what will happen if they do not pay their premiums on time.
For an individual to keep their life insurance policy active, they must make premium payments at regular intervals, usually once per month. If an insured stops making payments on their policy, either because they can no longer afford to make the payments or they forget to make their payments, the insurance company can legally terminate the policy.
In most instances, the insurance company must notify its insured in writing before terminating a policy. In other words, the insurance company cannot usually cut their insured off without informing them in writing beforehand. However, suppose the insured individual fails to make back payments on time or fails to keep up with their current payments, and they later pass away. In that case, their beneficiary will not likely have a valid right of appeal if the insurance company denies their claim.
Another common reason a life insurance company denies a claim for benefits is that the policy did not cover the stated cause of death. In some cases, insurance companies expressly exclude certain types of death from coverage under the policy. For example, the insurance company may exclude homicide as a covered cause of death or suicide—especially within the two years of contestability under most insurance policies. For life insurance policies, however, doctor-assisted euthanasia does not amount to suicide.
Moreover, insurance policies may exclude a death that resulted from the insured policyholder’s illegal activities, such as failing to wear a seatbelt in a car accident, drinking and driving, or drug and alcohol abuse that resulted in adverse health conditions, such as liver disease.
Next, an insurance company may have a right to deny a claim for benefits if the policyholder passes away during the period of contestability. For example, in a majority of states, when an individual decides to purchase a life insurance policy, the insurance company imposes a period during which they may review the information submitted on the initial policy application.
In Texas, for example, this period is two years. If an individual passes away during this time, the insurance company has a right to begin an investigation to ensure that the policyholder supplied reliable and accurate information. If the insurance company comes across misinformation in the policyholder’s application materials, then they can validly deny a claim for life insurance benefits.
Similarly, an insurance company may have a legal right to deny a claim for benefits if they determine that the policyholder was untruthful in their application for benefits. If the insured individual made an intentional misrepresentation when applying for benefits—especially about their health condition or negative habits (such as smoking)—the insurance company can validly deny a beneficiary’s claim for benefits if the insured individual later passes away.
Finally, an insurance company can deny a claim for benefits if the policyholder did not name a valid beneficiary in their policy documents. In instances where the policyholder failed to timely designate a beneficiary, the life insurance company has a duty to pay the policy according to state law—or according to the insurance policy’s express language and terms.
Other issues regarding beneficiaries may also result in a claim denial, such as cases where a policyholder names a minor child as the beneficiary or a policyholder names their spouse as the policy beneficiary, but the marriage ends in divorce.
While insurance companies sometimes have a valid legal reason for denying a life insurance claim for benefits, at other times, their reasoning may not be correct at all. A knowledgeable ERISA attorney in your area can help you determine if the insurance company made a mistake in denying your life insurance claim. In that instance, your attorney can help you take the appropriate legal action against the company and appeal the claim denial in a timely manner.
How to Handle a Benefits Denial Letter
If a life insurance company denies your claim for benefits, they have a legal obligation to send you a letter setting forth specific reasons for the claim denial. If you disagree with the insurance company’s findings, then you have the legal right to file an administrative appeal. However, you must first exhaust the administrative remedy that your insurance company provides before you file a lawsuit against the insurance company in federal court.
A skilled ERISA attorney can be beneficial as part of the administrative appeals process. Your attorney can gather additional documents, including supporting medical records, to prove your administrative appeal. However, your lawyer must introduce these additional medical records during the administrative appeal process. If your attorney must later file a lawsuit against the insurance company in the federal court system, they will be unable to supplement the record.
In addition, you must be sure to file your administrative appeal within the proper time. In its denial letter, the insurance company must explain the process for filing an administrative appeal and must state the deadline for submitting such an appeal. If you do not file your administrative appeal on time, you will almost certainly receive a second denial letter.
After you submit additional documentation as part of an administrative appeal, you may either receive the life insurance benefits you deserve or you may receive another denial. If you receive a second denial letter, your attorney can help you file a lawsuit directly against the insurance company in federal court and pursue federal litigation on your behalf.
Once your case is pending in the federal court system, the court will set a hearing date, and your attorney can represent you at your legal proceeding. During this time, your attorney cannot supplement the record with any additional documentation since the time of the administrative appeal.
A judge will then determine if the ERISA insurance company made a mistake in your case. If the insurance company did err, then you will receive the full amount of life insurance benefits you are entitled to receive as a beneficiary under the insurance policy.
How Can an ERISA Lawyer Help You if an Insurance Company Denies Your Claim for Benefits?
If you believe that an insurance company wrongfully denied your claim for life insurance benefits, you should seek the legal help that you need right away. Waiting too long to seek legal representation may jeopardize your right to recover the ERISA life insurance benefits you deserve. By having the right attorney on board as early in the process as possible, you increase your chances of recovering much-needed insurance benefits in your case.
First, an experienced ERISA attorney can review the denial letter you received from the insurance company and help you interpret it. They can also help you gather the appropriate documents and file the necessary paperwork for an administrative appeal—well within the required timeframe.
Next, if you lose your administrative appeal, your attorney can file a lawsuit on your behalf in the federal court system. Federal rules of procedure can be challenging to navigate, and your attorney can ensure that they file all paperwork in a timely manner.
Finally, if your appeal must proceed to a federal court hearing, your lawyer can represent you and make convincing arguments to the judge on your behalf. Your lawyer will do everything possible to help you recover the full life insurance benefits you’re entitled to receive under the policy.
Contact an Experienced ERISA Attorney in Your Area Today
If you receive a life insurance denial, it can be easy to panic. You were counting on those benefits to help move forward financially after your loved one’s death, and now the future might seem uncertain. You do not need to shoulder this stress alone.
By having knowledgeable legal counsel on board in your ERISA case, you significantly increase your chances of receiving a favorable result. A reliable ERISA attorney will understand the tricks and tactics that insurance companies routinely use to try and undermine claims. They can then take the necessary legal action to recover the full benefits you deserve.
Following graduation from Loyola Law School in New Orleans in 1990, Price McNamara served as a Federal Judicial Law Clerk to the Honorable John M Shaw, Chief Judge, United States District Court Western District of Louisiana.
Mr. McNamara founded J. Price McNamara ERISA Insurance Claim Attorney, and began putting his past experience to work for the injured and disabled clients he now represents against the insurance companies in personal injury and long term disability and other insurance disputes in both federal and state courts
