Life insurance companies have very strict rules about when they pay out for death benefits and how they deny claims for families. When an insurance company tries to reject the payment of benefits or slow down payments to beneficiaries, a Reno bad faith insurance attorney like Matthew L. Sharp is a family’s best option to protect their rights and receive their benefits.
What Is “Bad Faith”?
Under US law, insurance companies are required to act in “good faith” for every interaction with the people they insure. This “good faith” implies that the insurance company will honor claims under the insurance contract as long as the policyholder pays premiums and meets the requirements of the policy.
An insurance company acts in “bad faith” when it fails to provide the benefits the policyholder paid for. “Bad faith” may include anything from denial of coverage for medical procedures to refusal to cover accident damages to underpayment of death benefits. A Reno bad faith insurance attorney can file a lawsuit against an insurance company when the company fails to provide the benefits the policyholder paid for.
In life insurance cases, a Reno bad faith insurance attorney will fight against one of typically five attacks from the insurance company.
1. Policyholder Died During the Contestability Period
In most life insurance policies, the insurance company includes a clause that creates a two year contestability period. If the policyholder dies during the contestability period, the insurance company has the right to perform a full investigation of the cause of death. The insurer may then claim that the policyholder withheld information on the insurance application, and the omission of information led to lower premiums.
For example, a smoker does not include details about smoking on his or her application. Just 18 months later, the smoker dies from lung cancer. The insurance company can deny payment, because the lack of information about the policyholder’s health affected the calculation of premiums and benefits.
While there are some cases where misrepresentation does contribute to a legitimate denial of benefits, a Reno bad faith insurance attorney can argue that the lack of information or misrepresentation had nothing to do with the cause of death, and may secure death benefits for the family.
2. Misrepresentation
Insurance companies will use any inaccuracy on a policy to deny payment of benefits. Major misrepresentations of medical history or current health problems are errors that significantly reduce payments and may result in the cancellation of the policy before payment occurs.
Smaller errors, such as a misspelled name or incorrect address, may be used by the insurance company to deny claims, but their denial infrequently stands up to cross examination from a Reno bad faith insurance attorney.
3. Unpaid Premiums
The most common reason insurance companies refuse to pay is lapsed payments. Most policies do have grace periods or other payment protections in place that prevent the cancelation of the policy without sufficient notice. Whole life insurance policies often allow the policyholder to use part of the value of the policy to pay premiums when a payment is missed, giving flexibility for policyholders who are struggling financially.
Insurance companies often use unpaid premiums as an excuse for slow payment of benefits. In reality, they are acting in bad faith. An experienced attorney can prove the payment history with bank statements and policy statements.
4. Cause of Death
Not every death is covered under every policy, and insurance companies act in bad faith when they limit the type of death that is covered under the written policy. Some companies will exclude death benefits for people who engage in dangerous activities or put themselves at risk on a regular basis; however, these limitations rarely hold up in court.
There are only two causes of death for which an insurance company can deny benefits. The first is murder committed by the policyholder to cash out the policy. Second, suicide is generally excluded from all policies. A Reno bad faith attorney may be able to prove accidental death rather than suicide in an attempt to secure benefits.
5. Beneficiary Issues
When the beneficiary is unclear or unavailable, the insurance company will not make a payment on the policy. The policy must have accurate information about potential beneficiaries, and those beneficiaries must be updated to reflect changes in life status. For example, policyholders must change the name of their spouse on the insurance documents or add the names of their children in order to receive prompt payment.
An experienced attorney, working with the family, can settle beneficiary issues and speed up the process of payment.
Just because an insurance company contests death benefits does not mean the insurer will never pay off on the policy. A Reno bad faith insurance attorney may be able to prove the insurance company is acting in bad faith and receive an order from the court to pay the policy as quickly as possible.
