Life Insurance Dispute Litigation

While most life insurance claims go smoothly, in rare cases disputes can arise that can delay or prevent payment to the beneficiary. Often these difficulties can be resolved amicably and without undue delay; sometimes, however, such cases lead to life insurance dispute litigation, which can be costly and prevent payment for a lengthy period of time. Court proceedings should be avoided if possible, but when legal action becomes necessary, it is essential to enlist the services of a qualified legal professional in order to ensure that your rights and financial interests are protected in any such proceedings.

There are several reasons why insurance companies may attempt to avoid payment on a claim. The most usual cause cited is "material nondisclosure." This occurs when the insurance company believes, rightly or wrongly, that information was omitted or concealed by the insured at the time the policy was issued; this could include serious medical conditions, hazardous activities, hobbies, or job responsibilities, or travel to countries or areas that are considered dangerous. The insurer essentially argues that they would not have issued the policy if they had known of these conditions or activities. Other reasons given by insurance companies for denying a life insurance claim include nonpayment of premiums that led to a lapse in the policy and, in some rare instances, clerical error on the part of the insurance company may be cited as a reason for voiding the policy and denying payment.

If an agreement cannot be reached, life insurance dispute litigation is usually the result. Typically one or more of the beneficiaries files a civil suit seeking a full payment of the face value of the policy; the insurance company must then defend its decision to deny the claim. If the insurance company can prove that the policyholder deliberately concealed information material to the policy or did so recklessly and without normal care, then the court will usually rule in favor of the insurer. However, if the omission was the result of innocent oversight, the beneficiaries will prevail and the full amount of the claim will be paid by the insurance company.