Articles Posted in Life insurance claim

O’Ryan Law Firm, on behalf of our client, recently settled an accidental death insurance claim filed against Cigna, and the client’s employer, after Cigna refused to pay her accidental death insurance claim upon the accidental death of her husband.  The insurance coverage was purchased through her employer and insured by Cigna.  Shortly after she was hired, our client Ms. Y enrolled in accidental death insurance coverage for her husband through her employer and paid the premiums for the coverage through payroll deductions.

Unfortunately, several weeks after she started her new position, Ms. Y’s husband was killed in a traffic accident when he was struck by multiple motor vehicles while attempting to cross the street.  After her husband’s death, Ms. Y completed and submitted all paperwork provided to her by her employer in order to submit a claim to Cigna under the group accidental death insurance coverage which she had been paying for through payroll deductions.  Cigna denied Ms. Y’s claim, contending that her husband had died before our client was considered to be in a “Covered Class.”  She was never told that there was a 90-day waiting period for the accidental death benefits coverage to begin and nowhere in her company’s handbook and recruiting materials does it mention a waiting period for accidental death benefits coverage.

Despite everything that indicated our client was properly enrolled in the accidental death insurance coverage, Cigna denied her claim, contending that she was not eligible for the coverage because of an alleged 90 day waiting period found in small print in a multiple page insurance policy that was never given to our client.  Apparently only Cigna was aware of this alleged 90 day waiting period, because the employee relations manager and other employees were baffled by the reason Cigna had denied the claim.

The United States Court of Appeals for the Ninth Circuit in Salyers v. Metropolitan Life Insurance Company, ___ F.3d ___, No. 15-56371 (9th Cir. September 20, 2017) recently rejected an attempt by MetLife to avoid paying a $250,000 death benefit to a widow who had purchased $250,000 in life insurance coverage on her husband prior to his death. In what has recently become an increasingly common scenario, Susan Salyers purchased $250,000 in life insurance on her husband Gary Wolk through a MetLife plan offered by her employer and timely paid all of her premiums on the policy, but MetLife refused to pay the full amount of the death benefit after discovering that Ms. Salyers had not provided the required “evidence of insurability” when purchasing the insurance coverage.

According to the fine print in the MetLife policy, Ms. Salyers was required to submit “evidence of insurability” (proof that her husband was in good health) before any life insurance coverage greater than $50,000 would take effect. However, Ms. Salyers had originally applied for only $30,000 in coverage, and through a clerical error, her employer enrolled her in a policy providing $500,000 in coverage, for which she paid the full premium amounts to MetLife via payroll deductions. At the next open enrollment period, Ms. Salyers elected $250,000 in coverage for her husband, but no one ever told her that she needed to provide “evidence of insurability” in order to obtain this coverage. Nonetheless, MetLife happily accepted her premium payments while never insisting on “evidence of insurability.”  Two weeks later, Ms. Salyers’ husband died.

After the death of her husband, Ms. Salyers submitted a claim to MetLife for the life insurance that she had purchased, but MetLife refused to pay the $250,000 benefit, insisting that she had failed to meet the terms of the policy by not submitting “evidence of insurability.” This was the first time Ms. Salyers had ever heard about a requirement for “evidence of insurability.” Neither the employer nor MetLife had notified Ms. Salyers that she needed to complete further paperwork to be eligible for the life insurance coverage. After MetLife denied the claim, Ms. Salyers sued Met Life, asserting that by accepting her premium payments in the amounts requested for the $250,000 coverage and failing to request evidence of insurability, it was bound to pay the $250,000 death benefit. At trial, judgment was entered in favor of MetLife, and Ms. Salyers appealed to the Ninth Circuit.

The Employee Retirement and Income Security Act (“ERISA”) mandates that insurance companies and claims administrators provide claimants with the specific reasons for the denial or termination of employee benefits and the reasons for the denial must be in writing. See Militello v. Cent. States, Se. and Sw. Areas Pension Fund, 360 F.3d 681, 688 (7th Cir. 2004), cert. denied, 543 U.S. 869 (2004). The Department of Labor has promulgated regulations under ERISA which require certain information to be contained in a denial or termination of benefits letter. Specifically, 29 C.F.R. §2560.503(g) states:

Manner and content of notification of benefit determination.

(1)….The notification shall set forth, in a manner of calculated to be understood by the claimant –

(I) Reference to the specific plan provisions on which the determination is based;

(II) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;

These requirements ensure that when a claimant appeals a denial to the plan administrator, he or she will be able to address the determinative issues and have a fair chance to present his case. Halpin v. W.W. Granger, 962 F.2d 685 (7th Cir. 1992). Describing the additional information needed, as required by this section, enables a claimant to gain a better understanding of the inadequacy of his claim and to gain a meaningful review by knowing with what to supplement the record. Wolfe v. J.C. Penney Co., 710 F.2d 388 (7th Cir. 1983).
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When completing an application for life, health or disability insurance coverage, an insurance company will ask a broad array of questions designed to determine whether an individual is a good risk and the type of coverage that should be issued. It is important to carefully complete the application form to make sure that all of the answers are 100% accurate; otherwise, the insurance company may later deny your claim. Unfortunately, many people do not find out that they failed to disclose important information on the insurance application until a claim is submitted. The insurance company then denies the claim contending that the insured made a material misrepresentation in the application because the insured failed to disclose important information such as a previous health condition or by their failure to answer “yes” to questions which were answered “no.” If the misrepresentation is material to the insurer issuing coverage, the insurance company has the right to deny the claim, rescind the policy and refund the premiums that have been paid.

The falsity of any statement in the application for any policy may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer. (IC 27-8-5-5(c)). False representations on an insurance application made by an insured concerning a material fact, which mislead, will void an insurance contract, just as in any other contractual relationship, regardless of whether the misrepresentation was innocently made or made with fraudulent intent. Ruhlig v. American Community Mut. Ins. Co., 696 N.E.2d 877, 880 (Ind. Ct. App. 1998) citing Watson v. Golden Rule Ins. Co., 564 N.E.2d 302, 304 (Ind. Ct. App. 1990); American Family Mut. Ins. Co. v. Kivela, 408 N.E.2d 805, 810 (Ind. Ct. App. 1980); Bennett v. CrownLife Ins. Co., 776 N.E.2d 1264 (Ind. Ct. App. 2002); Jesse v. American Community Mut. Ins. Co., 725 N.E.2d 420 (Ind. Ct. App. 2000).
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When disabled clients first call the O’Ryan Law Firm, one of the first questions they ask is whether they can obtain punitive damages for the wrongful denial of their disability claim. No doubt, many of our clients have suffered incredible financial and emotional damages as a result of the insurance company either denying their claim outright or terminating the claim before the client can actually return to work. We have had clients suffer terrible financial losses, such as the loss of a vehicle, loss of their credit rating or even the loss of their home through foreclosure, due to the insurance company wrongfully denying their disability claim. Unfortunately, if the client’s disability claim falls under the Employee Retirement Income Security Act, commonly known as ERISA, the courts have found that punitive damages are not awardable when the disability claim is subject to ERISA.

ERISA is a federal statute that was passed in 1974 by Congress in order to protect participants of employee benefit plans. Most individuals receive medical coverage, life insurance coverage and disability coverage through their employer. Most employer sponsored benefit plans are governed by ERISA. There are two exceptions: governmental entities and church plans. If your employer is a governmental entity, such as a public university or school corporation, or a church plan, then you would not be covered by ERISA; instead, your claim is subject to state law. Under state law, you may be able to recover damages in excess of what the disability policy provides in the way of monthly disability benefits.

However, most disability claims are governed by ERISA. Unfortunately, the courts have found that ERISA preempts any state laws that allow for compensatory or punitive damages in excess of the policy benefits. For example, in the case of Midwest Security Life Ins. Co. v. Stroup, 730 N.E.2d 163 (Ind. 2000) the Indiana Supreme Court denied the Stroups’ request for punitive damages finding that their health insurance claims were preempted by ERISA. In this case, Patrick and Theresa Stroup received a group health insurance policy from Midwest Security Life Insurance Company as a result of Patrick’s employment and the policy was governed by ERISA because it was an employer sponsored health insurance plan. In January, 1993, Theresa sought predetermination of benefits for surgery to correct congenital problems with her jaw and Midwest approved the surgery. About four months after Theresa’s surgeries, in August 1994, Midwest amended its plan to exclude coverage for orthognathic surgery. In October 1995, she awoke in considerable pain to discover that her jaw had broken. One week later, Theresa underwent bone graft surgery to repair her jaw. In January 1996, Theresa was forced to undergo another surgery because of continued pain and muscle spasms in her jaw.