No Load Life Insurance

There are many cases where Insurance Companies have denied life insurance claims. The reason is usually because the policy owner has misrepresented facts during the application process or that the cause of death is not covered under the insurance contract. Here are some examples:

Young Dad Initially Denied Benefits based on a Technicality

Insurer: The Savings Bank Life Insurance Co. of Massachusetts
Facts: Jenny and John Crowley purchased life insurance in their thirties after having their firstborn. Both undertook and passed the medical exams. Jenny was even cleared by her own doctor one month after the she passed the company’s medical exam and blood tests.

She died one year later from breast cancer. The insurer denied the $500,000 claim on the grounds that Jenny would have been ill before they agreed to insure her.

Under the contract, the insurer was entitled to take this stance, even though Jenny had been passed by their doctors and even though she may not have been aware of her illness at the time.

Outcome: John settled with the insurer. John went even further to push for a change in the law (Massachusetts) in order to make insurance companies pay the proceeds unless they can prove that the insured actually falsified their state of health or the insured should have known they were not in good health based on “active symptoms or a serious change”.

The insurer supported John in requiring a change in the law and even changed its own policy to reflect the fairer standard.

No Life Insurance Paid Out due to Intoxication

Insurer: Hartford Life and Accident Insurance Co.

Facts: 68 year old attorney David Vinson died in his kitchen after dropping a domed glass cake cover which shattered and severed a main artery in his left foot. Vinson bled out after trying to stop the flow with a towel. His accidental death benefit was denied on the grounds that he was intoxicated at the time with a reading of 0.08.

The insurer relied on two exclusions in the contract to deny the claim:

1. The death had to be from “bodily injury resulting directly and independently of all other causes from an accident”
2. It could not be an “injury sustained while the Covered Person is legally intoxicated from the use of alcohol”.

The insurer therefore claimed the injury did not result merely from accident but also from intoxication and that that intoxication excluded coverage in any event.

David’s widow, Michelle Vinson, and her 19 year old daughter, Danielle, filed a lawsuit for $1.3 million against the insurer. Their lawyer William Gary argues that the death certificate only stated one cause of death; bleeding out from a “sharp force foot injury”. Although intoxication was noted as a condition at the time of death, it was not listed as a cause.

He also argues that Mr Vinson was not legally intoxicated since he was in the privacy of his own home. Gary states the insurer cannot equate Oregon’s maximum blood alcohol standard for driving to “legal intoxication” where the person is doing something other than operating a motor vehicle.

Insurance Law experts have heard of cases where life insurance proceeds were denied due to intoxication, but these cases were limited to circumstances involving driving or another risky activity; not being intoxicated in one’s home carrying out a normal daily activity.

Outcome: pending result of trial.

Widow of Murder Victim denied Life Insurance Payout for “Pre-Existing Condition”

The Insurer: Settlers Life Insurance

Facts: Curtis McCraw was shot down by unknown attackers in Knoxville, Tennessee in April, 2009. The insurance company denied his widow’s life insurance claim on the basis that he had Hepatitis C at the time his policy was issued. No suspects were ever identified or arrested.

The policy contract, purchased several months before his death, was silent as to how the death must occur to be covered and did not state that payment will not be made if there is a pre-existing condition.

The widow, Stephanie McCraw, sued the insurer for $25,000 plus damages. She could also be entitled to additional compensation under the State’s bad-faith statute, worth 25% of the original claim.

However, if Mr McCraw failed to disclose his condition at the time of the application process, then the insurer has a right to invalidate the policy within two years of it being issued even if the insured has died, according to the company President, Michael Lowe.

The widow’s attorney, William Hotz, states that Mr McCraw was not aware of his condition at the time of the application. This case is therefore similar to that of Jenny & John Crowley above where the insured was not aware of a pre-existing condition.

Widow Suspected of Killing Husband

Facts: Luz Ballestero’s husband was killed at their home in 2004. The life insurance company denied her claim to his $1 million policy on the basis that she had not been cleared of being responsible for his death.

There was compounding circumstances which gave rise to the suspicion she may have been involved in her husband’s death:

• Her first husband was killed. She ended up with his inheritance including his family’s mining claims.
• She then went on to live with Nicholas Martinez. He died after being shot and thrown in a well. This was only one year after the death of her first husband.
• She then married Adolfo Suarez who was a poor fisherman but nonetheless with a million dollar life insurance policy. They lived in her Glendale home with Freddy Starkweather.
• While Suarez was having drinks at the pub with Ballestero’s son, Starkweather was shot at Ballestero’s home.
• Two hours later, when Suarez came home, he was also shot and died.
• There was no sign of forced entry. The dog had been removed from the home and the phone was disconnected.
• At the time of the killings, Ballesteros was behind on all bills and her home was going into foreclosure. However, the life insurance premiums continued to be paid.
• Ballesteros was not overly cooperative with the police, refusing to answer questions which could have incriminated her and pleading the Fifth Amendment numerous times.

Result: The Judge ruled that Ballesteros was not entitled to her husband’s $1,000,000 life insurance policy based on the Slayer Statute. The Slayer Statute denies life insurance proceeds where the beneficiary has intentionally killed the insured. The Judge said there was an implication that she was responsible for her husband’s death because she had pleaded the Fifth Amendment. This ruling was made even though no homicide charges were ever laid against the widow.

Cause of death not covered by the Policy

Insurer: National Union Fire Insurance Company of Pittsburgh, Pennsylvania

Facts:

• The widow, Mary McMurray, and her husband went on their honeymoon.
• Payment was made using their Platinum Select Citibank MasterCard which included a $1 million policy for accidental death or dismemberment.
• The policy covered injury or death while “riding as a passenger in or on…any Common Carrier“.
• Common Carrier was defined in the policy as “any licensed…water…conveyance operated by those whose occupation or business is the transportation of persons for hire“.
• The husband was killed on the cruise while white water rafting. He was thrown off the raft and drowned. The rafting excursion was paid with the same credit card.
• The court held that the raft was not a “common carrier” as defined by the policy because the transportation of people was not its primary function. Rather, transportation was merely incidental to the raft’s main business of entertaining rafting participants.

Outcome: The insurer’s decision to deny the claim was upheld by the United States Court of Appeals.