Denied life insurance claims

Common reasons for denial

Misrepresentation during the contestability period. If the insured died within the contestability period, usually two years after the policy was issued or reinstated, the insurer will typically review medical records and compare them with the answers on the application. A denial or rescission generally requires that a misstatement was material, meaning the insurer would not have issued the policy, or would have issued it on different terms, had it known the truth.

The standard differs by state, and some states also require intent to deceive. Insurers often read a medical chart more broadly than the application question actually asked, and the underwriting guidelines in effect at the time are frequently the best evidence of what was material.

Lapse for nonpayment. Policies include a grace period, often 30 or 31 days, before coverage ends for an unpaid premium, and many states require notice before a lapse. California, for example, requires a 60-day grace period and advance notice for individual life policies, and the California Supreme Court held in McHugh v. Protective Life Insurance Co., 12 Cal. 5th 213 (2021), that those protections apply to policies issued before the statutes took effect. Whether the insurer sent the required notices, to the right people, is often the central question. We rarely take lapse cases, because the law strongly favors insurers when a premium goes unpaid. We will evaluate one when there is a good reason the premium was not paid, such as a bank error, or other strong proof that the lapse was improper.

Exclusions. Common exclusions include suicide within the first policy years (usually two, shorter in a few states), and, in some policies, aviation or hazardous activity exclusions. The insurer bears the burden of proving that an exclusion applies, and ambiguous exclusion language is generally read in favor of coverage.

Paperwork and eligibility. Group coverage can be denied because the insured was said to be ineligible, coverage ended when employment ended, a conversion or portability election was not made, or evidence of insurability was not approved for supplemental coverage. These denials frequently turn on whether the employer and the insurer did what the plan required, including collecting premiums for coverage they later say never existed.

Employer plans and ERISA appeals

Most life insurance provided through a private employer is part of an employee benefit plan governed by the Employee Retirement Income Security Act (ERISA). ERISA changes the process in important ways.

• The appeal comes first. Before suing, a claimant generally must appeal to the plan. Federal regulations give claimants at least 60 days after a denial to appeal, and entitle them, on request and free of charge, to copies of the documents and records relevant to the claim (29 C.F.R. § 2560.503-1(h)).
• The appeal builds the record. If the case goes to court, the judge often reviews only the administrative record compiled during the claim and appeal. The appeal is the time to submit affidavits, medical opinions and documents, not after.
• The standard of review. A court reviews a denial de novo, without deference, unless the plan gives the administrator discretion to interpret its terms, in which case the court asks whether the decision was arbitrary and capricious (Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)). When the same company both decides and pays claims, that conflict of interest is a factor the court weighs (Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105 (2008)).
• The lawsuit. A claimant may then sue in federal court to recover benefits due under the plan (29 U.S.C. § 1132(a)(1)(B)).

Plans also decide who the beneficiary is under their own terms, which can matter when a denial is really a dispute between family members. See Zaharopoulos v. Metropolitan Life Insurance Co., where a plan’s administrator reversed itself after an appeal.

FEGLI, SGLI and VGLI

Federal employees’ coverage (FEGLI) and service members’ and veterans’ coverage (SGLI and VGLI) are governed by federal statutes and administered through private insurers’ federal offices. Benefits are paid to the beneficiary designated in the manner the statute requires, and otherwise in a statutory order of precedence (5 U.S.C. § 8705; 38 U.S.C. § 1970).

FEGLI honors certain court orders entered in connection with a divorce if the employing agency received them before death. State divorce statutes that conflict with these federal schemes do not control who is paid, as the Supreme Court held in Hillman v. Maretta, 569 U.S. 483 (2013), and Ridgway v. Ridgway, 454 U.S. 46 (1981). Denials and disputes under these programs often turn on whether a designation form was properly completed and received.

What to do after a denial

1. Keep the denial letter and envelope. Deadlines often run from the date you received it.
2. Request the claim file and the full policy or plan documents in writing, including the application and any underwriting materials.
3. Do not sign a release or accept a refund of premiums without understanding what it gives up. Cashing a premium refund may be argued to accept a rescission.
4. Calendar the appeal deadline if the coverage is an employer plan, and treat the appeal as the main event.
5. Talk to an attorney before you respond, especially if the denial cites medical history or an exclusion.

We review denial letters at no cost and will tell you plainly whether we see a path to recovery.

Written by the attorneys of Interpleader Law. General information, not legal advice; the law differs by state and by policy, and every case turns on its own facts.