Seventy-five million U.S. families depend on a life insurance policy to protect their financial security and future. As we discuss below, if you file a life insurance claim and that claim is denied, you should seriously consider scheduling a consultation to speak with a an experienced California life and disability insurance claims lawyer.

If you are the beneficiary of a life insurance policy and your claim is rejected, what are your options? What steps should you take? What damages can you receive if you are wrongly denied a life insurance claim and you prevail in a legal action against the life  insurance company?

Most importantly, when should you contact a California life and disability insurance claims attorney? If you continue reading this brief discussion of life insurance claims and beneficiaries’ rights, you will find the answers you may need.

What Should Beneficiaries Know About Life Insurance?

Life insurance policies are purchased to protect beneficiaries from financial hardship in the unfortunate event of someone’s passing. You expect an insurance company to pay the death benefit under a life insurance policy after premium payments have been made, often for years or decades.  You do not need the prospect of financial hardship added to your grief.

Families are not the only ones who depend on life insurance policies. A life insurance policy may be purchased by a business to protect the business or its owners financially if an owner or executive passes away.

All life insurance companies will try to avoid paying a death benefit to a policy’s beneficiary if they can find any reason to do so, and those companies will use a variety of different tactics. If you submit a life insurance claim, and your claim is denied, you do not have to fight the insurance company by yourself.  A highly experienced and reputable California life and disability insurance claims attorney can assist you to get the money to which you are entitled. 

If Your Claim is Denied, How Will a Life Insurance Claims Attorney Help You?

In some cases of denied life insurance claims, a life and disability insurance claims lawyer will be able to negotiate with the insurance company to obtain the death benefit for you. However, in other cases a life and disability insurance claims lawyer will advise you to file an appeal with the insurer in an attempt to reverse their claim denial. If both negotiations and direct appeals to the insurance company fail, your lawyer may prepare a complaint to initiate a lawsuit to collect your death benefit.

Life and disability insurance claims lawyers routinely fight insurance companies for their clients and they are familiar with the strategies these companies use to avoid paying death benefits. With an attorney’s help, you are far more likely to have the matter resolved in your favor.

How Do Life Insurance Companies Avoid Paying Death Benefits?

Listed here are the most common ploys a life insurance company will use to avoid paying a death benefit:

1.  The company may claim that the decedent misrepresented key facts regarding himself or herself and therefore void or rescind the policy.
2.  The company may claim that the decedent died in a way that the life insurance policy does not cover, such as by an exclusion for death caused by suicide or while intoxicated.
3.  The company may claim that the policy has lapsed, is voided, or that some payments were not timely made.

This list is not exhaustive. Insurance companies concoct numerous ways to avoid paying life insurance claims. If you get only delays and unreasonable denials, you may have a claim for insurance bad faith.

California and most states have laws that protect life insurance consumers when their insurers engage in bad faith behavior. You should seek the help of a life insurance claims lawyer if a life insurance company is avoiding its obligation to you.

How is Insurance Bad Faith Defined?

When a life insurance company does not take seriously its obligation to you as a beneficiary, you may have grounds for filing an insurance bad faith claim against the company. An insurance bad faith claim must be based on an insurance company’s specific acts or failures to act. To establish bad faith, you must prove that the insurer acted unreasonably or without proper cause in denying a life insurance claim. See our FAQs for more information on insurance bad faith.

Insurance companies are like any other business, they want to make a profit. There is nothing wrong with a company making a profit when it provides the goods and services that it advertises. However, an insurance company should not be permitted to place profits over the legitimate claims of its policyholders and their beneficiaries.

How can you determine if you are the victim of insurance bad faith? Only by consulting a California life and disability insurance claims lawyer who regularly handles insurance bad faith cases will you know if the company’s actions constitute bad faith under the law and whether you have a good bad faith case.

What Can a Beneficiary Recover by Taking Legal Action?

If your life insurance claim is denied and you take legal action and prevail against the insurance company, what can you receive? California plaintiffs who pursue insurance bad faith claims may recover their attorneys’ fees separately and in addition to the original death benefit.

In many cases, a plaintiff may also recover consequential damages (for damages caused by the company’s bad faith), court costs, interest on the unpaid death benefit and – if the bad faith was egregious or intentional – a plaintiff may also be awarded punitive damages.

A beneficiary who is victimized by an insurance company’s bad faith needs to be “made whole.” If the life insurance company was responsible for additional losses beyond the policy’s death benefit amount because the claim was handled inappropriately, the insurer may be held responsible for these damages as well.

Was the Life Insurance Policy Purchased Through an Employer’s Group Plan?

If the life insurance policy in question was purchased through an employer, it is most likely governed by the Employee Retirement Income Security Act (ERISA), which is federal law. If ERISA governs the policy, your legal options are reduced and the damages you may recover are limited. Whether a life insurance policy is governed by ERISA can be a very complicated question and a qualified and experienced life insurance attorney may be your only resource for making that determination.

ERISA damages in cases involving life insurance policies include only the amount of the death benefit and in some cases, attorneys’ fees, costs and interest. While you cannot file a bad faith claim in cases that are governed by ERISA, you still have significant legal options.

A California life and disability insurance claims attorney who has experience in cases that are governed by ERISA will explain those options to you, protect your legal rights and guide you through the complicated ERISA appeals process if your initial life insurance claim is denied.

What Else Should Beneficiaries Know?

If the life insurance policy was purchased privately without employer involvement and you bring a lawsuit to recover the death benefit, state and federal courts have jurisdiction. However, if the life insurance policy is governed by ERISA, only federal courts have jurisdiction and they will have the final say in determining your rights.

There may be many issues that arise in determining who or what entity is entitled to a life insurance death benefit. Even though you may be the beneficiary of a life insurance policy, it is possible that you will not be entitled to all or any of the death benefit. Sometimes there are complicated questions about who is entitled to a death benefit and only an experienced life insurance claims attorney will be able to answer questions about who may be entitled to receive a death benefit.

What Will It Cost to Take Legal Action?

Depending on the life insurance lawyer you hire, there may be no fee or cost unless you get a recovery. A life and disability insurance claims attorney may handle your case on a contingency fee basis and if for any reason your attorney’s efforts are not successful, you will owe that attorney nothing. These insurance claims attorneys often offer beneficiaries a free case evaluation. That free evaluation is your opportunity to learn how the law applies to your specific circumstances and make an informed decision about moving forward with a legal action.

If you have had a life insurance claim denied, the aggressive and highly experienced life and disability claim attorneys at McKennon Law Group PC can provide you with a free consultation to determine your options under a life insurance policy.