What Is a Covered “Death” and “Dismemberment” Under An Accidental Death & Dismemberment Insurance Policy?

What Is Accidental Death and Dismemberment Insurance?

Insurance policies provide peace of mind that you or your loved ones will receive compensation for certain expenses and losses you experience. For example, you pay for auto insurance so you do not have to worry about covering losses associated with a auto accident yourself. You may pay for health insurance so that you are covered in case you develop a chronic condition or serious illness or require unexpected medical treatment. Disability insurance can provide cover your lost income if you are injured or otherwise unable to work at your occupation in the future due to a covered event or condition.

Accidental death and dismemberment insurance (“AD&D”) insurance is a type of policy designed to pay benefits in the case of an accidental death or loss of a body part, or the use of a body part, the latter known as dismemberment. The key under these policies is that the loss must result from an accident. Thus, AD&D plans typically include two levels of coverage. The first is a death benefit that is paid to a person’s beneficiary if they pass away due to a covered incident as described above. The second is dismemberment insurance, which is paid out to the person who was injured and suffers from a “dismemberment.” These policies are common and can be obtained much like other types of policies. If your employer offers group insurance coverage, you may be able to elect AD&D coverage through that group plan.

What Does AD&D Insurance Cover?

AD&D insurance covers losses associated with a catastrophic accident or other incident involving a fatality or resulting in the loss of one or more body parts or the use of certain body parts.

However, simply having AD&D insurance coverage does not mean you will receive benefits if you make a claim for a death or a dismemberment. Like other insurance policies, AD&D policies are complex and typically include exclusions that impact claims payouts. On top of this, it is all too common for insurance companies to act in bad faith and deny claims that they should pay. It stands to reason that you may not know how to deal with an insurance company denying your claim based on a policy exclusion.

Understanding your policy, including what it requires for you to receive benefits and how it defines important terms (such as dismemberment) can help you determine how to address your claim and whether an attorney may be able to help you receive benefits.

What Is an Accidental Death?

AD&D plans pay out accidental death benefits only when a covered person passes away due to a covered accident. Every policy is different in how it defines accidental death, but this benefit usually applies to what are deemed exceptional circumstances—unplanned incidents that cause a fatal injury. Examples of such incidents are:

A fatal auto accident
A drowning
Falls or other traumas that are fatal
Homicides, in some cases
Death resulting from unplanned or accidental exposure to a dangerous chemical

There are many deaths that do not easily fall into the category or definition of accidental death/death by an accident. It is the “gray area” cases in which insurance companies will deny these claims. Many of the deaths that appear to be accidental are complicated by factors that were involved with the death, such as drug or alcohol use, death that involves an underlying pre-existing physical condition, etc.

How Do AD&D Policies Define a Dismemberment?

A common definition of dismemberment in an AD&D policy is the loss of an entire body part or the loss of function of an entire body part. This is a standard definition used by insurance companies, though the specific language will vary from one insurance company or policy to another. For example, if you lose an arm, leg, or eye, you may qualify for coverage. If you lose your hearing but not your actual ears or your sight but not your eyes, you should also be covered. It is important to consult the details of your policy to understand exactly how dismemberment is defined for the purposes of a qualified claim.

Does AD&D Insurance Replace Life Insurance?

In general, AD&D insurance is considered a supplement for life insurance and not a replacement for it. These two types of plans provide different coverage. Your life insurance policy offers a death benefit that pays out in cases other than accidental death, for instance. However, consulting with an experienced insurance broker or financial planner can help you ensure there are no major gaps in your insurance coverage.

Understanding AD&D Policy Exclusions

Every insurance policy has exclusions – types of incidents or losses that are specifically not covered by the policy. Common AD&D policy exclusions are:

Medical Treatment Exclusions: Coverage may be excluded if the death or injury results from a medical condition, medical treatment or surgery not related to the accident.
Injuries Resulting from Illness: AD&D policies cover accidents rather than illnesses, so injuries or death resulting from illness or natural causes are usually excluded.
Intoxication: Coverage may be denied if the death or injury occurs while under the influence of alcohol or drugs, as specified in the policy. This exclusion does not only include explicit substances; use of prescription drugs that are not taken according to a specific prescription may result in a claim denial based on this exclusion.
Pre-existing Conditions: Coverage may be excluded for injuries or death resulting from pre-existing medical conditions, particularly if they cause or substantially contribute to the accident.
Criminal Activity: Policies typically exclude coverage for injuries sustained while committing or attempting to commit a crime.
Engaging in Hazardous Activities: Coverage may be excluded if death or injury results from participating in hazardous activities such as skydiving, racing, or extreme sports.
Intentional Self-Inflicted Injuries: AD&D policies often exclude coverage for injuries or death resulting from self-inflicted harm or suicide.

War or Acts of War: Many policies exclude coverage for injuries or death resulting from participation in war, declared or undeclared, or acts of terrorism.

Participation in Active Military Duty: Some policies may exclude coverage for injuries or death sustained while on active military duty, as military service often provides its own insurance coverage.

Aviation Activities: Some policies may exclude coverage for injuries sustained while traveling in private aircraft or engaging in aviation-related activities, excluding commercial flights.

What To Do When Your AD&D Claim Is Denied

If an insurance company denies your claim based on a policy exclusion, consulting with an experienced ERISA or non-ERISA insurance lawyer can help clarify whether the insurance company’s denial of your claim was proper. If the insurance company has improperly denied your claim, including based on a policy exclusion, having the right insurance/ERISA attorney in your corner can be critical in submitting an effective appeal and, if necessary, handling a lawsuit against the insurance company.

If your AD&D claim has been improperly denied, the knowledgeable and experienced attorneys at McKennon Law Group PC can recover the benefits you are owed. Our team is well-versed in AD&D insurance claims, and we fight aggressively to protect your rights and ensure you are compensated according to your policy. Call McKennon Law Group PC at 949-504-5381 for a free consultation now.

Your Guide to California Insurance Bad Faith

Insurance Bad Faith and How to Deal With It

When you have health, life, disability, or long-term care insurance, or any other type of insurance policy, you expect your coverage to provide peace of mind. You pay premiums trusting that your insurance company will pay out according to the policy if you experience a covered event. However, if you have ever were involved with an insurance claim, you know that is not always the case.

Insurance companies deny claims for every reason they can attempt to justify. Sometimes the policy language can be so complicated and confusing that it can lead you to believe you have coverage that you do not actually have.

Many insurance company denials are the result of bad faith actions. Understanding whether your case involves what is known formally as a breach of the implied covenant of good faith and fair dealing, less formally known as insurance “bad faith” is vital; if your denial involves bad faith, you may have more options available for seeking compensation for your damages against your insurance company.

What Constitutes Insurance Bad Faith?

Bad faith occurs when an insurance company unreasonably or without probable cause delays payment of your policy benefits or denies your claim for policy benefits. Therefore, not every denial rises to the level of bad faith. Some examples of insurance bad faith conduct are:

Denying a valid claim, even though the policy supports the claim and appropriate appeals and documents have been submitted;
Offering a low settlement for a covered claim that does not reasonably address the benefits and/or damages associated with the claim;
Failing to process a claim according to the reasonable claims handling standards in the insurance industry or as found in state statutes;
Refusing to reasonably investigate a denial or other claims issue without providing an adequate reason for the refusal to honor its obligations under the policy.

First-Party vs. Third-Party Insurance Coverage and Bad Faith Claims

There are two main categories of insurance: first-party and third-party policy coverage.
First-party insurance provides compensation directly to the insured individual or business. For example, disability insurance is first-party coverage because it directly compensates the insured for a loss incurred under the policy. First-party bad faith occurs when the insurance company in first-party coverage situations acts in bad faith regarding your claim. For example, your disability insurer denies your claim for disability insurance benefits unreasonably or without probable cause.

Third-party insurance is a form of liability insurance that covers you when someone makes a claim against you for damages. A common example of this is auto insurance, which will pay another driver who is injured in an accident that you have caused. Another common type of third-party insurance is for property damage. Third-party bad faith occurs when the insurance company in third-party coverage situations acts in bad faith regarding your claim.

What You Have to Prove in a Bad Faith Insurance Case

The laws governing bad faith insurance situations vary by state, and California has an especially complex statutory and regulatory legal framework. To understand whether you have a good bad faith case and how to prove it, it is critical that you speak to attorneys who are very experienced in fighting insurance companies.

Typically, the initial burden of proof falls on the person filing the claim. You must demonstrate two things to succeed in a bad faith lawsuit: 1) Benefits due under the policy were withheld and 2) The reason for withholding benefits was unreasonable or without proper cause.

What Kind of Damages You Can Seek in a Bad Faith Insurance Case

It is important to understand whether you are dealing with a bad faith claim situation or not, as it will determine the types of damages that may be available to you. With a breach of insurance contract claim, you can seek the benefits due under policy. If you have a potential bad faith insurance claim, you may also be able to seek what are known as extra-contractual damages. These damages differ from state-to-state, and include:

Liability for judgments in excess of the policy limits: If your own insurance company acts in bad faith, it may be liable for amounts exceeding the policy limits.
Emotional distress: This is mental distress caused by the insurer’s bad faith actions.
Economic Loss: This involves financial losses incurred because of the insurer’s bad faith actions. For example, your disability or health insurer unreasonably denies a valid claim and his leads you to pay hefty medical bills or causes you to lose your home. You may be able to seek compensation for this type economic loss.
Statutory Penalties: These are penalties enforced by statute when an insurer acts in bad faith.
Interest: This is interest that accrues on unpaid policy benefits. In California, you can get 10% interest on past-due disability benefits.
Attorneys’ Fees: If you sue your insurer for bad faith and win, you may be able to recoup your legal fees. Attorney’s fees can become expensive, especially in complex insurance cases. California has a complicated and unique method of calculating attorneys’ fees.
Punitive Damages: These are damages awarded to punish the insurer for its bad faith behavior. In California, you can prove the insurer engage in bad faith actions and they were done with fraud, oppression or malice.

Work With an Experienced California Insurance Bad Faith Attorney

Insurance law and insurance cases are complex, and you can feel like you are caught up in a machine with very little control over what happens with your claim. You do not have to face this type of issue alone and feeling like you have no way to fight back.

The insurance bad faith attorneys at McKennon Law Group PC are well-versed in fighting insurance companies and standing up for the rights of our clients. We can review your policy and claims situation and help you understand if you have a bad faith claim. Our team of insurance bad faith lawyers also works with you throughout the process, standing up for you in court to help support a positive outcome.

Call McKennon Law Group PC at 949-504-5381 to find out more about how we can help.

Federal District Court Grants Partial Summary Judgment Under the Voluntary Payment Doctrine to Our Client, Allowing Her to Keep Over $1 Million Mistakenly Paid to Her

On March 6, 2024, in an 11-page order, the Honorable Jesus G. Bernal granted partial summary judgment in favor of McKennon Law Group PC’s client, Diane Le, ruling that American General Life Insurance Company (“AIG”) could not recover over $1 million it claimed it had mistakenly paid Ms. Le. The court granted McKennon Law Group PC’s partial motion for summary judgment based on the voluntary payment doctrine, permitting Ms. Le to retain over $1 million in life insurance benefits AIG recklessly paid her in error.

AIG paid Ms. Le the proceeds from another person’s $1 million life insurance policy and then filed an aggressive complaint against her to recover the money, even though Ms. Le had accurately submitted all requested information from AIG, and had quit her job and spent a substantial portion of the money by the time she was served.

As we discovered in the ensuing litigation, the correct beneficiary shared the same first and last name and date of birth as Ms. Le’s late husband. However, nothing else matched – the Social Security numbers for the correct policyholder and beneficiary were different from Ms. Le and her late husband; Ms. Le had different first and middle names from the correct beneficiary; the correct policy holder had a different middle name from Ms. Le’s late husband; the contact information on file was in a state where Ms. Le and her husband had never lived; and Ms. Le’s date of birth was different from the correct beneficiary’s date of birth. During the claim review process, Ms. Le even asked for a copy of the policy – which would have informed her that she was not, in fact, the correct beneficiary – but AIG refused to provide it to her.

After filing counterclaims for Ms. Le’s 18-plus months of lost wages and significant emotional damages, we ultimately moved for partial summary judgment seeking a ruling that Ms. Le was entitled to retain the $1 million she was paid under the voluntary payment doctrine defense.

The voluntary payment doctrine is an affirmative defense that bars a plaintiff from bringing an action to recover funds mistakenly paid if the payment was “voluntarily made with knowledge of the facts.” Here, AIG had knowledge of all of the relevant facts, as Ms. Le readily and accurately supplied all requested information. Moreover, the AIG claims representative who was primarily responsible for the egregious error honestly admitted (to her credit) that she did, in fact, review a number of claims documents whereby she should have been able to discover that Ms. Le was not the true beneficiary, but she failed to notice a number of significant discrepancies that should have made it clear to her that she was not the correct beneficiary.

The judge granted partial summary judgment in Ms. Le’s favor, affirming that AIG’s payment to Ms. Le was made with no “mistake of fact,” thereby absolving her of any liability to return the funds.

This is a case of first impression in California, as most insurance companies unsurprisingly have safeguards in place to prevent reckless conduct like that which occurred here. Significantly, the court cited the voluntary payment doctrine cases from the Seventh Circuit Court of Appeals that we cited in our pleadings with approval, making it easier for future litigants in California to prevail under similar circumstances.

Ms. Le is now able to keep the money she was recklessly paid by AIG, for which she is extremely grateful to McKennon Law Group PC.

Western Kentucky District Court Reviews Long-Term Disability Denial Under De Novo Standard of Review Despite Discretionary Policy Language Where the Denial Decision Was Made by a Third Party

The Western Kentucky District Court recently reviewed a long-term disability (“LTD”) claim denial de novo rather than using an abuse of discretion standard, despite the policy containing language authorizing the plan administrator to use discretion in interpreting the plan and making claims decisions. In Smith v. Reliance Std. Ins. Co., 2024 WL 647395 (W.D. Ky. 2024), the court entered judgment in favor of the plaintiff and granted her leave to request attorney’s fees after determining under a de novo standard of review that her inherently subjective pain symptoms rendered her disabled under the terms of the policy.

When a disability insurance policy contains language permitting the plan administrator to use discretion in interpreting the plan’s terms and deciding whether to approve or deny a claim for benefits, typically a court will determine the outcome of the case by deciding whether the administrator abused its discretion in denying a claim. Alternatively, where a policy does not grant discretion to the administrator, the court will review the decision de novo, which means the court reviews the evidence and decides whether the plaintiff is disabled under the policy without giving any deference to the plan administrator’s denial. In Smith, a third party reviewed and denied the plaintiff’s claim. The court found that despite the policy language granting the plan administrator discretion, the plan administrator had not actually exercised any discretion, but instead had contracted out to the third party, Matrix Absence Management, Inc., to interpret the plan and deny the plaintiff’s LTD claim and the third party “exercised ultimate decision-making responsibility for the policy determination.” The court cannot determine whether the plan administrator abused its discretion if the plan administrator did not exercise discretion. Therefore, the court held that it could review the LTD claims determination de novo. The court explained that:

Reliance Standard responds to [to the argument that it did in fact exercise discretion in denying the claim] by pointing out that the April 26, 2021 letter is written to Smith from Reliance Standard. [] Although that letter is on Reliance Standard letterhead, it is signed by Norden, and it does not change the fact that Norden was employed by Matrix and exercised ultimate decision-making responsibility for the policy determination. []. This alone is sufficient to show that Reliance Standard—although the policy clearly vested it with discretionary authority—did not actually exercise that discretionary authority itself. As a result, the Court must review the claims determination de novo. See, e.g., Davidson v. Liberty Mut. De novo. Co., 998 F. Supp. 1, 9 (D. Me. 1998) (applying de novo review where “[No portion] of the LTD plan … expressly permits delegation of the duties of the plan administrator” and “the Court cannot assume that the LTD plan permitted delegation of the duties of the plan administrator[.]”); Belheimer v. Fed. Express Corp. Long Term Disability Plan, 2012 U.S. Dist. LEXIS 168882, at *20 (D.S.C. De novo. 28, 2012) (“[A]s Federal Express delegated its final decision-making authority to Aetna, and the LTD Plan did not contemplate or authorize such a delegation, this Court will review the decision to deny Plaintiff’s long-term disability benefits claim de novo.”).

Id. at *4.

For a plaintiff, overcoming an abuse of discretion standard is usually more difficult than the court determining as a first impression whether the evidence favors the plaintiff’s disability claim under the de novo standard of review. Thus, for the court in Smith to review the LTD denial de novo rather than using an abuse of discretion standard could well have been the difference between receiving LTD benefits and the court upholding the denial. The court’s decision to review the LTD denial de novo was therefore a significant victory for the plaintiff.

Aside from having her LTD benefits reinstated, the court’s decision also meant that the plaintiff had achieved success on the merits. Had the court decided the case using an abuse of discretion standard, the plaintiff may not have succeeded on the merits and therefore would not have been given leave to request attorney’s fees. Because the court overturned the denial of LTD benefits and approved LTD claim, it gave the plaintiff the ability to recover significant attorney’s fees possibly based on the distinction between the plan administrator making a claims decision itself on one hand or contracting out with a third party on the other. This nuance illustrates the need for knowledgeable, experienced counsel when challenging an insurance company’s claim denial. Finding experienced ERISA disability insurance attorneys to handle your denied disability insurance claim is critical. The attorneys at McKennon Law Group PC have been immensely successful handling matters like Smith involving complex nuance.

Oregon District Court Holds Long-Term Disability Insurer to Strict ERISA Appeal Deadline; Finds No Special Circumstances for Request to Extend Appeal and Finds Claim Deemed Denied

An Oregon Federal District Court recently issued a decision that helps illuminate the issues related to the requirement that a claimant exhaust administrative remedies prior to filing suit, specifically, when a long-term disability (“LTD”) claimant can consider a claim to be denied, when he exhausts his administrative remedies and when an insurer may properly extend deadlines and delay issuing a decision. In Witt v. Intel Corporation Long-Term Disability Plan, 2024 WL 687928, at *7, 10 (D. Or. Feb. 16, 2024), the claimant filed suit before the Plan had issued a decision on his appeal of his previously denied LTD claim. The Plan, who was the Defendant, hired ReedGroup to administrator the claims. The Plan moved to compel exhaustion of administrative remedies and argued that the claimant had filed suit prematurely because it had not issued a decision on the appeal of his LTD denial. Plaintiff responded that he had exhausted administrative remedies because the Plan had failed to issue a decision within the time required by the Employee Retirement Income Security Act of 1974 (ERISA). The court denied the Plan’s motion and concluded that plaintiff had exhausted his administrative remedies.

For disability plans, the claims regulations that govern ERISA allow a claimant to consider his administrative remedies to be exhausted if the plan violates its requirements. A plan generally has 45 days to issue a decision of a claimant’s appeal; it may take up to an additional 45 days, but it must provide plaintiff with written notice of the extension before the expiration of the 45-day period, and the extension must be warranted by “special circumstances.” In Witt, plaintiff had faxed his appeal, then also mailed it, so ReedGroup received it once by fax, then again in the mail several days later. ReedGroup acknowledged that it had received the earlier, faxed copy of the appeal. ReedGroup then sent plaintiff a letter stating that it required additional time to issue a decision because the medical reviews had to be corrected based on the Plan provisions for medical evidence. ReedGroup sent the letter after 45 days had passed since plaintiff’s faxed appeal but less than 45 days since it received the mailed appeal.

The Plan argued that because 45 days had not passed since it received plaintiff’s mailed appeal, its notice to plaintiff that it needed additional time to issue a decision did not violate the ERISA requirement. However, that argument failed because ReedGroup had previously acknowledged receipt of the earlier faxed appeal.

The Plan relied on Peck v. Aetna Life Insurance Company, 495 F.Supp.2d 271 (D. Conn. 2007), for the proposition that submission of additional materials to support an appeal tolls the appeal decision deadline. The court found the case distinguishable as it found that the defendant plan administrator’s request for an extension of time was a “special circumstance” because it requested the extension after plaintiff submitted additional materials that the plan had requested. Id. at 276-77. Although the appeal deadline may be tolled when an extension is requested “due to a claimant’s failure to submit information necessary to decide the claim,” or when a plan administrator requests additional information, that was not the case in Witt. 29 C.F.R. § 2560.503-1(i)(4). ReedGroup never requested additional information from plaintiff, nor did ReedGroup indicate that it needed the extension because plaintiff failed to submit necessary information. Plaintiff’s appeal was effectuated on May 25, 2023, making the 45-day determination deadline July 10, 2023. In turn, ReedGroup’s July 12, 2023 extension request was not timely. Therefore, the court concluded that ReedGroup committed a procedural violation by requesting an extension after the 45-day deadline to issue a determination had passed.

The Plan argued that there were “special circumstances” present because it needed time to correct the medical reports it had received. The court reviewed numerous cases and determined that there were no “special circumstances” present because medical reviews occur in almost all disability cases and ReedGroup engaged in a 29-day delay to initiate the medical review. ReedGroup itself had created its need for more time to decide on plaintiff’s appeal and therefore, its need for more time did not meet the statute’s requirement of being warranted by “special circumstances.”

Next, the Plan argued that while it had waited longer than 45 days to send written notice to plaintiff of its need for more time, it was only two days and therefore was a de minimus violation of the claims regulations that should not impact plaintiff’s requirement to exhaust administrative remedies. The Plan also argued that it was required by ERISA to issue a decision on the proper evidence, so it needed to be sure that the medical records were correct. The court noted that 29 C.F.R. § 2560.503-1(l)(2)(ii) states that de minimis violations that do not prejudice or harm the claimant will not deem administrative remedies exhausted so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan. The court explained that:

Read as a whole, this sentence indicates that, even if a violation does not prejudice or harm a claimant, the de minimis exception does not apply unless the plan demonstrates that the violation was for good cause or due to matters beyond its control.

Witt can serve as a reminder to insurers that ERISA time requirements are to be taken seriously and they may not get away with simply coming up with any feasible reason for extending the time it takes to issue an appeal decision on an LTD claim. For claimants and their attorneys, Witt is a reminder to be diligent and closely examine the insurer’s actions and motivations for an extension. In this case, diligence paid off and plaintiff’s case moved forward more quickly and efficiently than it otherwise might have. McKennon Law Group PC has made similar arguments in numerous disability and accidental death insurance cases to the great benefit of its clients.

What Is Life Insurance Contestability Under California Law and Why Is It Important to You?

Life Insurance Contestability and Its Impact on Your Life Insurance Policy and Claim

When you buy life insurance, you almost certainly expect that the policy will pay benefits when the insured person passes away. Life insurance can be a valuable way for people to give themselves and their loved ones’ peace of mind, knowing that there will be a death benefit to cover the costs associated with burial or to provide for dependents.

Many people who purchase life insurance do not expect the insurance company to deny a death benefit claim in bad faith. The reality is that life insurers will go to great lengths to avoid paying benefits. Assuming the policy requirements have been met, i.e., the premiums have been paid and the insured has passed away, the insurance company will need to find another way to avoid paying benefits. One of the most important ways life insurers can do this is to contest the policy in an attempt to rescind it, effectively treating it like it never existed in the first place.

Life Insurance Contestability

Contestability refers to an insurance company’s ability to invalidate, or rescind, a life insurance policy and refuse to pay the death benefit. The law provides a window during which life insurance companies can choose to rescind a policy under certain circumstances.

Note that rescinding a policy under this provision is not the same as canceling a policy for lack of premium payment. There is no set timeline for policy cancellations due to missed premium payments. If your life insurance is set up so that you pay a monthly premium for it, the insurance company may cancel your policy if you miss paying premiums, regardless of how long you have had the policy.

Why Insurance Companies Are Able to Contest Policies

It may seem surprising that an insurance company can rescind a policy if someone has paid all their premium payments on time. However, the contestability period is necessary for insurance companies to protect themselves against potential fraud.

Typically, when you buy life insurance, you must answer several questions about yourself, including about your age, lifestyle, and overall health and medical history. For example, you will likely be asked whether you smoke or not or if you have had any major health issues in the last five or ten years. Depending on the type and amount of life insurance you are seeking, you may even be required to undergo a basic medical exam.

Insurance companies use this information to calculate the risk you present, so the insurer can decide whether to insure you, what type of policy and benefit to offer, and how much to charge for premiums. The insurance company relies on the information you provide being accurate to properly calculate this risk.

If you misrepresent information on your application, purposefully or even by mistake, the insurance company may have based its assumptions on your risk on incorrect information. The contestability period allows insurance companies to investigate a policy claim after a death has occurred to ensure that all information provided is accurate before they pay out a claim. Insurers are looking for any misrepresentations on the policy application that may be material to the risk they insured so they can deny your life insurance claim and rescind your policy.

How Long Can Insurers Contest Life Insurance Policies in California?

Under California law (California Insurance Code section 10113.5), all life insurance policies delivered or issued in California must contain a provision that states the contestability period is no more than two years. While you might find a policy that states a shorter period, most insurance companies will want to include the maximum two-year contestability period.

What Happens if Someone Passes Away Within the Contestability Period?

Suppose someone purchases a life insurance policy and passes away within the two-year contestability period. In that case, the insurance company has a right to investigate the matter further to determine if there was a material misrepresentation in the application.

This does not mean that the insurer will not ultimately pay out death benefits. If there are no problems with the application information and the death occurred as a result of a covered event, the insurance policy should pay out as expected. There simply might be a delay before the benefits are received.

If the insurance company decides to rescind the policy due to an investigation for any matter during the contestability period—whether or not the policyholder has passed away—it must explain why it is attempting to rescind the policy. The insurance company typically also refunds the premium payments.

Can You Fight the Insurance Company If It Attempts to Rescind Your Life Insurance Policy or Deny Your Claim?

Yes, you can sue an insurance company if it refuses to pay out benefits and does not provide a valid reason for rescinding a policy or denying your life insurance claim. If, for example, an insurance company claims that you or the insured committed fraud by lying on the application, you may be able to argue that there was no fraud on the application and everything was true at the time.

Consider a hypothetical case where someone completes a life insurance application because they are not feeling well or have orthopoedic problems and this has made them think about the importance of planning for the future by buying life insurance. However, other than feeling sick or having orthopoedic problems, the person has not seen a medical provider for these conditions and has not been diagnosed at the time they complete the insurance application. Is the insured expected to provide this information on the application?

What happens if the person goes to the doctor a few weeks or months later completing an application and discovers they have cancer? If the insurance company reviews the case and sees how close all these events were to the application date, they might attempt to rescind the policy and claim the person knew they had cancer and did not include it on the application.

In these types of cases—and many others—the insurance company might be acting in bad faith. There are many defenses under California law to an attempt by a life insurer to rescind a policy. Only a very experience claim denial life insurance attorney can give you guidance as to whether an insurer has properly denied your claim and if that insurer committed the tort of insurance bad faith.

To find out if you have a case against an insurance company for bad faith life insurance practices, call the McKennon Law Group PC at 949-504-5381 for a free consultation.