A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

An excellent article was published in Bloomberg about the tactics used by insurance companies to deny claims made for accidental death and life insurance benefits. I consider it to be required reading for those who are interested in consumer issues, and specifically those who want to learn about the ways in which insurance companies deny claims in order to boost their revenues.

Several case examples are used by the author, David Evans. For instance, MetLife denied payment to Jane Pierce, a Montana widow whose husband died in a automobile accident when passing a car on a two-lane road. He was 46 and had staged a courageous battle against cancer in his sinus cavity. MetLife claimed his death was a suicide, despite the fact that the sheriff and medical examiner who investigated the crash conluded it was an accident. MetLife based this determination on a high level of pain medicine in his system, even though the medical examiner told MetLife that the high level was not due to taking excessive medication, but was physiologically related to the trauma of the accident.

Finally, Mrs. Pierce filed suit and eventually MetLife paid the entire death benefit, but it held the money for a year without paying any penalties or interest.

Delay, deny, defend – that’s the title of a book by Jay Feinman that describes in a nutshell the tactics used by insurers to deny claims, and it’s what MetLife did in this case.

This particular case involved an employee benefit. Under the governing law of ERISA, there is generally no right to a jury trial – or, for that matter, punitive damages (which are hard to come by anyway). In addition, policyholders and beneficiaries must first endure an internal review before they can file suit. As you may be able to discern, insurance companies do not suffer financial harm from delaying and denying payment. One could even say it’s in their financial interest to do so.

According to the article, in 2009 life insurers disputed $1.3 billion in claims. $396 million in claims were ultimately turned down.

The article mentions that most people who are denied a life insurance claim do not file lawsuits. Indeed, many consumers are completely unaware that they can sue an insurance company that denies a claim.

But sharp practices by insurance companies do not only exist during the claim stage, as the author points out. There are behind-the-scenes interactions between insurance companies and brokers to win business that have earned them scrapes with the law. It’s the brokers who are out there on the front line selling policies. They can influence consumers to purchase one company’s product over another. MetLife and Prudential each paid $19 million to settle claims by the New York Attorney General’s Office in 2006 that they illegally paid brokers in order to obtain new corporate clients.

Insurers also have routinely sent checkbooks to survivors as a way for them to access the policy proceeds. A controversy erupted over this practice as it pertained to the families of soldiers killed in combat, and the U.S. Department of Veterans Affairs required that Prudential pay a lump sum when survivors make such a request. By issuing checkbooks to survivors, insurers get to hold on to the money and reap investment earnings while survivors gradually spend it down.

The article points out how loved ones are forced to relive painful memories when insurers challenge their claims and they must comply with multiple requests for information. In the Pierce case, MetLife claimed that the decedent killed himself by overdosing on drugs. His widow cried for days.

Other examples where insurers in accidental death policies have twisted the facts to arrive at a cause of death that exculpates it from paying the policy. Again, their risk for denying claims is minimal. In fact, often they are protected by a highly favorable legal standard that upholds their determination unless it is “arbitrary and capricious.” That’s a tough burden for insureds to overcome.

Finally, read the article to see how MetLife challenged the death of late NBC correspondent David Bloom as being due to genetics rather than accidental. The article does a better job of describing it than I could do here by basically repeating it. The case settled, but the arguments made by MetLife, and the medical evidence it relied on, are cringeworthy and anger-inspiring…

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