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Subscribers Feedback - Claim Denials

In the July 2013 Update News and the August 2013 Update News Compulife discussed problems that are occurring with life insurance claims being denied by life insurance companies. We asked subscribers to email their stories related to that issue. We promised to provide the feedback to subscribers and keep individual identities anonymous:

Some Additional Thoughts

The subject of Claim Denial for Fraud is not new for me. I also write for a Canadian publication called Canadian MoneySaver. Apart from being one of the authors who contribute on the subject of life insurance, I think the magazine is an incredible value at only $25 per year. I recommend the on-line version of the magazine, which gives you access to current AND past articles. You can sign up here:

Click Here to Subscribe to Canadian MoneySaver

In September 2009 I wrote an article on the subject of claim denials for life insurance fraud:

When Fraud Isn’t Really Fraud

I do need to add a correction to the article. I originally said:

While most U.S. states do not MANDATE a fraud exclusion to the 2 year contestability period, many states do allow a life company to include a fraud exclusion if the company so wishes. That means some policies in some states are better than others (a better policy does not have a fraud exclusion). Even so, I don't see any evidence that claims are being denied for fraud in the U.S., following the 2 year contestability period, in the same way that they are being denied in Canada.

In further investigating the subject, I did a google search regarding life insurance claim denials related to fraud. Here is something that turned up:

Will Little White Lies Null and Void Your Life Insurance Claim?

The article, from a Massachusetts based insurance agency says at the end:

I have highlighted the important bit. I find this comment disturbing. Who says something is fraud? In Canada, in cases I have been made aware of, "fraud" does not mean criminal fraud. In the cases of criminal fraud, charges must be made, and the defendant found guilty in court. Unfortunately that is not what is going on in Canaada. Canadian life insurance companies are simply declaring the insured committed fraud. If beneficiary wants to contest the company's position, they have to sue in civil court. Unlike criminal fraud, the accused is considered guilty until proven innocent. Worse, in many of these cases settlements occur before trial, and one of the conditions of settlement is that the beneficiary not publicly discuss the particulars of the settlement. In other words, there is nothing to discourage life insurance companies from continuing this practice.

With that in mind, we would be happy to continue to hear from ANY subscribers who encounter issues related to claim denials. Life insurance companies cannot gag those whose claims have been denied from telling their stories during the litigation process. That's when we need to hear about these stories, and share them in the industry.

In my view, after the 2 year contestability period has expired, life insurance claims should and must be paid, regardless of what the insured did or did not do prior to obtaining the policy. And if fraud is to be allowed as an excuse to evade the payment of claims, that should be criminal fraud only.

My google search also turned up this PR Newswire article:

Appeal of Life Insurance Denial Gets $1 Million Claim Paid

According to the article:

It sounds like this issue arose during the 2 year contestability period of the policy. Even so, I have written to the Center for Life Insurance Disputes. Here is my email:

I received the following response from from the Center for Life Insurance Disputes. Here is what they said:

In response to that email I wrote:

I will provide further details, and post them here, as I receive them.

And just when you thought it couldn't get more interesting, this turned up, highly relevant to the comments from Center for Life Insurance Disputes:

The article says:

then goes on to say:

My view is that it sounds like a Canadian company using fraud as an excuse to get out of its obligations on a life insurance policy, 2 years after the contestability period. This time, it's an American company that is fighting back. We'll have to keep a close eye on this one.