$250,000 Claim Denied to 29 Year Old Friend who Died of Brain aneurysm

[DianeLSchuetz]

What is the name of your state?What is the name of your state? Minnesota

A female friend took out a life insurance policy three months before she died of a brain aneurysm. On her application, she made false statements about her health. (She said she didn't smoke - this was false. She said she didn't drink or use drugs - this was false, in fact, she had been in treatment at least twice for drugs and alchohol. She said she was never depressed - this was false as she had a prescription for anti-depressants.)

When the friend died, the insurance company conducted an investigation and found out about the misrepresentations on the insurance application. They denied the claim because it was 'fraudulent.' However, since the reason for her death - a brain aneurysm - is not directly related to the misstatements, is there a reason to believe the insurance company might settle for at least a partial amount of the $250,000? Is there any case law for this?

 

[cbg]

I don't know Minnesota state insurance law, but it seems likely that if she had told the truth on the application, the policy would never have been issued. That being the case, why on earth should they be obligated to pay out ANYTHING, regardless of the cause of death?

 

[ALawyer]

The prior response was absolutely correct. If you lie and die (assuming, in the United States, the lie is a "material misrepresentation" and the death occurs within the first 2 years the policy is in force - in some other countries it can be forever) the insurance company merely refunds the premuim.

The law does not create incentives to defraud life insurance companies. Of course, if the insurance company engages in post-claim underwriting and conjures up a baseless reason to deny the benefits (such as if she said she weighed 145 pounds and she really weighed 147) it would be engaging in bad faith and subject to punitive damages. To deny the claim the mistatement has to be a material misrepresentation. In some states the false statement about smoking may not have been sufficient to deny the claim, just to scale back the benefits. The anti-depressent misstatement is usually material. But to lie about having had recent treatment for drug and alcohol abuse -- NO LIFE INSURANCE COMPANY WOULD KNOWINGLY COVER HER, at least until many years had passed. She'd have to get insurance that takes all comers.