Trief & Olk is pleased to announce a jury trial victory in Queens County Supreme Court, in March 2023, in a dispute between two claimants of a Metropolitan Life Insurance policy. Our client, the insured’s wife, was designated as the beneficiary in a change of beneficiary form executed in China, where the insured was living at the time. His former paramour claimed the signature on the change of beneficiary form was forged. The claim of forgery was rejected by the jury and our client prevailed.
Trief & Olk negotiated a settlement for the full $ 1.2 million life insurance policy on behalf of their client, the wife of the insured. The insured had been experiencing mental health issues, in the midst of which he called the insurance company to cancel the life insurance policy. According to the terms of the policy, however, any cancellation had to be made in writing, and thus the cancellation was ineffective, requiring the insurance company to pay the full amount owed under the policy.
By statute, New York State has strictly limited the ability of insurers to contest the validity of a life insurance policy more than two years after the policy was issued (on grounds other than non-payment of premiums). This limitation is set forth in New York Insurance Law Section 3203(a)(3), which provides, that life insurance policies issued or delivered in New York must, at minimum, state that they “shall be incontestable after being in force during the life of the insured for a period of two years from its date of issue.” This two-year period is referred to as the contestability period, after which the insurance company is limited in its ability to deny payment to the insured’s beneficiaries.
While some jurisdictions have allowed insurance companies to limit the scope of the incontestability provision – in other words, to assert challenges to the policy’s validity or a beneficiary’s claim after the two-year period has ended – New York courts have made clear that the state’s provisions should be interpreted broadly to protect the insureds and their beneficiaries. These protections apply even in the event of fraud in the application, lack of an insurable interest, and lack of consent by the insured when the policy was taken out. Stated more succinctly: in the context of life insurance policies in New York, incontestability means incontestability.
This proposition was reinforced by a Federal Appellate Court in AEI Life LLC v. Lincoln Benefit Life Co., 892 F.3d 126 (2d Cir. 2018). The life insurance policy at issue in that case was originally obtained – and paid for – by a stranger to the insured in the context of a wager on human life. Not only did this type of stranger-originated life insurance policy violate New York law, see N.Y. Ins. Law § 7815(c), the facts of the case also demonstrated that the application for the policy at issue was fraudulent and that the insured neither signed the application nor was aware of it. Even so, it was not until five years after the policy was issued that the insurer sought to invalidate it. By that point, however, the policy had been purchased by an innocent third-party, who, in response to the insurer’s efforts to void the policy, brought an action seeking to confirm the policy’s validity. The purchaser prevailed in its initial action and then on appeal. The Federal Appellate Court hearing the appeal concluded that: (a) New York’s Life Insurance law “provid[es] no exception to the incontestability defense for fraud;” (b) the law likewise “does not create an exception for lack of consent;” and (c) that “wagering insurance contracts entered for the benefit of parties that lack an insurable interest . . . cannot be challenged after the contestability period has expired.”
These conclusions were heavily grounded on a prior decision by the New York Court of Appeals – the highest state court in New York. In that case, New England Mut. Life Ins. Co. v. Caruso, 73 N.Y.2d 74 (1989), the Court of Appeals explained that New York enacted its incontestability provision with respect to life insurance policies to reflect its “conviction that a policyholder should not indefinitely pay premiums to an insurer, under the belief that benefits are available, only to have it judicially determined after the death of the insured that the policy is void because of some defect existing at the time the policy was issued.” Relying on this policy, the Court of Appeals held that a beneficiary should not be required to “prove his interest after the policy has been in effect for over two years and after decedent has died and is unable to help confirm the arrangement.” This sentiment has been echoed in multiple subsequent decisions. See U.S. Bank National Assoc. v. Sun Life Assurance Co. of Canada, 2016 WL 8116141 (E.D.N.Y. Aug. 30, 2016); Public Administrator, New York County, 39 Misc.3d 952, 956 (Sup. Ct. N.Y. Cty. 2013); Principal Life Ins. Co. v. Erno Altman Ins. Trust, 2011 WL 7498936 (E.D.N.Y. Sept. 20, 2011); Ganelina v.; Reliastar Life Ins. Co. of New York v. Leopold, 192 Misc.2d 385, 387 (Sup. Ct. Nassau Cty. 2002). These decisions make clear that New York life insurance policies may not be contested beyond the period of contestability.
If you have had a life insurance claim denied for a policy in effect beyond the two-year contestability period, the life insurance attorneys at Trief & Olk are available to answer your questions and represent you if there is a basis to challenge the denial. Feel free to consult our website for examples of the many successes we have had relating to payment of life insurance benefits or call us directly to discuss how we may help you.
Trief & Olk’s life insurance attorneys frequently encounter scenarios where the insured has missed premium payments at the end of their life due to serious illness or other causes of incapacitation, leading to the policy lapsing – and leaving the beneficiaries without the proceeds the insured intended them to receive. Unfortunately, this can occur after the insured had been paying premiums regularly for decades, only missing the payments towards the end of their life when the insured was unable to manage their finances. The missed payment does not, however, necessarily mean that the beneficiary cannot claim the policy proceeds.
The first way to protect against the lapsing of a policy under these circumstances is for the insured to purchase a waiver of premium rider at the time the policy is issued. This type of rider provides (at an additional cost) the insured with peace of mind by eliminating the burden of paying premiums if the insured becomes too ill to work (and therefore unable to afford the premiums) or is incapacitated and unable to manage their finances. Ideally, where a waiver of premium provision is in place, the insured or their family would provide documentation to the to the insurance company of the relevant medical details before the insured passes away to ensure that the requirements for the waiver of premium provision are met. If the information is not provided before the insured’s death, however, the insurance company may (and sometimes must) consider the information after the fact.
Even without a waiver of premium rider, the beneficiary may have other options to challenge the cancellation of the policy if the insured was unable to handle their finances at the end of their life. The beneficiary first should ensure that the premium notices were sent to the insured on time and to the correct address. Under New York law (and the law of other states, and frequently pursuant to the terms of the policy itself), the insurer must send the insured a notice that the premium is due within a specific timeframe and, if the payment was missed, provide a grace period giving the insured another chance to pay the premiums owed. If the notice was not sent timely or the grace period not provided, the beneficiary can challenge the cancellation on that basis.
Second, the beneficiary may be able to prove to the insurance company evidence that the insured was not able to manage their finances due to being incapacitated, and therefore that the non-payment should effectively be excused. Insurance companies are not required under law to consider evidence of the insured’s incapacitation (unless there is a waiver of premium provision) but Trief & Olk has assisted several clients recently in proving that the insured was unable to manage their finances, resulting in the insurance company’s determination to pay the death benefits.
If you have had a life insurance claim denied to the policy’s lapse for non-payment of premiums, the life insurance attorneys at Trief & Olk are available to answer your questions and represent you if there is a basis to challenge the denial. Feel free to consult our website for examples of the many successes we have had relating to payment of life insurance benefits or call us directly to discuss how we may help you.
Ted E. Trief of Trief & Olk provides his perspective on life insurance denial claims in New York as featured in this article in Super Lawyers.
By Steph Weber
Life insurance offers a financial safety net, one that covers final expenses and eases the burden on a surviving spouse or children. So when a life insurance claim is unexpectedly denied, it only adds to the distress of losing your loved one.
“The application process for life insurance is fairly rigorous,” says Joshua L. Mallin, an attorney at Weg & Myers who specializes in insurance coverage litigation. “An innocent misrepresentation—if it’s what the courts call ‘material’ [or important]—is something that will void the policy.”
Failure to accurately answer financial questions or disclose a criminal background may raise red flags, but the primary cause of nonpayment is generally related to medical history. An applicant who withholds relevant medical information, whether intentionally or not, places their policy’s benefits in jeopardy.
“If it’s an obvious misrepresentation like you had open-heart surgery and didn’t disclose it, there’s no lawyer in the world that’s going to be able to fix it,” says Ted E. Trief of Trief & Olk, who handles life insurance claim disputes. If a question is open to different interpretations because it wasn’t clearly stated, there may be more leeway.
Ultimately, the potential for recovery hinges on this: Would the insurance company have issued the policy in the first place or at the same premium had it known about the misrepresentation? If not, successful litigation is unlikely.
But if the circumstances are “debatable at all,” Trief says, there may be avenues to overturn the decision.
For example, when an insurer sought to void a $3 million life insurance claim due to nondisclosure of smoking and drug use, “there was no doubt that the decedent had used drugs at the time of his death,” says Trief. “But the life insurance company was required to show that [it had also occurred] at the time of the application or shortly before,” a fact that could not be established, so the claim was eventually paid after trial.
Failure to pay just one premium, even after years or decades of on-time payments, can result in policy cancellation. “When people get sick, they don’t focus on their life insurance policy, they focus on their survival,” says Trief. They may miss mailing a payment or not realize their bank account lacks the funds to cover premiums that are automatically withdrawn.
Many states have anti-lapse provisions that require insurers to send a notice of premium due to the correct address, and Trief has been able to reinstate policies by showing the notice was sent to the wrong location, was worded improperly, or was not sent in a timely manner.
Applicants should be transparent in their responses, answering questions carefully, and working with a reputable agent who will do the same. Trief says agents eager to make a sale may encourage the policyholder to leave out pertinent facts.
“Consumers think they’re getting the insurance company’s advice because the agent is paid by the company, but you’re responsible for what you sign, even if the suggestion is made by the agent,” says Trief.
Always question inconsistencies and get everything in writing, says Mallin. When an elderly client wanted to replace a term-life policy with one that had whole-life conversion rights, the new multimillion-dollar policy was issued on the condition that the conversion occur before the term ran out or by the age of 70, whichever happened sooner. Already past the age cutoff, the policyholder received verbal and written assurances from the broker and company’s vice president. Later, when the conversion request was denied based on his advanced age, Mallin leveraged the client’s documentation to bring a successful suit against the insurer.
“It’s my sense that if this was a $100,000 policy, they would have just paid,” says Mallin. “The bigger the policy, the more the insurance company is going to be a stickler and not write a check so quick.”
Click here to read the original article.
UPDATED NOVEMBER 11, 2020: Trief & Olk defeated a second challenge to its successful $3 million verdict against William Penn Life Insurance Company of New York (“William Penn”). On September 15, 2020, the New York Court of Appeals (New York’s highest court) rejected William Penn’s motion to hear its appeal of the decision of the appellate court issued in February 2020, cementing Trief & Olk’s trial victory.
Trief & Olk successfully defeated a challenge to the $3 million verdict it had obtained in a suit brought against William Penn Life Insurance Company of New York (“William “Penn”), relating to William Penn’s denial of the claim for payment of the proceeds under two policies insuring the life of Jhonny Jaar. William Penn argued that Mr. Jaar had made material misrepresentations on the applications for his policies regarding his history of smoking and drug use, and that they would not have issued the policies if they had known about this alleged behavior.
The parties tried the case without a jury in June 2018 before Justice Francis A. Kahn III of the Supreme Court of the State of New York, Bronx County, who issued his memorandum opinion on October 22, 2018. You can read the opinion here. Justice Kahn found that William Penn did not meet its burden to establish that Mr. Jaar had made any material misrepresentation on the life insurance applications and therefore was obligated to pay the $3 million (plus interest) owed under the terms of the policies. William Penn appealed that determination.
In an opinion issued on February 27, 2020, a three-judge panel of Appellate Division of the First Department, unanimously affirmed the findings of Justice Kahn, ruling that William Penn’s challenges to the trial court’s evidentiary rulings had no merit. In particular, the Court found that the testimony of William Penn’s forensic expert, Dr. Michael Baden, was unreliable because he based his opinion in part on hearsay evidence – purported statements of Mr. Jaar’s widow – that is not typically relied upon by the medical profession.
If you recently lost a loved one who had life insurance for which payment was denied or which you fear may be denied, the life insurance attorneys at Trief & Olk are available to answer your questions and represent you if life insurance has been denied. Feel free to consult our website for examples of the many successes we have had when life insurance companies denied payment or call us directly to discuss how we may help you.
How to Choose Your Beneficiary Whether You are Married or Unmarried
When a married person with children obtains life insurance (whether purchasing it directly or receiving it as a benefit of employment), the usual practice is to designate the spouse as the beneficiary, assuming that any life insurance proceeds would be used to support the surviving spouse – and the children. When an unmarried person with children obtains life insurance, however, it is less clear how to ensure the children’s financial interests are protected. Many people choose to designate as the beneficiary a close relative or a romantic partner (who is not the parent of the children), assuming this person will honor the wishes of the insured and use the insurance proceeds to support the children, especially if any children are under the age of 18.
Based on our experience at Trief & Olk, however, we have seen many cases where this approach ends up with unintended consequences. Rather than giving the money to the children (or their legal guardians, if they are under age 18), the third party who was designated as the beneficiary has decided to keep the insurance money for himself/herself, despite knowing that this result is not what the insured intended. In such situations, there is little the children can do to challenge the result.
What Do Life Insurance Companies Use to Determine Who Should Receive the Proceeds
Life insurance companies base the determination of who should receive the life insurance proceeds on the person formally designated as the beneficiary (or beneficiaries), regardless of what might be expected or what might be indicated in the person’s will. Thus, if the insured’s romantic partner (or former partner) was the designated beneficiary listed on the insurance application, the children cannot argue after the death that the insured really wanted the children to receive the funds.
The fact that one might expect an insured to leave the money to support their children or has provided for the children in their will does not change how the life insurance proceeds are paid out. The life insurance company’s determination will be based on the identity of the designated beneficiary, regardless of how unfair this may seem.
To avoid this unfortunate outcome, the safest practice for unmarried individuals with children is to designate the children directly as beneficiaries. If the insured wants the partner/relative and the children to share the proceeds, they can be designated as joint beneficiaries, splitting the proceeds however the insured would like (such as 50% for the partner and 50% for the child).
If you have a dispute relating to life insurance proceeds, the life insurance attorneys at Trief & Olk are available to answer your questions and represent you if life insurance claim has been denied or is disputed by another purported beneficiary. Feel free to consult our website for examples of the many successes we have had relating to payment of life insurance benefits or call us directly to discuss how we may help you.
Trief & Olk has filed a complaint on behalf of its client against American Income Life Insurance Company (“AIL”) in Essex County, New Jersey, alleging that AIL and its agents misled its customers (the beneficiary of the life insurance policy and her now-deceased husband), persuading them to purchase $5,000 in whole life insurance coverage and $200,000 in term life insurance coverage, but actually issuing a policy with different terms. The policy AIL issued had no term life insurance but did have an accidental death rider for $200,000. Because accidental death coverage only applies in very limited circumstances, such plans are not a substitute for term life insurance, under which the beneficiary is paid whether the insured dies of illness or accidental causes. The family never received a copy of the AIL policy, despite repeated requests, and had no opportunity to confirm that the policy issued was the policy they thought they had purchased.
When the insured passed away in 2018, his wife submitted a claim for the insurance payment she thought AIL owed. Because her husband’s death was not accidental, however, AIL denied the claim. It was only at that point that she learned that hat the policy AIL issued had an accidental death rider rather than the $200,000 in term life insurance she and her husband thought they had purchased. She and her husband had been paying premiums for insurance that ended up being useless, rather than the insurance they thought they had purchased, under which she would have received the $200,000 benefit.
Trief & Olk has found numerous complaints of other AIL customers who claim that they did not receive copies of their policies and were not properly informed of the terms of the policies purchased. The complaint claims that AIL (and its agents) committed fraud and violated the New Jersey Consumer Protection Act, and were negligent in supervising their affiliated agents, who failed to properly explain the terms of the policy to the Ilizarovs.
If you think you have a claim related to the denial of life insurance coverage (against AIL or another life insurance company), the life insurance attorneys at Trief &Olk are available to answer your questions and represent you if life insurance claim has been denied improperly or is disputed by another purported beneficiary.
Individuals who have purchased life insurance in New York are protected by certain provisions of New York’s insurance law, so that policies cannot be canceled or payment denied for failure to pay the premiums on time without the insurance company providing adequate notice. If the proper notice is not provided, the policyholder has the benefit of a one-year grace period during which the policyholder can pay the amount owed and the policy claim cannot be denied.
Section 3211(a)(1) of New York Insurance Law requires that for policies for which premiums are paid annually, semi-annually, or quarterly, any notice that the policy will be canceled due to non-payment must be sent “at least fifteen and not more than forty-five days prior to the day when such payment becomes due . .” The notice must provide the following details:
- The notice must be mailed to the last known address of the policyholder (or any other person designated to receive notice on behalf of the policyholder); and
- The notice must state the amount due, date due, place to where and person to whom the payment is payable; and
- The notice must specify that if the payment is not made within the given time frame or the specified grace period thereafter, the policy will terminate or lapse.
Section 3211(b)(1), (2). If an insured who lives in New York receives notice from an insurance company that a life insurance policy has been cancelled due to non-payment, the policyholder should investigate whether the initial notice of premium due complied with the procedures outline above. For example, if the notice was sent only 10 days before the payment was due and the insurer cancelled the policy for non-payment, the insured could challenge the cancellation because the notice did not comply with the statute. As long as the insured sought to cure the default by paying any outstanding premiums owed within the one-year grace period, the insurer would have to reinstate the policy. If the insured dies within that one-year grace period, the insurer would have to pay the claim.
Note that without the benefit of this grace period, the insurance company may offer the policyholder the opportunity to have the policy reinstated but can require the insured to undergo new medical underwriting. In other words, the insurer would have another opportunity to review the insured’s medical history and could decide not to re-issue the policy or to charge a higher premium than before. If the insured’s health has declined since originally obtaining the life insurance, the new coverage may be more expensive or provide a lower benefit than under the policy as originally issued. Thus, the one-year grace period provided by Section 3211 protects the insureds from losing affordable life insurance coverage.
Trief & Olk recently obtained the full $1 million owed under a life insurance policy issued by Protective Life Insurance to a New York resident when the notice was mailed 11 days prior to the date the premium was due. Because the insured had recently moved, the notice apparently did not reach him prior to the date the payment was due. He eventually received a follow-up notice after the policy had been cancelled and tried to have the policy reinstated but the insurer undertook new medical underwriting, which had not been completed by the time the insured passed away. The beneficiaries sought our firm’s assistance and after a close review of the documents, we recognized that the premium notice had been sent 11 days from the due date, which was outside the timeframe provided by the statute. After we demonstrated non-compliance with New York law, Protective Life Insurance agreed that the premium notice did not comply with Section 3211 and agreed to pay the policy proceeds in full, along with the interest that had accrued since the death.
When a marriage ends in divorce, the parties’ attorneys should address issues relating to life insurance to ensure the parties’ intentions are fulfilled years later when an ex-spouse dies. For example, the parties can include a provision in the divorce agreement requiring the party paying alimony and/or child support to maintain life insurance for the benefit of the former spouse. This practice is a common tool to make sure that adequate funds are provided to the former spouse (and/or children) if the insured party passes away during the period when alimony and/or child support would have been owed.
Unfortunately, if the divorce agreement does not address life insurance at all or if the language in the agreement is unclear, disputes can arise after the insured former spouse passes away, resulting in the claim being denied or contested by multiple parties. At Trief & Olk, our life insurance attorneys see many cases where different parties assert competing claims to the same insurance policy proceeds, such as disputes between children from the first marriage and the second spouse.
To avoid such a dispute regarding a life insurance claim, it is important for the attorneys who are handling the divorce to ask about any existing life insurance policies and the extent to which the parties intend for coverage to be maintained in the future for the ex-spouse and/or children; then the parties should take steps to put in place the coverage required and designate beneficiaries to comply with the terms agreed upon. For example:
- If the party providing child support is obligated to purchase life insurance, that party should make sure that the beneficiary is properly designated to show that the insurance proceeds are paid to an adult (usually the ex-spouse) on behalf of the children;
- Steps should be taken to ensure that the party obtaining the coverage cannot change the beneficiaries without the consent of the party for whom the coverage is maintained;
- The insured should notify the insurance company that payment of any insurance proceeds must comply with the terms of the divorce agreement or court order, and provide a copy of the relevant documentation; and
- If the parties agree that the insured party can reduce the amount of life insurance coverage over time (such as when a child reaches the age of 21 or after a certain amount of alimony has been paid), the language in the divorce agreement should clearly reflect the parties’ understanding as to how such changes can be made and the amount of coverage that must remain.
One mistake that is sometimes made is assuming that a life insurance policy purchased while the couple was married will satisfy the obligation to obtain coverage, without making any changes. If, however, no changes are made, the outcome could be the opposite of what the couple intended, depending on the law of the state where they reside.
In 26 states (including both New Jersey and New York), statutes provide that any life insurance beneficiary designations made prior to the divorce are considered to be revoked when the divorce is finalized, meaning it is as if the designation were never made. These statutes are based on an assumption that the insured person usually would not want to keep the former spouse as the beneficiary of her life insurance policy but may have neglected to change the beneficiary after the divorce. Although enforcing these statutes can lead to a result that is the exact opposite of what the parties wanted, the U.S. Supreme Court recently ruled that such statutes can be enforced, even if the statute in question was passed after the parties had divorced (and, thus, at the time of the divorce, they could not have asked their attorneys to plan accordingly). Sveen v. Melin, 138 S. Ct. 1815, 1822-23 (2018).
The best solution for avoiding disputed life insurance claims that arise after a previous divorce is to plan in advance – making sure that the attorneys handling the divorce specifically consider what life insurance coverage should be in place and check to make sure that the beneficiary designations are documented properly to avoid later being undone by operation of state law. If, however, you do have a dispute relating to life insurance proceeds, the life insurance attorneys at Trief &Olk are available to answer your questions and represent you if life insurance claim has been denied or is disputed by another purported beneficiary. Feel free to consult our website for examples of the many successes we have had when competing parties contested payment of life insurance benefits or call us directly to discuss how we may help you.
The law firm of Trief & Olk has a reputation for success in insurance denial claim cases requiring high-powered trial skills, expert research and sophisticated strategies.