LIFE INSURANCE LITIGATION
Even on grounds of misrepresentation there are time constraints on an insurance carrier’s ability to seek to cancel an insurance policy or issue a life insurance claim denial, they must include an “incontestability clause,” which bars insurers from challenging a life insurance claim after the life insurance policy has been in effect for at least two consecutive years. For example, in Ilyaich v. Bankers Life Ins. Co. of New York, according to the Court, the life insurance company’s failure to verify the information found in the application within two years barred the life insurance company from denying claims.Every state, including New York and New Jersey, requires that lawsuits concerning life insurance claim denials be filed promptly, before the statute of limitations runs out so If you have lost a loved one and the life insurance company has denied your life insurance claim, your ability to recover life insurance benefits might not be lost.
A denial of benefits may also be blamed on rescission. Rescission is a term used by life insurance companies and in legal settings to refer to the reversal or undoing of a contract that established a life insurance policy. Reversing the contract means that the policy has basically been erased and the beneficiary is no longer entitled to the benefits stated within the policy.
Rescission is legal and laws allowing it were initially intended to protect life insurance companies from fraudulent applicants. However, the rise in denials of death benefits in recent years has led many life insurance and legal experts to believe that insurers are now rescinding policies as a way to collect premiums from individuals without fully evaluating their risk before underwriting the policy and without paying out benefits. Additionally there have been a number of cases brought to court where the insurance company rescinded a policy or refused to pay out benefits due to a fabricated suicide, drug abuse, or medical problem.
Life Insurance claim denials are a common practice by insurance companies. After a policy holder dies, the insurance company reviews both the claim filed by the beneficiaries of the insured and the policy itself, in search of possible details that can be used as a reason to deny the claim.
This practice is also called life insurance rescission and it effectively reverses the contract that was made when the policyholder purchased the life insurance policy. The insurance company may argue that omissions or errors made by the policy holder on his initial application were misrepresentations that render the contract null and void. Life insurance rescission were originally devised to help insurance companies mitigate the financial risks associated with life insurance fraud but now have become a way for life insurance companies to minimize costs and maximize profits—often at the expense of bereaved family members struggling to cover funeral costs and leftover medical bills.
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