Significant Settlement for Wrongfully Denied Life Insurance Claim
Donahue & Horrow recently obtained a significant settlement for their client against an insurance company that denied her claim for accelerated benefits under a life insurance policy.
Most life insurance policies are straightforward; the insured pays premiums, and when they die, their family receives a lump sum payment. However, policies sometimes include riders that allow an insured to collect a portion of the death benefit while they are alive. Typically, life insurance accelerated benefits riders promise that if you are diagnosed with a terminal or chronic illness, need long-term care, or face other qualifying life-threatening conditions, you will be paid money that you can use for medical expenses, long-term care, or other costs.
The insured was diagnosed with a life-threatening illness. Immediately following her diagnosis, she focused her energy on getting the intense treatment she needed to survive her diagnosis, including multiple surgeries. About 15 months after her diagnosis, she filed a claim for accelerated benefits with her life insurance company, providing the company with medical records detailing her diagnosis, treatment, and ongoing prognosis. Under the ambiguous terms of the accelerated benefits rider, our client was clearly entitled to receive a payment of a portion of the death benefit to allow her to pay her expenses during this difficult time.
However, the insurance company failed to approve her claim. The company refused even to consider her medical evidence, instead relying on a provision in the accelerated benefits rider stating that any claim must be made within 365 days of the initial diagnosis. The company stated that because the claim was made about 15 months after her diagnosis, our client missed her window to make a claim. Therefore, the insurance company was under no obligation to pay, or even review, her claim.
Our client contacted Donahue & Horrow and spoke with Michael Horrow about the claim denial. However, under California law, an insurance company is not permitted to deny a claim because it was received after a deadline imposed by the company. California’s “notice-prejudice rule” means that an insurer cannot deny a claim based on late notice without offering proof that the delay caused actual and substantial prejudice in investigating or settling the claim. The insurer provided no proof that it was prejudiced by the delay.
Understanding that the insurance company’s obvious violation of the “notice-prejudice rule” was evidence of insurance bad faith in failing to follow California law, Donahue & Horrow quickly filed a lawsuit, seeking damages for breach of contract, insurance bad faith, and punitive damages.
Shortly after the lawsuit was served, the insurance company’s counsel reached out to Donahue & Horrow, and the parties scheduled an early mediation. At the mediation, the insurance company was, of course, unable to provide a defense to its supposedly trained claims handlers’ ignorance of California law, and a favorable settlement was reached, ending the litigation and allowing our client to focus on fighting her diagnosis rather than the insurance company.
If an insurance company unfairly denied your claim for life insurance, long-term care insurance, or disability insurance benefits, call Donahue & Horrow LLP at (877) 664-5407 for a free consultation. Michael Horrow and his team at Donahue & Horrow are ready to fight for the benefits you deserve.