Proving Material Misrepresentation In Life Insurance Policies

Life insurance companies often deny claims by accusing the insured of material misrepresentation—that is, lying or omitting important information on their application. This allows the insurer to rescind the policy and avoid paying out benefits. However, many misrepresentations are not truly material, and some are simply innocent mistakes due to confusingly worded questions. If your claim has been denied, a good attorney may be able to help you overturn the denial and recover the benefits.

Misrepresenting background information (criminal, financial, employment)

Misrepresenting background information, such as criminal, financial, or employment history, is one of the most common forms of material misrepresentation in life insurance applications. This occurs when an applicant provides false or misleading information about their past, which could impact the insurer's decision-making process. For instance, an applicant might lie about their criminal history or fail to disclose their true employment status.

When applying for life insurance, individuals are typically required to answer questions about their background, including their criminal, financial, and employment history. These questions are designed to assess the risk associated with insuring the individual and determine the premium rate. Material misrepresentation occurs when an applicant provides false or misleading information in response to these questions, omitting or concealing relevant facts. For example, an applicant might deny having a criminal record or fail to disclose their current unemployment status. Such misrepresentations could lead to the insurer offering a lower premium or providing coverage that they would not have offered had they been aware of the true information.

In some cases, applicants may unintentionally misrepresent their background information. The questions on life insurance applications can sometimes be vague or confusing, leading to innocent mistakes. For instance, an applicant might honestly believe that their previous conviction does not fall under the category of "criminal history" as defined by the insurer. However, insurers may still claim material misrepresentation even in these cases, arguing that the applicant had fraudulent intentions.

To prove material misrepresentation in the case of background information, insurers must typically demonstrate both materiality and intent. Materiality refers to the significance of the misrepresentation, meaning that the insurer would have made a different decision had they been aware of the true information. Intent, on the other hand, refers to the applicant's deliberate choice to misrepresent their background, as opposed to an honest mistake.

It is important to note that the specific requirements for proving material misrepresentation may vary depending on the state. Some states may only require proof of materiality, while others may also need to demonstrate intent. Therefore, it is always advisable for individuals facing allegations of material misrepresentation to seek legal advice from experienced life insurance lawyers.

Missing information, e.g. doctor visits or medical tests

When applying for life insurance, applicants are typically required to answer questions about their health and medical history. This includes information such as doctor visits, medical tests, and any medications taken. Missing or omitting this information can be considered material misrepresentation, as it can affect the insurer's decision on whether to issue a life insurance policy and the premium the insured will pay.

Life insurance companies assess the answers provided to evaluate the risk involved in insuring an individual and establish the premium rate. If the insured dies within the first two years of the policy's effective date, the insurer has the right to contest the claim and request the insured's medical records to verify the accuracy of the information provided in the application. This two-year period is known as the "contestability period."

During the contestability period, the insurer can investigate and rescind the policy if they find significant inaccuracies or misrepresentations in the application. This includes cases where applicants disclosed their medical history but made innocent mistakes in their answers due to confusing or vague wording.

It is important to note that each state in the US has unique laws governing material misrepresentation in life insurance applications. In some states, insurers must prove that the policyholder intended to deceive, while other states allow rescission of the policy even without fraudulent intent.

If your life insurance claim has been denied due to alleged material misrepresentation, it is recommended to seek legal assistance from experienced attorneys who can help defend your claim and ensure you receive the benefits you are rightfully entitled to.

Failing to disclose substance use

Substance use is a complicated topic when it comes to life insurance. While drugs like marijuana have gained wider acceptance in recent years, the United States is also facing an epidemic of harmful drug use, with a significant number of deaths attributed to drug overdoses. As a result, insurers view drug use as a potential risk factor and may deny coverage or increase premiums for applicants with a history of substance abuse.

When applying for life insurance, individuals are typically asked about their current and past substance use, including alcohol, tobacco, and illegal substances. Most applicants are also required to undergo a medical exam, which includes testing for drug, nicotine, and alcohol use. Being honest and transparent during the application process is crucial, as failing to disclose substance use could lead to the insurer rescinding its offer or denying future claims.

If an individual has a history of substance abuse, they may not qualify for a life insurance policy until they have been drug-free or out of rehabilitation for several years. Even then, they may face higher premiums or reduced coverage. On the other hand, casual substance users, such as those who drink alcohol or use marijuana recreationally, can generally expect to obtain coverage without significant issues.

It is important to note that insurers may deny claims or rescind policies during the "contestability period," which is usually the first two years after the policy is issued. During this time, insurers have the right to investigate and rescind the policy if they find that the insured made a mistake or lied on the application or medical questionnaire.

In summary, failing to disclose substance use in a life insurance application can have serious consequences. It is essential for applicants to be truthful and comprehensive in their disclosures to avoid issues with their coverage or potential claim denials in the future.

Not declaring pre-existing conditions or chronic illnesses

When applying for life insurance, individuals are typically asked to answer questions about their health and medical history, including specific diseases, diagnostic tests, and medications. These answers are assessed by the insurance company to evaluate the risk of insuring the individual and to establish the premium rate.

If an applicant fails to disclose pre-existing conditions or chronic illnesses, it could be considered a material misrepresentation if the condition is significant enough to impact the insurer's decision. For example, if an applicant has a family history of terminal cancer or is a smoker and intentionally leaves this information out of their application, it could be considered a material misrepresentation.

In some cases, the insurance company may argue that the omission of pre-existing conditions or chronic illnesses was intentional and meant to work in the insured's favour by making them seem like less of a risk. However, it is important to note that each state in the US may have unique laws that govern the definition of material misrepresentation and the requirements for proving it.

If a life insurance claim is denied based on material misrepresentation, it is essential to seek legal advice and explore potential defences, such as arguing that the omission was unintentional or that the alleged misrepresentation was not directly related to the cause of death.

Omitting dangerous hobbies or activities extreme sports

Omitting dangerous hobbies or activities like extreme sports can be considered material misrepresentation on a life insurance application. Material misrepresentation refers to untrue statements or omissions that influence an insurer's decision-making process regarding policy issuance and premium rates. This often involves portraying the insured as a lower-risk individual to secure a more favourable policy.

Engaging in hazardous hobbies or extreme sports is one such instance where nondisclosure can be deemed material misrepresentation. These activities are considered high-risk by insurers due to their potential for injury or loss. Examples include mountaineering, skydiving, racing, and scuba diving. While some insurers may deny coverage to individuals who participate in these activities, many others offer life insurance with adjusted premiums to account for the additional risk.

When applying for life insurance, it is crucial to be transparent about any involvement in extreme sports or hazardous hobbies. Failure to disclose such information may result in adverse consequences. If an insurer discovers dangerous nondisclosed activities, they may take several corrective actions. These can include denying the application, increasing premiums to reflect the higher risk, or even cancelling the policy altogether.

The impact of extreme sports participation on life insurance premiums varies depending on the individual and the specific activity. Insurers consider factors such as the frequency of participation, the level of involvement, and the inherent risks associated with the activity. For example, a professional scuba diver who spends significant time in deep water will likely face higher premiums compared to someone who occasionally dives recreationally.

It is important to note that the definition of "hazardous activity" can differ between insurers, and occasional participation in a hazardous activity may not automatically classify an individual as high-risk. Additionally, honesty about these activities during the application process is essential, as nondisclosure could lead to issues with payout in the event of a claim.

Frequently asked questions