Some insurance companies are refusing to pay valid death benefits on claims where police investigations are involved. Sometimes the refusal goes on for several years – often leaving beneficiaries in dire straits. It’s a new phenomenon that some experts say is another way that insurance companies have discovered to avoid paying claims.

Case in point

Bob Scott, a California attorney and partner with the Advocate Law Group, says that he’s seeing more and more of life insurance companies not paying benefits when the beneficiary is being investigated concerning the death. He provided the following example:

An example that was in the news recently concerned a husband who contacted the police and reported that his wife never came home from work one night. She didn’t show up the next day either, so they started searching for her. Unfortunately, they didn’t find her and the husband became the suspect in the case – partially because the couple had a life insurance policy.

The police asked the husband to take a lie detector test and provide all sorts of other information. The husband was outraged and thought that the police should be out looking for her instead of interrogating him. Well, it turned out that the police did find the wife. She had driven off of a snowy road on an underpass and her car was completely covered in snow. However, she was alive.

Life insurance policies create suspicion

Scott says that the key to a scenario such as the one described above is the life insurance policy. He explained, “Police and insurance companies are often suspecting when it comes to life insurance polices and usually think there is some sort of motive. Many times, as in this case, that’s just not true. I’ve seen a number of cases where the insurance carrier doesn’t deny the claim, but won’t pay the claim either. They will claim that they won’t pay until the police rule out the beneficiary as a suspect. However, they don’t put a time limit on it.”

Are insurers allowed to do this?

Insurance companies cannot arbitrarily refuse to pay out the proceeds of a life insurance policy, according to Scott, as the policy itself doesn’t allow for it. He told us:

There’s no provision in any insurance policy written in the United States that allows that event to occur. The reason there isn’t is because the National Association of Insurance Commissioners says that insurance companies in every state are prohibited from crafting exclusions that would give them that sort of protection in this type of setting. Once an insurance company is presented with a proof of loss for a death and has an identifiable dead body, they have to pay – unless the beneficiary is charged and convicted of the murder. It’s just as simple as that.

Scott thinks the way that insurance companies deal with these types of claims is wrong. He said, “They’re really not denials, but they’re not payments either. Many of these are just called cold claims or inactive claims or investigations and they just sit there for years. Well, the carrier shouldn’t be allowed to sit on the money during that time.” He says that, as he sees it, three things are going to happen:

1. They’re going to make the claim.
2. They’re going to be told that they can’t make a decision because they’re waiting.
3. They’re going to know that to some extent, greater or lesser, that law enforcement people are looking at that person as potentially a person involved in or the perpetrator of a homicide.

Insurers must make a decision

Life insurance companies must be forced to make a decision, according to Scott, who explained, “If they say no, ask them to point out what policy language allows them to not make a decision. The answer will always be that there isn’t any. If enough time goes by, say six months or so, you should contact an attorney and file a lawsuit against them.

If your insurance company hasn’t paid your valid life insurance benefits, they may have acted in bad faith. To contact a qualified attorney whose practice focuses in this area of the law, please click here. Consultations are free, without obligation and are strictly confidential.