Defenses to Life Insurance Denials Based on a Material Misrepresentation – New York

There are some common defenses that beneficiaries can assert when a life insurance policy has been denied in New York based on a claim of material misrepresentation. As a New York life insurance attorney with experience in material misrepresentation cases, Eric Dinnocenzo understands how to litigate these cases.

The misrepresentation was not “material”

Not every omission or misrepresentation in a life insurance application rises to the level that is “material.” The insurance company has the burden to show that an omission or misrepresentation in the application, if it had been known, would have caused it to deny coverage or assess a higher premium rate. Not all facts or conditions inquired about in the application will meet this standard, nor will all personal and medical information that an applicant fails to disclose. Some will be minor or trivial because they have no impact on either the mortality risk or the amount of insurance offered.

Demand underwriting guidelines and other materials

In a lawsuit, a life insurance company must produce documentation concerning its underwriting practices. It cannot rely on mere conclusions to disclaim coverage.

Life insurance companies have detailed underwriting guidelines and other materials that rate or classify a whole array of medical conditions and financial information. A New York life insurance material misrepresentation lawyer should know to demand this information during a lawsuit to verify if the reason for the claim denial is a valid one.

Were other facts or conditions ignored during the application process?

It is important to discover if the life insurance company glossed over or overlooked other known health risks or personal information when issuing the policy. This may show that the denial is not objective and instead is motivated by the insurer’s financial interests. In other words, it may show that the underwriting standards used during the application process were more lenient than the stricter post-claim analysis later used by the insurance company after the insured died. Pursuing this approach can be very effective in overturning a life insurance denial.

After all, if the life insurance company dismissed a known fact or medical condition as insignificant and issued a policy at an incorrect and impermissible rate according to its own guidelines, why should a court believe that it would have correctly rated the undisclosed condition it relies on to deny the claim?

In their rush to get business and receive premium payments, life insurance companies will often ignore medical and financial facts in order to be competitive. They should not have the benefit of being permitted to selectively ignore or emphasize facts simply based on their own interests.

Waiver and estoppel

Sometimes a life insurance company, when it issued the policy, had sufficient information to put it on notice of the fact or condition that it later alleges was not properly disclosed. For example, an abnormal result from a blood test administered in conjunction with the sale of the policy may indicate the existence of a medical condition. In such a case, a life insurance attorney may be successful with a waiver or estoppel defense because the insurer knowingly chose not to connect the abnormal blood test result with the medical condition.

The misrepresentation was innocent, not intentional

Although the law in New York is not forgiving to insureds who make a misrepresentation or omission in the policy application—in fact, courts often do not even consider whether it was innocently or fraudulently made—there are instances when a successful argument can be made to excuse a misrepresentation that was not intentional. These may include situations where:

• The agent was at fault
• The insured had a disability
• The insured had a language barrier
• Lack of knowledge of a condition or its significance

You can read articles that Eric Dinnocenzo wrote about material misrepresentation defenses entitled The Postclaims Underwriting ‘Gotcha’ and Life Insurance Denials Based on Material Misrepresentations: The Application Process, the Law, and Public Policy Collide.

Please contact New York Life Insurance Lawyer Eric Dinnocenzo at (212) 933-1675 to discuss if you have a valid life insurance denial claim.