Many employees receive life insurance coverage as part of their employee benefits. A group life insurance has many advantages over private life insurance policies.

First, group life insurance coverage is usually offered at low prices and is available not only to employees, but also to their qualified dependents.

Second, the employee does not have to keep track of monthly premium payments as the employer withdraws life insurance premiums from the employee’s paycheck and transfers them to the insurer regularly. This protects the employee from a possible missed payment which could result in a policy lapse.

Finally, the employer’s human resource department acts as a liaison between the employee and the insurer, so if there are questions or changes, the employee can simply turn to the employer for help.

What leads to denied life insurance claims?

Ideally, the employee should be given accurate information about his life insurance benefits and any changes in the employee’s status should be handled promptly and efficiently.

Unfortunately, it’s not uncommon both for insurance companies and employers to make mistakes regarding life insurance benefits, provide wrong information, fail to update records and fail to maintain or forward documents to the appropriate department.

These practices often lead to a denied life insurance claim when the employee or his dependent dies.

When a group life insurance claim is denied, the beneficiary may find himself struggling with paying funeral expenses and other financial obligations associated with the death of a loved one.

A family who loses the only breadwinner and receives a denial letter from the life insurance company may feel despair. However, beneficiaries whose life insurance claims have been denied are not left without recourse.

Every unfair life insurance claim denial can be disputed and appealed.

A better Understanding of ERISA

Most group life insurance polices are controlled by ERISA (“The Employee Retirement Income Security Act of 1974”). ERISA provides a wide range of protections for employees and their families.

One of the main purposes of ERISA is to protect the interests of participants and beneficiaries by establishing standards of conduct, responsibility, and obligation for fiduciaries (usually employers and insurance companies) and provide for appropriate remedies and ready access to federal courts.

ERISA imposes high standards of fiduciary duty upon administrators of an ERISA plan. ERISA’s fiduciary duty encompasses three components:

1. The first is a duty of loyalty which requires that all decisions regarding an ERISA plan must be made with an eye single to the interests of the participants and beneficiaries;
2. ERISA imposes a prudent person fiduciary obligation, which is codified in the requirement that a plan fiduciary exercise his duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims.
3. ERISA requires that a fiduciary act for the exclusive purpose of providing benefits to plan beneficiaries.

In addition, ERISA entitles employees to free access to all the documents pertaining to their life insurance policies. This means that upon the employee’s request, the employer and/or the insurer must provide a copy of the life insurance policy, proof of premium payments and all relevant documents.

There can be many ways in which the insurance company and the employer breach their fiduciary duties.

How to recognize unfair life insurance claim denial

Below is a list of some practices that may result in an unfair life insurance claim denial:

1. Employer failed to update its employment records after an employee became part-time, disabled, was terminated, etc.;
2. Insurance company continued to charge premiums after it had received an employee’s waiver of premium application;
3. Insurance company extended coverage without requesting evidence of insurability and later claimed that no coverage should have been issued;
4. Employer or insurance company made material misrepresentations about coverage;
5. Employer and insurance company failed to inform an employee about his rights to convert or port coverage;
6. Employer failed to provide a copy of the life insurance policy to its employees;
7. Employer failed to advise an employee that his/her dependent is not considered a qualified dependent under the policy and collected premiums for the dependent coverage.

ERISA allows beneficiaries whose claims have been denied to file an administrative appeal and request reconsideration. Since ERISA imposes strict deadlines and other restrictions during the appeal process, we encourage all employees and their families to consult a life insurance attorney before considering filing an administrative appeal.

About the Author: The author’s name is Tatiana Kadetskaya. Tatiana Kadetskaya runs a Law Firm devoted to the practice of life insurance law, experienced in all aspects of life insurance law, including ERISA claim denials and claims against insurance companies and employers.