How Do Life Insurance Appeals Work? What to Do After a Claim Denial

A life insurance policy is often purchased for one reason: to make sure the loved ones left behind have financial support after a death. When an insurer denies a claim, however, beneficiaries can suddenly find themselves dealing with a complicated insurance dispute while they are still grieving.

Fortunately, receiving a denial letter does not always mean the claim is over.

Depending on the policy and circumstances, a beneficiary may be able to appeal the decision and ask the insurer or plan administrator to reconsider the claim. An appeal can involve much more than sending a letter saying you disagree. It may be the beneficiary’s opportunity to identify errors, submit missing evidence, challenge the insurer’s interpretation of the policy, and build the record that could become important if the dispute eventually goes to court.

Here is how the life insurance appeal process generally works.

Why Are Life Insurance Claims Denied?

Before appealing, it is important to understand why the insurer denied the claim.

Life insurance claims may be denied for reasons involving:

• Alleged misrepresentations on the insurance application
• Questions about the insured’s medical history
• A policy that allegedly lapsed because premiums were not paid
• Disputes over whether coverage was active at the time of death
• Exclusions contained in the policy
• Disputes over whether a death is properly considered “accidental” in nature
• Disagreements over the identity of the proper beneficiary
• Employer-sponsored coverage that allegedly ended before the insured died
• Problems involving the conversion or continuation of employer-sponsored coverage
• Disputes over whether required forms or enrollment documents were completed
• Questions arising because the insured died during the policy’s contestability period

The denial letter should explain the insurer’s stated reason for refusing to pay the benefit. That explanation becomes the starting point for an appeal.

Beneficiaries should not assume that the insurer’s interpretation is automatically correct. A denial can depend on incomplete records, disputed facts, ambiguous policy language, administrative errors, or an interpretation of the policy that may be challenged.

Step 1: Read the Denial Letter Carefully

A life insurance denial letter can contain several pieces of information that may affect what happens next.

Look for the specific provision of the policy the insurer says supports the denial, the factual basis for the decision, any documents the company relied upon, instructions for appealing, and the deadline for filing the appeal.

Do not focus only on the insurer’s summary of what happened. Compare the denial letter with the actual policy or plan documents whenever possible.

For example, an insurer may say the policy was no longer in force because premiums were not paid. But that can raise additional questions. Was proper notice of the lapse provided? Was there a grace period? Did an employer fail to make the required deductions or submit paperwork? Was the insured entitled to continue or convert the coverage?

The wording of the policy and the underlying records can matter enormously.

Step 2: Determine What Kind of Life Insurance Policy Is Involved

One of the most important questions is whether the deceased had an individual life insurance policy or coverage obtained through an employer.

Individual policies are generally governed by state insurance and contract laws. Appeal procedures and deadlines can depend on the policy and the state involved.

Employer-sponsored group life insurance may be governed by the Employee Retirement Income Security Act, commonly known as ERISA.

ERISA has its own rules for employee benefit claims and appeals. In many ERISA cases, beneficiaries must complete the plan’s administrative appeal process before filing a lawsuit. That makes the appeal particularly important.

Under federal ERISA claims regulations applicable to many benefit plans, a claimant generally must receive at least 60 days after receiving a denial to file an appeal. The plan must also provide an opportunity to submit documents, records, comments, and other information related to the claim.

The particular plan documents should always be checked because procedures can vary.

Step 3: Request the Policy and Claim File

An appeal is difficult to prepare if you do not know what information the insurer used to make its decision.

Beneficiaries may want to obtain documents such as:

• The complete life insurance policy
• The insurance application
• Any amendments or riders
• Beneficiary designation forms
• Premium payment records
• Correspondence between the insured and insurer
• Medical records relied upon by the insurer
• The original claim submission
• Documents cited in the denial letter

For employer-sponsored coverage, additional records may be important, including the summary plan description, enrollment records, payroll deductions, employment records, notices concerning termination of coverage, and documents explaining continuation or conversion rights.

In an ERISA case, claimants generally have rights to obtain documents and information relevant to the benefit claim. Reviewing those materials can reveal gaps between what the insurer says happened and what the record actually shows.

Step 4: Identify the Weakness in the Insurer’s Reasoning

A successful appeal usually needs to do more than say, “I disagree.” The appeal should address the insurer’s reason for denial directly.

Suppose an insurer claims that the insured failed to disclose a medical condition on the application. Relevant questions might include whether the answer was actually inaccurate, whether the insured reasonably understood the question, whether the alleged omission was material to the insurer’s decision to issue the policy, and whether the insurance agent completed or altered any portion of the application.

If the insurer claims the policy lapsed, the appeal may examine payment records, notices, grace periods, automatic payments, or communications with the insurer.

If employer-sponsored coverage is involved, the dispute might center on whether the employee remained eligible, whether coverage ended properly, whether the employee was informed of the right to convert the group policy, or whether the employee attempted to have the coverage converted into an individual policy.

The evidence needed depends on the reason for denial.

Step 5: Gather Evidence Supporting the Claim

Once the denial has been analyzed, the beneficiary can begin assembling evidence that addresses the insurer’s allegations.

That evidence may include medical records, physician statements, employment documents, emails, payroll records, bank statements, premium receipts, insurance applications, beneficiary forms, correspondence, and statements from people with firsthand knowledge of what occurred.

Timing can also matter.

If an insurer claims that an insured allowed a policy to lapse, for example, correspondence showing that the insured believed premiums were being paid could become significant. If an employer-sponsored policy is involved, payroll records showing insurance deductions may raise questions about whether coverage should have remained active.

A strong appeal connects the evidence to the terms of the policy rather than simply providing a stack of documents and expecting the insurer to figure out why they matter.

Step 6: Submit a Written Appeal

The appeal should generally identify the claim, explain why the denial should be reversed, address the insurer’s stated reasons, cite relevant policy provisions, and include supporting evidence.

Depending on the dispute, the appeal may also identify inconsistencies in the insurer’s investigation or explain why evidence relied upon in the denial does not support the insurer’s conclusion.

Keeping records is important. Beneficiaries should generally maintain copies of the appeal, supporting documents, correspondence with the insurer, and proof showing when the appeal was submitted.

Missing an appeal deadline can create serious problems, particularly when employer-sponsored coverage is governed by ERISA.

Why ERISA Life Insurance Appeals Can Be Especially Important

Appeals involving employer-provided life insurance deserve particular attention because the administrative appeal can affect a later lawsuit.

ERISA generally requires covered plans to provide a process for reviewing denied benefit claims. Beneficiaries typically need to use the required internal appeal process before asking a court to resolve the benefit dispute, although exceptions may apply.

There is another reason the appeal matters: in many ERISA cases, a court reviewing a later lawsuit focuses heavily on the administrative record developed during the claims and appeals process.

That means documents omitted from the appeal may be difficult to introduce later.

Instead of viewing an ERISA appeal as merely another letter to the insurance company, beneficiaries may want to think of it as an opportunity to build the factual and legal record supporting the claim.

What Happens After You File the Appeal?

The insurer or plan administrator reviews the appeal and supporting evidence.

The reviewer may uphold the original denial, reverse it and approve benefits, or request additional information.

For many ERISA-covered benefit claims that do not fall into special categories such as health or disability claims, federal regulations generally provide up to 60 days for a decision on appeal. Certain special circumstances can permit an additional period of up to 60 days.

Individual life insurance policies may follow different procedures and timelines depending on the policy and applicable state law.

If the appeal succeeds, the insurer may pay the death benefit. If the appeal is denied again, the beneficiary may have additional legal options including litigation.

What If the Appeal Is Denied?

A second denial does not necessarily end the dispute. Depending on the circumstances, a beneficiary may be able to pursue additional administrative review, file a complaint with an insurance regulator, or bring a lawsuit seeking the benefits allegedly owed.

What happens next depends heavily on the type of policy. A lawsuit involving an individual life insurance policy may involve state contract or insurance law. A lawsuit involving an ERISA-governed employee benefit plan generally proceeds under federal law.

Deadlines often continue to apply even after an appeal has been denied. Beneficiaries should therefore avoid assuming they have unlimited time simply because they completed the insurer’s appeal process.

Should You Hire a Lawyer for a Life Insurance Appeal?

You are not necessarily required to have an attorney simply to challenge a life insurance denial. However, complicated denials can involve policy interpretation, medical records, employment records, insurance regulations, ERISA requirements, and strict procedural deadlines.

One of our Morgan & Morgan attorneys who is dedicated to exclusively handling life insurance matters may be able to determine why the claim was denied, obtain relevant records, identify evidence the insurer overlooked, evaluate the policy language, and prepare an appeal directed at the insurer’s stated justification.

Legal assistance can be particularly important with ERISA-covered policies because mistakes during the administrative appeal may affect what evidence is available if the dispute later reaches federal court.

A Life Insurance Denial May Be Worth Challenging

A denial letter states the insurer’s position. Whether that position withstands scrutiny depends on the policy, the evidence, and the law. Morgan & Morgan’s Life Insurance Team can evaluate the denial, identify applicable deadlines, and explain the available options for challenging it.

If a life insurance company has refused to pay benefits after the death of a loved one, Morgan & Morgan may be able to help you understand why the claim was denied, whether the decision can be challenged, and what steps may be available next.

Contact Morgan & Morgan today for a free case evaluation to learn more about your options with no obligation.