The complexity of life insurance puts many litigators at a disadvantage when disputes reach the stage of legal action.
In addition, special rules often apply if policies are part of a retirement plan or other tax-favored entity. Even the methods of paying for life insurance—especially split-dollar and outside premium financing—can affect an outcome. Tax implications are another factor.
Lance Wallach is one of few professionals who knows how these pieces work both alone and in conjunction with estate and financial planning.
In many situations, the plan the client bought or the manner in which he purchased it was inappropriate. In other cases, the right product was sold in the right way but the purchaser was still unhappy.
Lance wrote the book on life insurance that accountants and financial planners read to prepare for CPE certification.
Lance uses his expert knowledge and vast experience to offer advice, opinions, and testimony to attorneys, accountants, and other individuals facing life insurance litigation.
Lance Wallache has never lost a case.
Signs of Insurance Bad Faith
Insurance bad faith refers to an allegation that an insurance company treated a customer unfairly or inappropriately or was noncompliant with the state legislation on claim processing.
An insurance company can act in bad faith in a variety of ways.
Some examples include:
- Failing to process a policyholder’s legitimate claim in a timely manner
- Requiring excessive or unnecessary documentation from a policyholder while processing a legitimate claim
- Appointing and relying upon experts (medical, engineering, etc.) who seem to always act in the interest of the insurance company
- Refusing to comprehensively evaluate a claim for insurance benefits
- Hiring and relying upon medical or engineering experts who always side with the insurance company
- Arguing that a legitimate claim for insurance benefits is not covered by the insurance company
- Asserting that a legitimate claim for insurance benefits is not covered by the insurance policy
- Paying only a portion of the benefits outlined by the policy rather than the full benefits
- Proposing an offer that does not reasonably cover the claimant’s needs
In the United States, it is understood that all contracts carry an implied covenant of good faith and fair dealing. This legal principle was asserted by a 1933 ruling by the New York Court of
Appeals which stated;
“In every contract there is an implied covenant that neither party shall do anything, which will have the effect of destroying or injuring the right of the other party, to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing.“
Kirk La Shelle Co. v.The Paul Armstrong Company et al. 263 N.Y. 79; 188 N.E 163; 1933 N.Y.,
This legal principle is even more important when it comes to insurance companies. Consumers purchase insurance because they want to protect themselves, their families, their property, or their businesses. However they have extremely limited bargaining power both upon entering a contract with an insurance company and in a situation where the insurance company refuses to make claim payments, failing to fulfill the terms of the contract.
In general, insurance companies only offer a ‘take-it-or-leave-it’ insurance policy, and the customer has little or no ability to negotiate the terms of the policy. Since customers have little
wiggle room, the law requires insurance companies to treat their customers fairly. Many states have gone an extra step and passed further regulations governing how insurance companies
must deal with customers and processing a customer claims for insurance benefits.
Insurance companies owe a duty of good faith and fair dealing to every person or company they insure which means an insurance company is required to treat their customers fairly and honestly. The reason the law places requires insurance companies is because insurance companies are commonly so large and powerful that it is generally not possible for a customer to negotiate the terms and details of an insurance policy in a fair manner.
Life Insurance Claim Benefits Denied?
Life Insurance claim denials are a common practice by insurance companies. After a policy holder dies, the insurance company reviews both the claim filed by the beneficiaries of the insured and the policy itself, in search of possible details that can be used as a reason to deny the claim.
This practice is also called life insurance rescission and it effectively reverses the contract that was made when the policyholder purchased the life insurance policy. The insurance company may argue that omissions or errors made by the policy holder on his initial application were misrepresentations that render
the contract null and void. Life insurance rescission were originally devised to help insurance companies mitigate the financial risks associated with life insurance fraud but now have become a way for life insurance companies to minimize costs and maximize profits — often at the expense of bereaved family members struggling to cover funeral costs and leftover medical bills.
Even on grounds of misrepresentation there are time constraints on an insurance carrier’s ability to seek to cancel an insurance policy or issue a life insurance claim denial, they must include an “incontestability clause,” which bars insurers from challenging a life insurance claim after the life insurance policy has been in effect for at least two consecutive years. For example, in Ilyaich v. Bankers Life Ins. Co. of New York, according to the Court, the life insurance company’s failure to verify the information found in the application
within two years barred the life insurance company from denying claims.
Every state, including New York and New Jersey, requires that lawsuits concerning life insurance claim denials be filed promptly, before the statute of limitations runs out so If you have lost a loved one and the life insurance company has denied your life insurance claim, your ability to recover life insurance benefits might not be lost.