Breach of Contract Claims: How Courts Interpret Life Insurance Policies

Q:        What law governs a breach of contract claim?

A:         In the majority of group life insurance cases state law governs the interpretation of life insurance policies when federal jurisdiction is based on diversity of citizenship  (the insured lived in State A and the insurance company is headquartered in State B).[1]

Under laws of many states, contract interpretation is a question of law and to prevail on a breach of contract claim, a beneficiary must show that there was a promise (e.g., a promise to pay life insurance benefits upon the insured’s death); that the insurance company breached that promise (the insurance company denied a claim); and that the beneficiary suffered damages as a result of the insurer’s breach (the beneficiary did not receive the payout).

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FEGLI Beneficiary Change / No Beneficiary Designation

We have written in our other blogs about various issues that may arise in the context of a beneficiary change. However, FEGLI (Federal Employees Group Life Insurance) policies are controlled by an entirely different set of rules.

For example, if the policyowner desires to change the beneficiary on her policy she must sign a special change of beneficiary form in the presence of two witnesses. The two witnesses should also sign the form and to be effective it must be received and approved by the Office of Personnel Management (OPM) before the insured’s death.

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Contesting Beneficiary Designation on a Life Insurance Policy

Who can contest beneficiary designation?

Usually, beneficiary disputes arise in the context of a family feud, divorce, marriage, separation or insured’s illness. Anyone with a valid legal claim can dispute the existing beneficiary on the policy.

In the majority of cases, those disputing the existing beneficiary designation have a claim for benefits that is based either on a contract or divorce decree or on allegations of undue influence, duress, insured’s mistake or mental incapacitation.

Whatever the case may be, beneficiary disputes are complex and require legal counsel on both sides. Our firm has successfully handled many beneficiary contests. We are aware of the legal issues involved in such cases and have the experience necessary to resolve them.

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Murder – Suicide Cases Present a Host of Life Insurance Problems

Murder – suicide cases are extremely tragic. They involve an act in which a person kills one or more other individuals before, or at the same time as, killing him- or herself.

Murder-suicide cases can take many different forms and usually involve family members, relatives and friends. Often, the surviving family members’ grief associated with several deaths is compounded by the insurance company’s denial of their life insurance claim.

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AEA Gone Wrong: Death From Autoerotic Asphyxiation

People purchase Accidental Death insurance hoping that coverage would exist if they die due to accidental means. The interpretation of the words “accidental means” has been a subject of heated debate in the insurance industry and courts across the country.

Insurers tend to claim that the definition is a very narrow one and does not include cases where there is a chance the death was caused by an illness, intoxication or a self-inflicted injury. One of the most complicated issues of AD&D coverage arises in cases of death resulting from autoerotic asphyxiation (AEA).

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Common Carrier / Trip Insurance Issues

For many of us, traveling is an indispensable part of our lives. Whether we travel for business, go on vacations or visit families in other states and countries, we care greatly about safety of our trips. Mishaps and accidents do happen, however.

Many employers requiring business travel from their employees offer wide protections when it comes to trip coverage. Still, it is not rare for frequent travelers to obtain private common carrier insurance.

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