Tips on Critical Illness Insurance Claim Denials

Insurance companies often deny claims based on alleged misrepresentations in the application for critical illness insurance. For the uninitiated this is how the process works:

  • The broker or insurance salesperson talks you into purchasing critical illness insurance.
  • The salesman comes to your house and completes an application for critical illness insurance.
  • The salesperson asks you questions about your medical history and fills in the application.
  • You are then handed the application and asked to sign.
  • Above your signature are words to the effect that the answers to the questions in the form are accurate and that you understand that if they are not accurate your insurance may not be valid.
  • Also, often the questions are ambiguous and have a clause that indicates “or any indication of” or some other vague term.
  • You don’t notice these words and you cursorily skim the application and sign it and pay the first month premium.
  • Often the application is filled in by salesperson whose main interest is in collecting a commission. He or she will tend to minimize your medical history and may tell you not to worry about what both of you perceive as irrelevant or minor matters.
  • For example:
    • an unusually high blood pressure reading,
    • an isolated visit to the emergency room where a doctor tells you it was just stomach issue and not to worry,
    • a blood test that shows high blood sugar on one occasion,
    • a visit to the doctor for a colonoscopy,
    • a lump in a breast which turns out to be just a cyst etc.
  • Sales bias – The salesperson wants to sell you the policy in order to collect the commissions and therefore he has an incentive to do it as quickly as possible. The more the questions are answered in detail, the less likely the insurance company will approve your application and the less likely the salesperson will collect a commission. So the bias is to fill in the form with less details, so it is approved by the insurance company and commissions are collected.
  • Human error – The salesperson is human. Based on his skill set, he may not have a lot of attention to detail. Sometimes fine little points are missed in the completion of your medical history. These will come back to haunt you, the applicant, if you ever have to put in a claim.
  • Often the insurance applicant may not carefully read over the questions and answers that have been completed on the forms by the salesperson. And the applicant will probably never read them over with a view that his answers will be analysed later by the insurance company in order to try to deny his critical illness claim.
  • Most times the salesperson will not impress on you the importance of having to be absolutely 100% accurate in filling in the application form. And the salesperson may not tell you that even though the insurance company starts collecting premiums, you may not have a valid insurance policy if any answer to any question in the application was not “literally” correct.
  • The insurance company, eager to get your premiums, does not review your medical history at this time. They want your payments and will approve your policy based on the answers you gave to the questions in the application. They usually solely rely on your health questionnaires.
  • You then pay your premiums for months or years thinking you have a valid insurance policy.

You then suffer a critical illness. This is what happens next:

  • You suffer a critical illness and apply for benefits.
  • Once you apply for critical illness benefits, the insurance company will order your historical medical records.
  • The insurance company will then scrutinize your historical medical records carefully to see if there were any “mistakes” in the answers given in the application for the critical illness policy.
  • The insurance company will analyse your application form for insurance and look for any mistakes in your answers to the questions.
  • The insurance company, after having sold you the policy, is now looking for any reason they can find to deny your claim.
  • Once the insurance company finds any mistake, now matter how minor, it gives the insurance company a reason to deny your claim.
  • The insurance company will deny your claim and send you a letter stating that you misrepresented the true state of your health when you applied for benefits and because of that, your policy is void. The may try to return your premiums to you.
  • Usually the mistake in the insurance application has nothing to do with your critical illness but the insurance company doesn’t care. They will still deny your claim.
  • And you will go away with no money. Or so the insurance company hopes.

In reality there are several ways a lawyer can fight the insurance company’s denial.

  • A lawyer can argue:
    1. The questions in the application were ambiguous and you answered thinking they were asking one thing while the insurance company thinks they were asking something else.
    2. Your answers were accurate but the insurance company is misreading your medical history concerning your pre-critical illness health history.
    3. The answers were not relevant to the issuance of the policy, and even if the insurance company had known the true state of affairs, the insurance company would still have issued the policy.
    4. In some cases it may be possible to show that there was a miscommunication between the applicant and the salesperson who completed the form.

There is some consumer protection legislation in place that may help your claim:

  • If a critical illness occurs two years or longer from the date the insurance policy is issued, the onus is on the insurance company to prove fraud. Fraud means intentionally misrepresenting the true state of affairs to get the policy issued. The insurance company bears the onus of proof and must prove on a balance of probabilities (also known as “more likely than not”) that you intentionally lied.
  • If the critical illness occurs less than two years after the date the policy is issued, then whether you lied or not is not relevant. A misrepresentation in law in these circumstances is defined as a wrong answer, whether you forgot to mention something or thought it wasn’t relevant is not material. A misrepresentation is any mistake in answering the questions, your state of mind is not considered. The insurance company is not necessarily accusing you of lying, in fact they do not need to show that you lied only that the answers to the questions were not accurate and that they influenced them into issuing the policy of insurance.

Take away tips:

  • You have a duty to be 100% honest when completing an application for critical illness insurance policy and it is in your interest to be 100% accurate or get the information from your doctor to ensure that it’s accurate.
  • The answers you give will be read literally and compared to your actual medical file. But this will only be done after you suffer a critical ilness and file a cliam for benefits.
  • The salesperson gets paid based on the number of policies he sells, not on the accuracy of the applications he completes. Even if there is the odd mistake in the application form, he still gets paid his commission.
  • There are legal arguments to the insurance company’s claim that you made a material misrepresentation in your application for the insurance policy.
  • There is a limitation period that determines when the legal claim must be filed at the court house. In Alberta that period is usually one or two years from the date the critical illness occurs.
  • If your claim has been denied, talk to a lawyer who has expertise in these types of claims to discuss your rights as soon as possible. Don’t give up hope before you discuss your claim with a lawyer who has handled these types of claims.

If you have been denied critical illness benefits, call our office today to see if our office can help you.  If you have a legal claim and your claim isn’t filed in time, it could be statute barred and you may not be able to pursue your claim any further.