California Insurance Lawyer Blog

A recent Wall Street Journal article tells the story of our client Celina Whinery, who is suing Life Insurance Company of North America (LINA), a unit of Cigna, after the insurer refused to pay benefits the policy promised upon her husband’s death because he died in a one-car accident while legally intoxicated.

LINA argues that an insured who is legally intoxicated at the time of death is not entitled to benefits -- even though the policy does not exclude intoxication. Even though the policy language does not support LINA's argument, the insurer is forcing beneficiaries around the country to sue for benefits, and then appealing the cases it loses, which is most of them.

LINA knows how to exclude drunk driving from a claim for accidental death. It has a policy form that does exactly that. Those policies are less expensive however, since benefits are further limited. Instead, LINA sold a policy to CitiGroup (Mr. Whinery’s employer) in which it charged CitiGroup more money for a policy that did not exclude drunk driving. When Ms. Whinery made a claim on the policy (asking LINA to make good on their promise to pay), LINA denied the claim saying death due to drunk driving is not an accident and thus not covered. So, LINA makes more money by charging CitiGroup for the more expensive policy, but administers and denies claims as though they are dealing with the less expensive policies that expressly contain the exclusion.

LINA told Ms. Whinery that the policy defined accident. It didn’t. Moreover, the definition of accident LINA says was in the policy is not the definition of accident that the Appellate Court ruled applies in this type of case.

To make matters worse, LINA has an internal “authoritative” claims manual instructing that in cases of drunk driving, if there is no “intoxication exclusion” that claim must be paid.

So why is LINA forcing Ms. Whinery to sue for benefits? Mainly because federal law gives carriers of employer-based insurance the “discretion” to decide which claims they will – or will not – pay, as long as the decision is not "arbitrary or capricious."

Thankfully, California, enacted a law this year that now bans the enforcement of so-called "discretionary clauses" in insurance contracts (Insurance Code section 10110.6). Going forward, insurers will have to persuade the courts that their denials are supported by credible evidence. The law might not help Ms. Whinery, who told the Wall Street Journal, “Emotionally, you are going through a lot of things, and then to add this [unfair denial] on top, it makes it even worse.”

A recent CBS News segment relates the story of Timber Harwood, a 93-year-old long-term care insurance policyholder fighting Bankers Life for benefits after he was seriously injured in a fall and needed the care of an in-home health aide. See “Some long-term healthcare policies not paying up,” http://www.cbsnews.com/8301-500202_162-57352805/some-long-term-healthcare-policies-not-paying-up/.

For more than a year, Bankers Life repeatedly “lost” or “misplaced” hundreds of pages of Harwood’s documents supporting his need for benefits while he used his life savings to pay for care. Things improved when Harwood’s niece – Kansas’s top insurance regulator – stepped in to help. Bankers Life eventually paid his claims, but then concluded he is “too healthy” to need in-home care, so the benefits stopped. Harwood and family are so worn down by the process they have decided not to pursue benefits.

The report concludes that LTC insurance isn’t paying as advertised and that customers should expect hefty premium increases.

We have also witnessed Bankers Life (and other LTC carriers’) claims handling practices, and have sued them to force them to pay. In our opinion, the worst thing a family can do is to give up the fight and let the carriers get away with not paying the benefits they owe.

Many people are successfully fighting their LTC carriers for benefits. Some of them have had to hire contingency fee lawyers like us to do it, but they made the decision that it’s more sensible to attempt hold their insurer accountable then spend their life savings on care they paid an insurance company to provide for.

Every LTC carrier is going to make you prove you need benefits, and some won’t make the task easy. Others will make the process discouraging and next to impossible. When that happens, find someone who understands how to deal with LTC insurers to help you. Most people aren’t as lucky as Mr. Harwood was to have an insurance regulator in the family to come to the rescue. Still, family members can help by calling and writing letters to the insurance company and demanding that they act expediently. Complain to the insurance commissioner of your state if the company does not respond to your inquires, or is acting irresponsibly. Usually, squeaky wheels get the grease. If all else fails, find an attorney with experience in this area.

We sincerely hope Mr. Harwood is indeed too healthy to need LTC benefits, but if he isn’t he shouldn’t give up the fight. And no one should. If Bankers Life or any other insurance carrier has denied your benefits, fight for your rights and make them pay what they owe!