Standing up to a big life insurance company is a daunting task. It seems simple enough – your family member or loved one had a life insurance policy, they died, the insurance company refuses to pay the benefits, so a court should hold them liable for breach of contract. But, litigating even the most basic of claims is rarely straightforward when large sums of money are involved. Here are the basics that a Maryland life insurance claim lawyer should know when filing a lawsuit for wrongful denial of benefits.

Pleading A Claim For Breach Of Life Insurance Policy: Six-Part Test

An action against a life insurer to compel payment of policy benefits is essentially a claim for breach of contract. See Milbourne v. Conseco Servs., LLC, 181 F.Supp.2d 466, 468 (D. Md. 2002). What distinguishes a life insurance claim from a standard contract claim is the plaintiff.

In a standard contract action, one of the parties to the original agreement brings the claim. On the other hand, in a claim for breach of a life insurance policy, a third party files the lawsuit – the beneficiary named in the policy. In other words, only an intended beneficiary has standing to sue an insurer for the wrongful denial of life insurance benefits.

This difference results in slightly different elements that must be alleged to state a claim upon which relief may be granted. Specifically, the following six-part test applies:

To state a cause of action for breach of a life insurance contract, a petition must allege: (1) the existence and terms of the policy; (2) the right or interest entitling the plaintiff to sue; (3) performance or waiver of conditions precedent; (4) death of the insured; (5) the amount of the insurance; and (6) the fact that payment is due, but has not been made.

Id. at 469 (emphasis omitted) (citing Giles v. American Family Life Ins. Co., 987 S.W.2d 490, 494 (Mo. App. 1999)). Stated otherwise, a complaint must quote the applicable terms of the policy, state that the plaintiff is an intended beneficiary, generally allege that any conditions precedent have occurred or been waived, state that the insured has died, disclose the amount of the benefits owed to the plaintiff, and state that the insurer has failed to pay the benefits now owed.

Conditions Precedent

Corporate defense lawyers often like to play a silly little game with respect to Milbourne’s condition precedent requirement. Insurance policies often outline various conditions that must occur before the insurer may be held liable for the benefits outlined in the policy. For example, many policies require that the policy was delivered during the good health of the insured. This means that it is a condition precedent that the insured did not suffer an illness or accident that was not disclosed on the application, between the date of the application and the date the policy was approved and delivered. Another example of a condition precedent is the insured’s payment of the premium.

Lawyers representing insurance companies will often file a motion to dismiss at the outset of the case, and argue that the complaint should be dismissed for not specifically alleging that each particular condition precedent has been fulfilled. The defense lawyer will usually focus on only one condition precedent, essentially setting a trap.

If the plaintiff foolishly does not have a lawyer, or, if they do have counsel but the lawyer is inexperienced, they will often fail to mount a proper counterargument. The court will then grant the motion to dismiss without prejudice, thereby allowing the plaintiff to allege the condition precedent in an amended complaint. But, once the amended complaint is filed, the defense lawyer will then point out a different condition precedent that was not alleged. At this point, or after one or two more amended complaints, the court may rule that the plaintiff has exhausted their chances to state a claim, and then dismiss the complaint with prejudice (meaning, the end of the road).

There is an exceedingly simple way around this nonsense. Counsel for the plaintiff should just generally allege in the complaint, “upon information and belief, all conditions precedent have occurred or been performed.” Then, when the defense lawyer files a motion to dismiss, quote the above passage from the complaint, and cite Fed. R. Civ. P. 9(c), which provides, “In pleading conditions precedent, it suffices to allege generally that all conditions precedent have occurred or been performed.”

The burden will then shift to the insurance company to provide evidence of any specific condition precedent that has not been performed. From there, either present evidence showing that the condition has been performed or, if it has not, have it performed immediately and then present evidence of the same to the court. In either case, the court should allow the action to proceed without requiring multiple amended complaints.

A final thought concerning conditions precedent: retain an experienced attorney before filing suit in the first place. Never try to represent yourself, especially when you know full well that your opponent will be a big, well-funded insurance company with an army of lawyers at the ready. It is imperative to hire a skilled attorney, so they can review every word of your policy, and make sure that there is evidence lined up to prove that any and all conditions precedent have been performed or waived, before filing the lawsuit.

Evidentiary Considerations

Another common pitfall in life insurance litigation concerns proof of the specific terms of the policy. A prime example is the unpublished decision in Villenouze v. Primerica Life Ins. Co., No. RDB-11-0099, 2011 WL 4479699 (D. Md. Sept. 26, 2011).

There, the plaintiff tried to sue the life insurance company for wrongfully denying benefits that were owed to her. She may well have had a valid claim. But, we will never know. This is because the court dismissed the case on an evidentiary technicality. Specifically, the plaintiff “d[i]d not provide any of the specific terms in [the] life insurance contract,” and she failed to “provide any supporting documentation, such as a copy of [the] life insurance policy.” Id. at *3.

What happened was tragic, because there was a very easy fix. All the plaintiff needed to do was attach a copy of the policy as an exhibit to the complaint, and then quote the applicable provisions in the complaint. But she did not, and this lack of evidence left the court with no option other than to throw the case out.

So, it is a best practice to simply attach the entire policy to the complaint as an exhibit. In fact, do not file the lawsuit until you have a copy of the full policy in your possession (unless you are running up against the statute of limitations). Otherwise, you risk having the insurance company refuse to provide it, and then request the court to dismiss the case because you cannot quote the precise applicable terms verbatim.

And, this is another reason to never try to file a life insurance claim without an attorney. Even something as simple as getting the policy may turn into an issue that results in complete dismissal. An experienced lawyer would never let that happen, as they would subpoena the policy or use other litigation tactics to force the insurance company to hand it over.

Summary

Pleading a claim for wrongful denial of life insurance benefits requires highly specific allegations. The complaint must set forth facts that satisfy the elements of the Milbourne case’s six-part test. Counsel should attach the entire policy as an exhibit to the complaint, and also make certain to cite the correct policy provisions verbatim as part of the factual allegations. Otherwise, the insurance company will have a better chance of getting the case dismissed on a technicality.

Lastly, despite the seemingly straightforward nature of the claim, be prepared for a fight. Life insurance policies usually involve significant sums of money. The increased value of the case will only encourage the defense lawyers to come up with reasons to justify billing the insurer tens of thousands of dollars for abusive discovery tactics, an endless barrage of motions, and other nonsense that honest legal professionals would probably deem frivolous. If you have retained a skilled attorney, then just roll with the punches, be patient and realize that, if the judge rules correctly on the obligatory motions to dismiss and for summary judgment, then it will, in all likelihood, only be a matter of time before the case settles for a significant payout.

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