Louisiana Life Insurance Benefits Denials
In general, life insurance is purchased through two different types of policies. They are “cash value” (also known as “whole life” or “universal life”) policies, and term life insurance. In very broad terms, cash value policies, for which higher premiums are paid, accumulate a value which the policy holder can borrow against or redeem. For years, industries representatives and consumer advocates have argued over whether cash value insurance is the cheapest way to purchase life insurance over time, or whether it is instead an expensive, low-return and unnecessary investment vehicle. Term policies, which require payment of a lower premium, do not return money to the policyholder, or allow loans against the policy. Term life insurance policies make payment only when death occurs. There are numerous detailed distinctions between various types of insurance policies, and the foregoing is only a very simplified description of the two primary types of life insurance policies.
The cost of life insurance generally varies with the age and gender of the person whose life is being insured. Based upon mortality tables, insurers attempt to determine life expectancies for various individuals so that they can set an appropriate price allowing them to pay claims and still earn a profit. One of the most important additional factors to a life insurance company is whether or not the person whose life is insured uses tobacco.
Term life insurance is the type of insurance typically provided to employees by an employer. The employee may receive the insurance as a fringe benefit, or may be required to contribute all or part of the premium.. Either term life insurance or cash value life insurance may also be purchased by individual, usually from insurance agents. One estimate is that 70% of all individually purchased policies are cash value policies.
Some Louisiana Statutes Related to Life Insurance Claims
Louisiana R.S. 22:656
This statute provides that a claim for life insurance benefits for a policy of insurance issued or delivered in Louisiana must be settled by the insurer within 60 days after receipt of due proof of death. If the insurer does not pay the claim within 60 days, without just cause, then the amount due shall bear interest at the rate of 8% per annum from the date of receipt of due proof of death by the insurer until paid. Failure to pay a life insurance claim may also result in penalties provided by Louisiana R.S. 22:1220 discussed below.
Louisiana R.S. 22:1220
This is Louisiana’s broadest penalty statute applicable to insurers. The statute begins by stating that insurers owe a duty to their insured of good faith and fair dealing. They also have an affirmative duty to adjust claims fairly and promptly, and to make a reasonable effort to settle claims with the insured, a claimant, or both. Insurers are liable for damages caused by their breach of these obligations.
Louisiana R.S. 22:1220 also lists certain specific acts or omissions which will constitute a breach of the insurer’s obligations, including misrepresentation of pertinent facts or insurance policy provisions relating to coverage, failing to pay a settlement within 30 days after a written agreement is reached, misleading a claimant as to the applicable prescriptive period, and other acts.
Louisiana R.S. 22:1220 provides that an insurer may be liable for any general or special damages which the claimant may be entitled to because of the insurer’s breach of the duty imposed by the statute, and a penalty of two times the damages sustained or $5000.00, whichever is greater. The statute exempts health and accident insurance policy claims, and claims against Louisiana’s Insurance Guaranty Association Fund.