【Claim or No Claim?】Unpacking Life Insurance Dispute Cases - Key Details Revealed

Life insurance, though rarely excluding coverage for certain matters, does not mean there are no disputed compensation cases—some even escalate to court, with final rulings in favour of the insurance company, absolving them of the need to pay out. To understand the compensation criteria for life insurance, apart from carefully reviewing the product information, terms, and conditions of the life insurance policy, one can also refer to real-life cases. 10Life has prepared four life insurance case studies for you and consulted legal experts to present the legal disputes and technical aspects in an accessible manner. In the future, we will also analyse other types of insurance cases, so stay tuned!

 

 

Currently, most insurance companies list suicide within the first year or first two years of a life insurance policy as an exclusion (i.e., not covered). In other words, if Mr. Chan in the above case did indeed die by suicide, the insurance company may refuse to compensate. However, the burden of proof to demonstrate that the death was caused by suicide lies with the insurance company. If the deceased did not leave a suicide note or other clear evidence, it is not easy for the insurance company to prove that the death was due to suicide. If the beneficiary disputes the insurance company’s decision on compensation, they can ultimately file a complaint with the Insurance Authority for a review of the case.

 

 

As mentioned in our earlier articles, life insurance generally does not focus on the insured risk (cause of death), so the cause of death usually has little impact on life insurance claims. In fact, most term life insurance products on the market cover death due to AIDS, illegal activities, suicide (after one to two years from the policy’s effective date), overdose of drugs, alcohol, and narcotics. However, some term life products deviate from the norm by including specific exclusions. Therefore, when purchasing term life insurance, consumers should not only compare premiums but also pay attention to exclusions and do a bit more research. In Ms. Wong’s case, the decision on whether the insurance company will accept the claim depends on the specific exclusions in her policy.

 

 

This is a real case that occurred in Canada. In brief, the Ontario Court of Appeal ruled that the insurance company was not required to compensate the beneficiary because the deceased husband (the policyholder) failed to disclose to the insurance company at the time of purchase that he had been convicted of terrorist activities in another country. These activities included firing live ammunition and throwing grenades at an Israeli airline passenger plane, resulting in at least one death. He was later released during a hostage negotiation, relocated to Lebanon, and eventually smuggled himself into Canada.

 

Court documents revealed that shortly after purchasing the life insurance policy in Canada, the insured individual informed the local government that his life would be at risk if deported to Israel. This demonstrated that the individual was fully aware of the serious threat to his personal safety posed by his past activities and his illegal entry into Canada under a false identity. It also reflected his deliberate concealment of past activities from the insurance company, failing to disclose material facts, which amounted to fraud. Ultimately, the court ruled in favour of the insurance company.

 

This raises the question: Does having a criminal record mean one cannot purchase life insurance? If a criminal conviction automatically disqualified compensation, it might not align with reality. As mentioned in our earlier articles, the vast majority of term life insurance policies cover illegal activities and even war-related incidents.

 

 

Insurance contracts are governed by the principle of “Utmost Good Faith.” Even if the insurance company does not inquire about certain information, the policyholder is obliged to disclose any material facts to the insurer. Therefore, if a policyholder misrepresents or omits health conditions, preventing the insurance company from making a fair and accurate underwriting decision at the outset, the beneficiary may not receive compensation as a result.

 

 

 

Further Reading:

〈Why Do Life Insurance Policies Have So Few Exclusions? A Comparison of Coverage and Exclusion Concepts Between Life Insurance and General Insurance〉

 

 

Note: The above information is provided by 10Life and is updated as of 13 August 2021. It is for reference only and does not constitute sales advice.