How to read a life insurance denial letter, line by line

Most families read a denial letter once, in a hurry, looking for one word: yes or no. That is a natural reaction, and it is also how important details get missed. The letter is not just a verdict. It is the insurer’s explanation of its position, and in many cases the law tells the insurer what that explanation has to include. Whatever the letter leaves out, or gets wrong, can matter later.

Below is the way I suggest reading one. Keep a pen nearby and your copy of the policy or benefits booklet if you have it.

Before you read: two things to write down

The date you received it. Write it on the envelope and keep the envelope. Deadlines in these letters are often counted from the date of the notice, so you want a record of when it actually arrived.

What kind of coverage this is. Was the policy bought individually, or did it come through the deceased person’s job? Group coverage from a private company is usually governed by a federal law called ERISA, and the rules for the letter, the appeal and any lawsuit are different from those for a policy someone bought on their own. If you are not sure, the letter often tells you: look for words like “plan,” “plan administrator” or “summary plan description.”

Line 1: the stated reason

Find the sentence that says why. Underline it. Then ask whether it is specific enough that you could prove it wrong.

For employer plans, the federal claims regulation requires the notice to give “the specific reason or reasons for the adverse determination” (29 C.F.R. § 2560.503-1(g)(1)(i)). State laws for individual policies push in the same direction. In Texas, an insurer that rejects a claim must tell the claimant in writing and “must state the reasons for the rejection” (Tex. Ins. Code § 542.056(c)). Among the unfair claims practices Louisiana lists is not promptly explaining, by reference to the policy and the facts or law, why a claim was denied (La. R.S. 22:1964(14)(n)). The Louisiana list is aimed at insurers that make a habit of these things, so it is a regulatory measure rather than a rule about any one letter. It still describes what a fair letter looks like.

In practice, most stated reasons fall into a handful of groups:

• Something about the application. The insurer says an answer on the application was wrong or incomplete.
• An exclusion. The insurer says the death falls within a category the policy does not cover.
• The coverage was not in force. The insurer says premiums lapsed, or the person was not eligible, or coverage ended when a job ended.
• The beneficiary. The insurer questions who is entitled to the money.
• Missing proof. The insurer says it does not have what it needs to pay.

Knowing which group you are in tells you what evidence will matter. A reason like “based on our review of the information in the file” is not much of a reason. Write down any question the letter leaves unanswered.

Line 2: the policy or plan language it quotes

Insurers usually quote a provision. Employer plans are required to reference “the specific plan provisions on which the determination is based” (§ 2560.503-1(g)(1)(ii)).

Do not take the quotation on faith. Compare it word for word with your copy. Ask:

• Is this the version of the policy or plan that was in effect on the date of death? Group plans are amended, and riders are added and removed.
• Does the quoted sentence have a definition elsewhere in the document? A word like “accident,” “eligible” or “active employment” may be defined in a section the letter never mentions.
• Is there an exception to the exclusion a page later?

If you do not have the policy or plan, ask for it first.

Line 3: the evidence it relied on

Many letters list what the insurer reviewed: medical records, a pharmacy history, an investigator’s report, an employer’s eligibility form. That list is a map of the insurer’s file.

For employer plans, you have a right to see that file. Under the claims regulation, a full and fair review means that, if you ask, the plan must give you free access to and copies of the documents, records and other information relevant to your claim (§ 2560.503-1(h)(2)(iii)). “Relevant” is defined broadly. It reaches anything the plan relied on, plus anything submitted, considered or generated in the course of deciding the claim, even if the plan did not rely on it (§ 2560.503-1(m)(8)). Make that request in writing and keep a copy.

When the records arrive, read them against the letter. Denials sometimes rest on a single line in a long medical chart, read out of context.

Line 4: what the insurer says is missing

Look for a paragraph that describes additional information that could change the outcome. Employer plans must describe “any additional material or information necessary for the claimant to perfect the claim” and say why that material is necessary (§ 2560.503-1(g)(1)(iii)).

Sometimes this is the most useful part of the letter. A “denial” for missing proof may really be a list of what to send next.

Line 5: the appeal rights and the deadlines

This is the part people skim, and it is the part that can end a claim.

For employer plans, the notice must describe the plan’s review procedures and their time limits, and must mention your right to bring an ERISA lawsuit if the appeal fails (§ 2560.503-1(g)(1)(iv)). The plan has to allow you no fewer than 60 days from receipt of the denial to file an appeal (§ 2560.503-1(h)(2)(i)). On appeal, you may submit written comments, documents and other information, and the review must take all of it into account, even if it was not part of the first decision (§ 2560.503-1(h)(2)(ii), (iv)). A decision on the appeal is generally due within 60 days, and the plan may extend that once, by up to 60 days, with written notice (§ 2560.503-1(i)(1)(i)).

Two cautions:

The appeal is often your last chance to add evidence. If the claim later goes to federal court, the judge may look only at the file the plan had. In Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99 (2013), the Supreme Court observed that the federal courts of appeals have generally limited the record for judicial review to the administrative record built during the plan’s internal review, so evidence not developed then may never be considered. Treat the appeal as the time to submit everything.

The deadline to sue may already be running. Heimeshoff involved an employer disability plan that required any lawsuit to be filed within three years after proof of loss was due. The Court held that limit enforceable even though the clock started before the internal appeal was finished. Look in the plan for a “legal action” or “limitations” clause, and do not assume you get a fresh start when the appeal ends.

Individual policies may not offer a formal appeal at all. Some insurers invite a “request for reconsideration.” Before you send one, find out whether the policy or state law sets a deadline for filing suit, and whether that deadline keeps running while the insurer reconsiders.

Line 6: words about discretion

Somewhere in an employer plan, and sometimes quoted in the letter, you may see that the administrator has “discretionary authority” to interpret the plan or decide eligibility. That language is not filler. Under Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), a court looks at an ERISA benefits denial fresh (de novo) unless the plan hands the administrator discretionary authority over eligibility or the meaning of the plan’s terms. If the plan does that, a court usually asks a narrower question about whether the decision was an abuse of discretion. Some states restrict these clauses. Texas, for example, bars insurers from using a policy or certificate form in the state, including group life forms, if it contains a discretionary clause (Tex. Ins. Code §§ 1701.002, 1701.062). Whether a rule like that reaches a particular plan is a question to ask a lawyer.

Things in the envelope that are not the letter

Two items sometimes arrive with, or soon after, a denial:

• A check. If the insurer is rescinding the policy, it may refund premiums. Cashing that check can have consequences. Read our page on contestability and rescission before you deposit anything.
• A request for a recorded statement or a new authorization. You can ask for the request in writing and take time to understand why it is being made.

A one-page summary to make for yourself

When you finish, you should be able to fill in five lines on a single sheet:

1. The reason given, in the insurer’s words.
2. The provision quoted, and whether it matches your copy.
3. The records the insurer relied on, and whether you have them.
4. Anything the insurer says is missing.
5. Every deadline in the letter or the plan, with a date next to each.

If any line is blank, that is your to-do list. If the reason does not make sense to you, or the deadline is close, it may be time to have a lawyer read the letter with you. You can also read more about how we approach denied claims.

Sources

1. 29 C.F.R. § 2560.503-1 (ERISA claims procedure), paragraphs (g), (h), (i) and (m)(8). Electronic Code of Federal Regulations.
2. Tex. Ins. Code §§ 1701.002, 1701.062. Texas Constitution and Statutes.
3. Tex. Ins. Code § 542.056(c). Texas Constitution and Statutes.
4. La. R.S. 22:1964(14)(n). Louisiana State Legislature.
5. Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99 (2013). Justia.
6. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Legal Information Institute.

Written by Stephanie Prestridge, an attorney at Life Claim. Treat this post as general information rather than legal advice; reading it does not make you a client of the firm. Policies, plans and state laws vary and are amended over time, and the outcome of any claim depends on its particular facts. Sources were checked on the date shown above.

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