Missing Insured and The Life Insurance Death Claim[dagger], The

FDCC Quarterly, Winter 2004 by Sentell, C Edgar

XI.

SUMMARY

The burden placed upon an insurer defending an action for life insurance benefits, in a case based on the disappearance of the insured, will vary depending on whether the claimant has the benefit of a presumption of death. In many cases, it is not necessary to resort to a presumption to prove a person's death or to prove death at a particular time. Many cases will fall within a broad gray area where the facts are suggestive of death or intentional disappearance.

The presumption of death that arises from a seven-year absence (or a shorter period of time that may be prescribed by a particular state statute) does not usually carry a lot of evidentiary weight. However, at a minimum, when the presumption applies, the insurer must go forward with evidence to prove the insured is alive. There is also a presumption, which may be relied on by an insurer, that a person alive when last seen is presumed to still be alive. Another presumption that sometimes comes into play is a presumption of death when a person disappears under circumstances of imminent peril.

The unprecedented and tragic events of September 11, 2001 have caused a number of state legislatures 1) to create presumption of death exceptions; or 2) to define terrorist attacks as specific perils which would justify a court to immediately determine that a presumed decedent died on September 11, 2001; or 3) to provide that death is presumed to have occurred at the time of a catastrophic event certified by the governor.

In life insurance cases involving a disappearance of an insured, the actual date of death can be of critical importance because of the amount of interest that will run, the possible imposition of penalties and attorney fees, and the payment of premiums during the running of the presumptive period. Generally, the beneficiary would be well advised to keep up premium payments. This will avoid any problem of insurance having expired at the time of the presumptive death. The claimant will be able, in some cases, to obtain a refund of these premiums if there is a recovery of the death benefit, based on the date when the insured presumably died.

The most difficult aspect of the problem of a missing insured is when the insurance company pays the amount of money due under the policy and the insured reappears. If the company pays the full death benefit and the insured thereafter reappears, the company will generally have a claim against the beneficiary usually on the grounds of mutual mistake of fact. When a compromise settlement has been made, however, the company may have much more difficulty in recovering the policy proceeds. To avoid any questions on this score, the company could obtain from the payee a repayment agreement at the time of making settlement, or attempt to have such a provision incorporated in the decree if there is litigation to establish the claim. A bond with adequate surety is even more desirable from the insurance company's standpoint.

[dagger] Submitted by the author on behalf of the FDCC Life, Health and Disability Section.