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Understanding your Critical Illness Policy & Litigating Critical Illness Claims

The idea behind Critical Illness Insurance sounds great.

If you suffer from a particular critical illness, then the insurance company will pay you a lump sum.

What sort of critical illnesses are covered are defined by the policy.

It all sounds great, and sounds like a very lucrative proposition. For many, this sort of insurance bets AGAINST your very own health. People think that if they sustain a heart attack, then they’ll be entitled to a lump sum under the policy. So, eating that hamburger and skipping that workout might actually pay out in the long term if your critical illness policy works the way you think it works.

Unfortunately, many of these policies don’t work they way that you think they work, or the way that the broker who sold you the policy explained it to you.

It’s important you understand exactly what critical illnesses are covered by the policy.

I’ve had clients approach my law firm after their CI Claim was denied insisting that they were covered because they got cancer, or because they had a heart attack. In those cases, the clients thought that simply because they’d contracted cancer, or suffered a heart attack covered them for Critical Illness benefits.

The devil’s in the fine print at law, and certainly in these sort of cases. These policies, much like Long Term Disability Policies are referred to at our office as “four corner policies”. Your benefits, and the amount that you’re entitled to in your case, are, for the most part, defined by the four corners of the policy. With the exception of bad faith claim, punitive damage claims, and damages for mental distress, your benefit amount is defined in the POLICY of insurance. And, what you’re covered for is also DEFINED in the POLICY of insurnace. If it’s not in the policy, then you can’t claim benefits for it.

Upon reading the policy, and the fine print which nobody but lawyers tend to read, we quickly discovered the following:

1) Only certain types of cancer, at certain stages of cancer are covered for benefits. Other forms of cancer are EXCLULDED, along with other early form stages. In this instance, thyroid cancer and skin cancer were EXCLUDED from coverage. No benefits were payable under the policy.

2) In the heart attack example, only coronary bipass surgery with GRAFTING was covered. Simply having a heart attack, and surviving it was NOT covered under the policy. Even if you had coronary bipass surgery, WITHOUT GRAFTING, it was NOT covered for benefits.

These are very specific examples. But, these examples are exactly what insurers do to deny your claim. It’s important that you understand that these critical illness policies are NOT drafted in your favour. Rather, they are drafted in favour of the insured, so expect to see a ton of exceptions and exclusions in order to deny your benefits.

The cheaper the policy, the more exclusions you will see or find. In insurance, much like many other things, you pay for what you get. If you purchase a cheap, bottom of the barrel policy, then you can expect cheap, bottom of the barrel coverage.

In other instances, where the benefit amount is relatively low for a critical illness, like $10,000-$25,000, the insurer may simply pay you out in spite of these exclusions. It might just be cheaper for them to do so, rather than keeping your file open and litigating your claim.

A good insurance broker will explain to you the advantages and disadvantages of each policy, and what to look out for. Unfortunately, there are some bad insurance brokers out there who fail to explain to clients how their policies work. They might also fraudulently complete the paper work on behalf of clients in order for them to get approved for insurance, full well knowing that their previous medical history will get them excluded. This happens frequently because brokers most brokers are paid on a commission basis. If you get approved for insurance, then they get paid on the sale.

When litigating critical illness claims, we always ask our clients about their respective policies, and HOW they got their policies. In many cases we see that the broker failed to do their job and explain to the client how the policy worked. Or, the broker misrepresented how the policy worked along with its exclusions in order to make a sale. Years down the road, when a critical illness does in fact happen, and the client’s claim gets denied, the broker will have to explain their actions (or lack thererof). We call these claims “broker’s negligence claims“. They can go hand in hand with any private insurance policy claim. But, we frequently see them in critical illness claims and long term disabiliity claims. Think of it as suing your broker for misrepresenting to you as to how the policy worked. We also allege that the broker breached his/her fiduciary duty/obligation to you. Think of this as a claim based on a breach of trust in a relationship where there is a power imbalance between two parties; the weaker party trusts the stronger party to have their best interests at hand. Then the powerful party abuses that trust or relationship to take advantage of the weaker party.

Our law office has seen cases where brokers have taken advantage of clients who cannot read, write or speak English (which is a pre-requisite under some policies). The broker then fills out the form on behalf of the client (which is not allowed), and makes the sale. Years down the road, when a claim is made under the policy and denied, it comes back to haunt the broker because what they did is wrong. How can somebody understand the policy or questionnaire if they cannot read, write or understand English, and there is not certificate from a translator?300px-Flag_of_Canada.svg.png

One of the final points I’d like to bring to your attention is the difference between group policies (through your employer) and individual policies that you buy on your own. The group policies through your employer are NOT yours. They tend to belong to the employer and the contract of insurance is between the employer and the insurance company whereby the employee is a named insured. That policy of insurance can be CANCELLED or CHANGED without your knowing about it at any time. The coverage also STOPS the moment you stop working for that employer. You’re also limited to the coverage that the employer selects.

In a private insurance policy that you purchase, you’re the boss. You pick the coverage. You pick the benefit amount. The policy begins and ends when you say. It also follows you from job to job, even during periods of unemployment.

For young professionals purchasing an individual policy of insurance which follows you from job to job might be a safe bet. But, this all depends on your own personal circumstances and financial situation. My point is that your group benefits plan through work might NOT provide you the level of protection you think it does.

Enough law talk? Sure. Anyone watching the World Cup? Some very exciting games. Some classic diving and classic faux injuries. I miss the “magic spray” of the 2002 World Cup. I’d like to see them bring that back. Happy Canada Day. Don’t drink and drive!

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