Contestability Period – Part 1

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Matilda Rose Ledger vs. ReliaStar Life Insurance Company: 2 Year Contestability Period – Part 1

Heath Ledger died of what was ruled an accidental drug overdose. So why did Ledger’s three-year-old daughter, Matilda Rose, have to sue for the $10 million claim?

Ledger’s life insurance company, ReliaStar, did not deny the claim; they simply exercised their right to perform an investigation regarding the circumstances surrounding his death. In certain circumstances, a life insurance company may exercise their right to investigate, and, depending on the outcome of the investigation, contest the claim being made.

In order for the life insurance company to contest and, or deny a claim, the death must occur within the first two years of the policy; this is known as the “Contestability Period”. Generally, when a contract is revoked, due to an investigation of a death occurring during the Contestability Period, it happens due to one of two reasons: death by suicide, or misrepresentation of material information. In Ledger’s case, ReliaStar was investigating whether the death was actually a suicide, and whether Ledger lied about drug use when applying for the policy.

Normally, when a death occurs within the Contestability Period, the insurance company will perform an investigation before a death benefit is paid.

Trustees representing Matilda Rose, filed the suit claiming bad faith on the part of ReliaStar due to an unreasonable delay in paying the death benefit. In the end, the claim was neither denied nor paid in full. A confidential settlement was reached between the Ledger’s daughter and the insurance company.

In Part 2 of our analysis of the Contestability Period, we will go into greater detail regarding this case.

Spencer Couch

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