Life insurance: the insurer refuses to pay the beneficiary — what now?

The payment deadline

The insurer must pay the sums insured within 30 days of receiving the proof required for payment; the deadline is 60 days where the insurance covers sickness or accidents, unless it covers loss of income due to disability (article 2436).

This deadline is specific to insurance of persons. In damage insurance — home, auto — the rule is different.

The two-year rule

Absent fraud, a misrepresentation or concealment concerning the risk cannot ground the nullity or reduction of insurance that has been in force for two years (article 2424). The rule does not, however, apply to disability insurance where the disability began during the first two years.

In practice, after that period it is no longer enough for the insurer to show that an answer on the application was inaccurate: it must prove fraud. Ask it for a copy of the application; the insurer must give it to the policyholder (article 2400), and that document is where the question will be decided.

Suicide

The insurer cannot refuse to pay because of the insured's suicide unless it stipulated an express exclusion for that case. Even then, the exclusion has no effect if the suicide occurs after two years of uninterrupted coverage (article 2441). Where the amount of insurance was increased, the additional amount is subject to a new two-year period from the increase.

Exclusions must be visible

In insurance of persons, the insurer may rely only on exclusions or reductions of coverage that are clearly set out under an appropriate heading (article 2404). An exclusion buried in an unrelated paragraph, or obscurely worded, can be challenged on that ground alone.

The benefit is not part of the estate

A sum insured payable to a designated beneficiary does not form part of the insured's estate (article 2455). Conversely, insurance payable “to the estate” or “to the heirs” does (article 2456). Where the beneficiary is the married or civil-union spouse, a descendant or an ascendant, the rights under the contract are exempt from seizure until the beneficiary has received the sum (article 2457).

Getting the file

A beneficiary can obtain the deceased's personal information where its disclosure bears on their interests and rights as beneficiary (section 41 of the Act respecting the protection of personal information in the private sector). An action against the insurer is generally prescribed by three years (article 2925 of the Civil Code).