Category: Life Insurance Claims
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Can you have two primary beneficiaries on a life insurance policy?

Yes. An insured should always name multiple beneficiaries on a life insurance policy.

Why do you need more than one beneficiary on your life insurance policy? Read on to find out, and if you are a beneficiary to a life insurance policy that has multiple beneficiaries, this is what you need to know about the amount of death benefit you will receive.

If you have questions about being a beneficiary when there is more than one beneficiary on a life insurance policy, call us. Our award-winning life insurance beneficiary lawyers are ready to help you get paid.

What is a Beneficiary in Life Insurance?

A beneficiary is someone who is named to receive the death benefit on a life insurance policy. Upon purchasing a life insurance policy, the insured names one or more beneficiaries who will receive the death benefit if the insured passes away while covered by the policy.

How Many Beneficiaries Can Be on a Life Insurance Policy?

There is no limit to the number of beneficiaries an insured can name on a life insurance policy. An insured has multiple options for choosing beneficiaries:

  • Primary beneficiary
  • Secondary or Contingent beneficiary
  • Co-beneficiary

What is the meaning of primary beneficiary?

The “primary beneficiary” on a life insurance policy is the first in line to receive the death benefit. Even if contingent or secondary beneficiaries are named, the primary beneficiary receives the entire death benefit if they are available to do so.

What is a contingent beneficiary designation?

A “contingent beneficiary,” also called “secondary beneficiary,” may receive the death benefit in place of the primary beneficiary if the primary beneficiary is deceased or unreachable. Listing a contingent or secondary beneficiary acts as a safeguard in case something happens to the primary beneficiary.

What is a primary and secondary beneficiary on life insurance?

The primary beneficiary is first in line to receive the death benefit. If the primary beneficiary is not available, for example, if they cannot be found or they are deceased, the secondary or contingent beneficiary is next in line to receive the death benefit.

What happens when there are two beneficiaries on a life insurance policy?

How do you split life insurance beneficiaries?

When there are multiple beneficiaries on life insurance, the life insurance company first looks to the type of beneficiary designation the insured used. A primary beneficiary is the first to receive the death benefit. If the primary beneficiary is not available for any reason, the secondary or contingent beneficiary received the death benefit.

Can You Have Two Primary Beneficiaries on Life Insurance?

Yes. If there is more than one primary beneficiary, the primary beneficiaries share the death benefit equally or in a percentage determined by the insured at the time of designation. Multiple primary beneficiaries to life insurance are also called “co-beneficiaries.”

Who You Should Never Name as Your Beneficiary to Life Insurance

Certain people should not be named directly as your beneficiary, namely, minor children and disabled people. If you want to designate a minor child or disabled person as your beneficiary, create a trust in their name and name the trust as beneficiary. This way, you avoid the involvement of the court in naming a guardian for your intended beneficiary.

You should also not name your estate as your beneficiary because then the death benefit will be subject to the claims of your creditors and may be taxable as inheritance.

Be aware also that divorce affects the life insurance beneficiary designation, depending upon where you live.

Last, avoid being general about naming beneficiaries. For example, if you designate “all of my children” as beneficiaries, who do you mean if you have children by your first marriage, step-children in your second marriage, and a natural child outside of marriage? You are potentially laying the ground for a child contesting the life insurance beneficiary on your policy if you do not designate your children by name.

Can you have multiple beneficiaries on life insurance? Can there be more than one primary beneficiary?

Yes, and it is recommended that an insured names multiple beneficiaries to ensure that someone is available to receive the death benefit.

What happens if no beneficiary is named on life insurance policy?

If the insured does not name more than one beneficiary, there is no beneficiary, and this is what happens to death benefits when a life insurance beneficiary is deceased.

Lawyer to Help with Life Insurance Beneficiary Disputes and Life Insurance Claims

Legal problems frequently arise when multiple parties claim to be the validly named beneficiary to a life insurance policy, or when the beneficiary designation is sufficiently vague to be interpreted to designate different individuals as beneficiaries.

Were you named as a beneficiary to a life insurance policy, and there are multiple beneficiaries disputing your claim? Do you think you should be a life insurance beneficiary, but the beneficiary designation is vague and being interpreted too narrowly? Was there a last-minute beneficiary change, and you want to dispute that beneficiary’s claim? Was your life insurance claim denied? Is your life insurance claim delayed?

Our life insurance beneficiary attorneys can help. Contact us for your free, no-obligation case evaluation.

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16 Reasons Life Insurance Won’t Pay Out

People purchase life insurance policies to protect their families and dependents in the unfortunate event of their death. Life insurance policies are valid, legally binding contracts between policyholders and life insurance companies. So, why is the life insurance company not paying out?

These are the sixteen most common reason life insurance companies deny claims:

  1. Nonpayment of Premiums
  2. Death during the Contestability Period
  3. Misrepresentation on Application
  4. Employer Failed to Submit a Disability Waiver of Premium
  5. Problems with the Beneficiary
  6. Policy was included in a Trust or a Will
  7. Denials Due to Suicide Exclusion
  8. Policy Included a Drug or Alcohol Exclusion
  9. Death Due to other Policy Exclusion
  10. Death Due to Act of War or Terrorism
  11. Death Resulted from Extreme or Dangerous Activities
  12. Death Due to Homicide
  13. Death While Living or Traveling Abroad
  14. Policyholder Dies Committing an Illegal Act
  15. No Insurable Interest
  16. New or Replacement Policy

Just because your claim was initially denied does not mean you do not have a valid claim. You must fight the life insurance company when they deny your claim. Call our experienced life insurance lawyers at 855-553-9010 to discuss the specifics of your life insurance policy and learn about your options – free of charge

Remember, life insurance companies only make money for their shareholders when they collect premiums and deny or delay paying valid life insurance claims. Here are the sixteen most common reasons life insurance won’t pay out.

1. Nonpayment of Premiums

When the life insurance premiums are unpaid, life insurance coverage lapses, the policy terminates, and claims for death benefits get denied. However, our experienced life insurance lawyers have gotten many beneficiaries paid under these circumstances, especially when nonpayment of premiums is not the policyholder’s fault.

When you buy a life insurance policy, the insurance company’s obligation to pay out is contingent on the policyholder having paid the premiums. If you forget to pay, the insurance company typically provides a “grace period” for making late payments of around one month from the due date. If you do not pay within the grace period, the policy “lapses,” and you will no longer be covered. Even if you’ve been paying diligently for decades, your policy can be terminated after missing one premium payment.

Often, nonpayment of premiums is not the policyholder’s fault. For example, the life insurance company may not have sent the legally-required notices of impending lapse, or cannot show that the policyholder received them.

Lapse in Coverage because Employer Stops Paying Premiums

Sometimes policy lapse and termination happens through no fault of the insured. For example, if ERISA controls, there are many safeguards in place for an insured who does not receive the required notices and application for conversion from their employer, and their employer simply stops paying premiums on their behalf. Beneficiaries can get paid even if the policy lapsed in these circumstances!

Lapse in Coverage because the Employee Went Out on Disability

Again, there are notices that the employer is required to provide an employee if the employee is out of work on disability. The employer may not simply stop paying premiums. The disabled employee may be eligible for waiver of premiums due to disability and their employer should provide them with that application.

Lapse in Coverage Because the Employee Was Unable to Convert the Policy

When an employee leaves a job with group life insurance, they have the option to convert that coverage to an individual policy. Unfortunately, not all employers effectively administer their group life insurance plan, and either the necessary paperwork is not given to the employee or that paperwork is not properly completed or filed with the life insurance company.

2. Death During Contestability Period

In most states, the first two years of a life insurance policy are considered the “contestability period.” If the policyholder dies shortly after purchasing life insurance during the contestability period, the life insurance company has the right to review and fact-check information on a life insurance application for accuracy. They perform a full investigation of the policyholder’s medical records and any other information requested on the application.

If the life insurance company finds any false statements or omissions, they have the power to  retroactively cancel the policy and refund premiums instead of paying the beneficiaries’ claims for death benefits.

Unfortunately, this is a common tactic among life insurance companies, even when the misrepresentation in question is unrelated to the insured’s death. All too frequently, otherwise valid life insurance claims are denied due to an innocent mistake on the application.

Do not take no for an answer! Our life insurance lawyers investigate alleged misrepresentation and are often able to get our clients paid. For example, we got our beneficiary client paid in full when the insured died within the contestability period of heart failure.  We argued that the insured had no history of heart failure, did not know they had a heart condition, and could not have disclosed an unknown heart condition.

Death Due to Self-Inflicted Injuries During the Contestability Period

Most life insurance policies contain a two-year “suicide clause,” in which claims can be denied in the event of a policyholder’s suicide. This clause deters people from buying policies with the intention of committing suicide shortly afterward, thereby leaving large life insurance benefits for their family members.

Know that if there is even a possibility that the policyholder died from self-inflicted injuries, the life insurance company will probably deny your claim. Call us – we investigate and may be able to show that the cause of death was something else, or that the policyholder did not intend to harm themselves.

3. Misrepresentation on Application

Life insurance companies frequently rescind policies and deny claims for death benefits due to material misrepresentation on the part of the policyholder, for example, if the policyholder failed to disclose:

  • Past or present health conditions,
  • Past or present medications,
  • Past surgeries,
  • Participation in activities that the insurance company deems dangerous,
  • Financial background,
  • Criminal background,
  • Past or present lifestyle habits such as tobacco use, alcohol use, or drug use.

If you or someone you know is struggling with alcohol or drug abuse call the Substance Abuse and Mental Health Services Administration (SAMHSA) hotline at 1-800-662-HELP (4357) for free and confidential help, 24 hours a day.

If there is false information on your application for life insurance or medical questionnaire, the life insurance company will deny your beneficiaries’ claims despite you having paid premiums all those years. Call your life insurance company to correct any false information and update your information in order to get your beneficiaries paid.

If your life insurance claim was denied because the policy was rescinded due to misrepresentation, call us. We can help.

Agent Error or Omission

We have gotten many client beneficiaries paid when their claim was denied because the life insurance agent made a mistake completing the insured’s initial application for insurance. The life insurance company will deny beneficiaries’ claims due to alleged fraud, when the mistake was in fact the agent’s.

Knowingly Committing Fraud

In most states, a policyholder’s innocent mistake on a life insurance application does not rise to the level of fraud, and the life insurance company should pay beneficiaries’ claims. The life insurance company must show that the policyholder knowingly completed their application fraudulently with the intent to procure coverage or to pay less in premiums.

4. Employer Failed to Submit a Waiver of Premium

If an employee is disabled and out of work, and is covered by group life insurance through their employer, their employer must submit a disability waiver of premium to the life insurance company. If they do not, and the policy lapses due to nonpayment of premiums, the life insurance company will deny the disabled employee’s beneficiaries claims for the death benefit.

We get our client’s claims paid under these circumstances because the lapse was not the policyholder’s fault.

5. Problems with the Beneficiary

Insurance companies invariably deny or delay paying claims when there are one or more of the following problems with the beneficiary:

6. Policy Was Included in a Will or Trust

If a life insurance policy was included in a will and the policyholder’s heirs are different from the life insurance beneficiary designation, this may spark a beneficiary dispute. The same may occur if the beneficiaries of a policyholder’s trust are different from their life insurance beneficiaries.

If the policy names a trust for a minor child or a special-needs child as beneficiary, the policy pays out to that trust.

7. Claim Denial Due to Suicide Exclusion

If a life insurance policy has a suicide exclusion, they will deny beneficiary’s claim for death benefits if the policyholder died from self-inflicted wounds. Suicide clauses differ depending on what state’s law applies to the policy but commonly provide that if the policyholder commits suicide within the first two years of this contract, the beneficiaries will receive a premium refund, but not the death benefit.

One common complication with enforcing suicide exclusions is proving that the policyholder actually committed suicide. It is not uncommon for an insured to die accidentally, resulting in what might look like a suicide.

One case in which we got our beneficiary client paid arose when the policyholder died due to auto-erotic asphyxiation. The autopsy stated that the cause of death was accidental, as the policyholder had laid out clothing for the next morning. The insurance company had the burden of proving that the policyholder “purposefully injured himself” (the wording of the exclusion) They could not as there was evidence the insured intended to survive, and we got our client paid.

Keep in mind that although we were successful in this case and many others, we cannot guarantee the result of any other matter. But we can guarantee that at the Boonswang Law Firm, our attorneys have extensive experience in taking on the challenge of disputing these suicide exclusions. As a result of our skill and knowledge in insurance law, we have been able to successfully obtain death benefits for clients who had previously been denied payment in the face of suicide exclusions.

If you or someone you know is struggling with thoughts of suicide, call the National Suicide Prevention Hotline at 1-800-273-8255 to access their national network of local crisis centers that provide free and confidential emotional support to people in suicidal crisis or emotional distress 24 hours a day, 7 days a week.

8. Policy Included a Drug or Alcohol Exclusion

Many policies have exclusions that will deny claims when the policyholder died due to illegal drug use or overdose on prescription drugs. Some policies also exclude and deny life insurance claims for death related to alcohol use.

Life insurance companies often apply these exclusions and deny claims when marijuana or some other drug was found in the toxicology report. Life insurance companies also will apply the exclusion in cases involving heroin overdoses, when someone took too many prescription pain pills or other medication, or died from alcohol poisoning.

Does life insurance cover drug overdoses? Does life insurance cover death from alcohol? Sometimes. Some states have laws that protect life insurance policyholders who are prescribed narcotics or who are deemed disabled due to addiction to drugs or alcohol.

One recent case in which we successfully got our client beneficiary paid arose when the insured died in a motorcycle accident. The toxicology report stated that the policyholder had “acute amphetamine intoxication” so our client’s death benefit claim was initially denied.  However, ultimately it was determined that the policyholder died of injuries sustained in the motorcycle accident some several weeks later, not from a drug overdose the day of the accident.

Of course, we cannot guarantee the result of any matter. However, our attorneys at The Boonswang Law Firm are extremely knowledgeable in life insurance laws across the country and the nuances one must argue when faced with claim denial due to policy exclusions. Our knowledge and experience help us zealously fight for our clients and get them the death benefits they deserve.

If you or someone you know is abusing drugs or suffers from drug addiction, call the Substance Abuse and Mental Health Services Administration (SAMHSA) hotline at 1-800-662-HELP (4357) for free and confidential help, 24 hours a day.

9. Policy Lists Other Exclusions

Every policy has a set of exclusions, and they differ from insurer to insurer. If there is any chance the policyholder’s death was excluded from coverage, the life insurance company will leap at the chance to deny their beneficiary’s claim.

This is especially the case in Accidental Death & Dismemberment life insurance policies and riders (AD&D), in which life insurance companies define “accidental” death in a manner that is deliberately hard to satisfy. Common provisions are that the insured must die within 90 days of the injury which caused his or her death and that death in an airplane is not covered for pilots.

Recently we settled a case where the insured died of drowning, but he drowned due to an undiagnosed heart condition. We argued that “accident” is an event that is not a natural and probable result of the insured’s own acts. In this case, there was no way the drowning could have been naturally and probably expected or anticipated by the insured because it was caused by his undiagnosed heart condition. Our client got paid.

Life insurance will often not pay out to beneficiaries’ and try to apply exclusions even when they are legally required to pay out. An insured should disclose participating in any activities that are considered dangerous by the insurance company. This might include skydiving, motorcycle riding, mountain climbing, kayaking, surfing, or anything that could be subject to exclusion under some policies. This way, an insured can get the type of policy that is right for them and their lifestyle.

10. Death Due to Act of War or Terrorism

Most policies have an Act of War exclusion allowing the life insurance company to deny claims connected to civilians killed in wars or acts of terrorism. This commonly applies to first aid and other medical volunteers in an area of conflict, journalists, and others who travel to regions of the world where there is armed conflict.

11. Death Resulted from Extreme or Dangerous Activities

“Accidental Death & Dismemberment” policies (AD&D) are commonly sold to policyholders under the impression that if they die of a non-natural, “accidental” cause, a death benefit will be paid to his or her beneficiaries. However, it is common for life insurance companies to deny accidental death claims.

Life insurance companies often define “accident” in an arbitrarily specific manner, in which long lists of provisions must be satisfied before they agree to pay out. Lie insurance companies then deny claims based on a failure to fulfill that list of provisions. Note that AD&D policies never cover self-inflicted death or health-related deaths, since both of these scenarios would not qualify as an “accident.”

We recently settled a matter for our client where the policyholder died from severe injuries he sustained in a motorcycle accident, several weeks after the accident. Our client’s claim was initially denied based on “acute amphetamine intoxication” and benzodiazepine use, although no medical history was available, no autopsy was ever performed, and the medical examiner never viewed the body.

We argued that the insured’s cause of death was the injuries sustained from the accident, having nothing to do with drug use, that foreseeability of the accident is legally irrelevant, and that even deaths resulting from negligence (taking drugs then driving) may still be an accident. We got our client paid!

12. Death Due to Homicide

In most cases, life insurance policies should pay out in the event of homicide. However, there are specific circumstances in which life insurance companies deny a beneficiary’s claim in the event of the policyholder’s murder.

If the beneficiary is under investigation for the homicide of the policyholder, then the beneficiary will not receive the death benefit until cleared of any involvement in the policyholder’s death. If the death is under investigation, the life insurance company delays paying claims until all beneficiaries are cleared of suspicion.

We had one case where the policyholder was murdered. The policyholder was a drug user, and the beneficiary’s claim was denied based on misrepresentation. We successfully argued that the agent did not probe into the policyholder’s drug use while completing the application, that the policyholder was never asked whether he was treated for drug abuse, and that drug abuse had nothing to do with his cause of death. Our client was paid in full.

13. Death while Living or Traveling Abroad

Does life insurance cover overseas death? Perhaps. A policy may specify that if the policyholder dies while living outside the United States, that is an exclusion that results in claim denial. Be sure to inspect your policy for this exclusion if you plan to travel or live abroad.

Be advised that if you die while traveling abroad, the insurance company may delay paying on your beneficiary’s claim while they investigate your death.

14. Policyholder Dies Committing an Illegal Act

This might seem like common sense, but there are plenty of times people do illegal things and don’t realize it. For example, what if you were jogging and unintentionally trespassed on private property? If you had a heart attack and died while jogging, the insurance company will try to deny your beneficiary’s claim because you were doing something illegal when you died.

15. No Insurable Interest

Someone purchasing life insurance covering someone else must have an insurable interest in the insured. If they do not, the life insurance company will deny their claim for death benefits.

16. New or Replacement Policy

If the policyholder replaced their former policy with a new one just prior to their death and failed to check for possible new exclusions, the life insurance company may deny their beneficiaries’ claims for a surprising reason. Similarly, when a policyholder purchases new or replacement life insurance, the contestability period restarts, and the life insurance company is empowered anew to deny claims for inconsistencies or inaccuracies in their application or medical questionnaire.

Talk with a Life Insurance Lawyer About Denied or Delayed Claims

The experienced life insurance lawyers at Boonswang Law have gotten beneficiaries across the nation paid when the life insurance company denied their claims due to these common reasons, among other reasons.

Don’t take no for an answer! If you believe your life insurance or AD&D claim has been unlawfully delayed or denied, don’t hesitate to contact us for your free case evaluation. We get our clients paid!

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Misrepresentations and cause of death in life insurance applications

Can Life Insurance Companies Deny a Claim?

At first glance, life insurance seems like a fairly simple process. The policyholder applies for insurance with a specified death benefit, and, after he or she dies, the beneficiary or beneficiaries will receive this benefit in full. However, this is not always the case.

Insurance companies will frequently deny benefits to claimants due to misrepresentations during the policy’s contestability period.

The Laws Governing Insurance Vary From State to State

Each state has unique laws limiting the insurance company’s ability to rely on misrepresentations on the application to avoid liability. Typical statutes require some combination of three main elements: intent, materiality, and relation to the insured’s cause of death.

An Insurer Must Prove “Intent to Deceive”

Some states provide that an insurer cannot deny claims unless they prove that the misrepresentations were made with the “intent to deceive” the insurer. This means that the policyholder intentionally lied while filling out the application for life insurance.

For instance, Alabama Code §27-14-28 states that no “misrepresentation … under any insurance policy shall defeat or void the policy unless such misrepresentation is made with the actual intent to deceive as to a matter material to the insured’s rights under the policy.”

If an insurer voids an Alabama policy due to misrepresentations on the application, they must prove that these misrepresentations were knowingly and willfully made.

What is Material Misrepresentation on an Insurance Application?

Most states require that a misrepresentation be “material” in order to void a policy and deny a beneficiary’s life insurance claim. Within the context of life insurance, this means that the misrepresentation must have substantially affected the insurer’s decision to issue the policy in question. If the misrepresentation was “immaterial,” or did not affect the insurability of the insured, then the policy cannot be voided.

For instance, California Insurance Code § 359 allows insurers to “rescind the [insurance] contract” provided that “a representation is false in a material point.” The materiality of specific misrepresentations is hotly contested between denied claimants and insurance companies.

Misrepresentation Must be Relevant to Cause of Death

Five states (Kansas, Missouri, Nebraska, Rhode Island, and South Carolina) provide that misrepresentations cannot void a life insurance policy unless they “contribute” to the insurer’s “loss.”

For instance, Neb. Rev. Stat. § 44-358 dictates that the “breach of a warranty or condition in any contract or policy of insurance shall not avoid the policy nor avail the insurer to avoid liability, unless such breach shall exist at the time of the loss and contribute to the loss.” This means that a connection must exist between the misrepresentations in question and the insured’s cause of death (which leads to the insurer’s “loss”).

For instance, if the insured neglected to mention a diagnosis of diabetes when applying for life insurance but died in an automobile accident, the insurer could not legally void his policy due to the misrepresentation of diabetes.

Insurance companies will frequently deny claims based on misrepresentations that were not material to their risk, made without the intent to deceive, or irrelevant to the insured’s cause of death. For example, our client’s claim was denied when the insured died of COPD. We showed that the insured was never diagnosed with COPD, therefore there was no intent to decieve. WE got out client paid. Another client’s claim was denied due to “incorrectly answered questions” on the application. The insured died of natural causes, therefore, there was not only no intent to deceive but the insurer could not show that any errors on the application were material to their risk. Again, we got our client paid.

If the Misrepresentation Was Made By The Insurance Agent, the Beneficiary Can Get Paid

We have seen many, many cases where the application was filled out incorrectly by the insurance agent, despite the insured giving the agent correct information, and the claim was denied.  As a general rule, anything the agent knows is imputed to the insurance company, so the insurance company cannot deny a claim based on misrepresentation under these facts.

If your claim has been unjustly denied or delayed due to alleged misrepresentation, don’t hesitate to ask an experienced life insurance lawyer to evaluate your case.

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When must an insurable interest exist for a life insurance contract to be valid?

When someone purchases life insurance, he or she must have an “insurable interest” in the insured. This means that the policyholder, i.e. the person who owns the policy and names the beneficiary or beneficiaries, will suffer financial loss if the insured dies unexpectedly. It is important to remember that this sort of relationship only needs to exist between the policyholder and the insured, not the beneficiary. Beneficiaries are not required to have any insurable interest in the insured.

There are many situations in which an insurable interest exists, including:

  • A spouse or family member
  • A financially dependent ex-spouse
  • An employer or business partner (if designated as “key personnel”)
  • A creditor

In each of these examples, the policyholder is financially or emotionally “interested” in the well-being of the insured. If insurable interest were not a requirement for taking out life insurance, strangers could essentially gamble on the lives of others. A policyholder without substantial interest in the life of the insured would be incentivized to cause harm and profit from an early death benefit.

When Must An Insurable Interest Exist in a Life Insurance Policy?

An insurable interest must exist and is a non-negotiable requirement for any form of any insurance, including life insurance. If there is an insufficient insurable interest between the policyholder and the insured, the policy is voided. The legal precedent for insurable interest was solidified in Warnock v. Davis, in which the Supreme Court of the United States asserted that a life insurance policy without insurable interest constitutes a “wager” against the life of the insured. (Warnock v. Davis, 104 U.S. 775)

Many state statutes also include provisions explicitly outlining what constitutes an “insurable interest.” For instance, California Insurance Code § 10110.1 defines insurable interest as “a reasonable expectation of pecuniary advantage through the continued life, health, or bodily safety” of the insured, “or a substantial interest engendered by love and affection in … individuals closely related by blood or law.”

Many investors try to find loopholes to avoid the need for an insurable interest in the insured. They do this by arranging with an individual to pay all the premiums on the individual’s policy on himself or herself with the understanding that, after a few years, the investor will obtain ownership of the policy. This evades the need for an insurable interest because insurable interests are evaluated at the time of the original purchase. Courts are not consistent in deciding whether these policies are legal.

Know that in any case, the insured must know of and give their consent to someone purchasing life insurance coverage for them. Forging a signature on a life insurance policy is always illegal.

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Contesting a life insurance beneficiary designation

Can a Life Insurance Beneficiary Designation Be Contested?

Yes, you can contest a life insurance beneficiary designation and you may be able to sue for life insurance proceeds.

Common reasons to dispute a life insurance beneficiary designation include:

  • the beneficiary designation was forged,
  • the beneficiary designation was fraudulent,
  • the beneficiary designation was made under duress,
  • there were errors on the change of beneficiary form, and
  • state law mandates a beneficiary change.

When a policyholder passes away, his or her life insurance benefit is supposed to go to the named beneficiary, often a spouse, family member, or close friend.

However, when multiple beneficiaries claim the death benefit, things can quickly become complicated under life insurance beneficiary rules. Alleged forgery/fraud, errors on change of beneficiary forms, and specific circumstances regarding divorce are all typical reasons for fighting life insurance beneficiary designations.

Cases involving life insurance beneficiary disputes can be complex and there are always mitigating circumstances. Reach out to our office today to speak with a life insurance dispute lawyer that can guide you through a potentially complex legal situation, such as an interpleader action.

Challenging a Life Insurance Beneficiary Designation because there was a Forged Life Insurance Beneficiary Change

Yes, this is one of the most common reasons for life insurance disputes. Where there are allegations of a forged life insurance beneficiary change, typically, a family member may have originally been named beneficiary, yet the policyholder recently designated someone else to receive benefits in their place.

It is important to note that fraudulent changes in beneficiary designation are exceedingly difficult to prove. Anyone can legally be named as a beneficiary by the policyholder regardless of the relationship between both parties.

Still, there are specific circumstances during which a change of beneficiary can be fraudulent.

For instance, written or eyewitness evidence may be able to prove that the change of beneficiary form signed by the policyholder was completed under duress or by someone other than the policyholder.

The policyholder may also have been mentally compromised by dementia, Alzheimer’s, or some other condition, which would invalidate any change in beneficiary. Without concrete evidence, however, allegations of fraud are nearly impossible to prove.

We’ve been able to prove them in certain circumstances.

For example, in one case the insured was bedridden, and her daughter gave herself power of attorney and changed the life insurance beneficiary from our client to herself. We got our client paid.

Challenging a Life Insurance Beneficiary Designation because the Change was Fraudulent

It is important to note that fraudulent changes in beneficiary designation are exceedingly difficult to prove. Anyone can legally be named as a beneficiary by an insured regardless of the relationship between both parties.

Even so, circumstances may prove that a change of beneficiary was fraudulent. For example, if the insured was mentally compromised by dementia, Alzheimer’s, or some other condition when they changed the beneficiary designation, that would invalidate any change in beneficiary.

Challenging a Life Insurance Beneficiary Designation because the Change was Made under Duress

Unfortunately, we have had cases where a caregiver or purported romantic partner manipulated or forced the insured to change the life insurance beneficiary designation to themselves. Any late-in-life beneficiary change, or a last-minute beneficiary change, should be treated as suspicious.

Can someone with power of attorney change a life insurance beneficiary?

Yes, but if that change was not authorized by the insured or was clearly self-serving, that can be challenged. For example, in one of our recent cases, the insured was bedridden. Her daughter gave herself power of attorney and changed the life insurance beneficiary from our client to herself. We got our client paid.

Was there a mistake made on the change of beneficiary form?

Sometimes, the policyholder may intend to change the beneficiary on a life insurance policy but make mistakes when completing or filing the change of beneficiary form. Insurance companies will often reject forms which are incomplete or improperly formatted, in which case the originally designated beneficiary receives the death benefit instead of the “new” one. In contrast to allegations of fraud, invalid forms provide a strong argument in favor of the “new” beneficiary.

What happens when a life insurance policy is contested for these reasons? Example: in Williamson v. Western-Southern Life Ins. Co., the court ruled in favor of the “new” beneficiary since the available evidence suggested that the policyholder intended to enact the change.

Case No. 1098, (Ohio Ct. App., April 19, 1977). Even though there was no official form on file with the insurance company, multiple pieces of corroborating evidence demonstrated that the policyholder wanted to change the beneficiary designation on the policy.

In similar cases, even handwritten notes may be sufficient to prove the policyholder’s intent to change the beneficiary.

We’ve had many cases like this.  In one recent case, our client was married to the insured for many years.

The insured’s daughter was originally the beneficiary of his life insurance policy, but they became estranged during that time, and he filled out and submitted a change of beneficiary form changing the beneficiary to his wife, our client.

He never received notice that the form was deficient in any way, so assumed the change was valid.

After he passed, the insurer asserted that the beneficiary change form was not filled out correctly and wanted to pay the daughter.  We got our client paid.

What Happens When the Life Insurance Beneficiary is an Ex-Spouse?

The law is complex regarding life insurance and divorce. After divorce, an insured will likely want to change the primary beneficiary on their life insurance policy from an ex-spouse to someone else, such as a child or relative. However, there are instances when they might not be able to, or the ex-spouse is removed as beneficiary by operation of state law.

Change of Beneficiary Due to Revocation-Upon-Divorce State Statute

Life insurance beneficiary rules after divorce vary by state. About half of all states maintain a “revocation-on-divorce” statute which provides that divorce effectively removes an ex-spouse as beneficiary. However, a revocation-upon-divorce statute is overridden if:

  • the insured re-designates their ex-spouse as beneficiary, or;
  • if the divorce decree states that an ex-spouse will remain the beneficiary.

Divorce decrees often require that an ex-spouse receiving alimony be the beneficiary of a life insurance policy on the ex-spouse paying the alimony. Whenever a divorce decree specifies the beneficiary of a life insurance policy, the beneficiary becomes “irrevocable.” The insured is then prevented from “revoking” his or her ex-spouse as beneficiary without consent. If the insured does change the beneficiary designation, the former beneficiary has a strong case for a beneficiary dispute.

Change of Life Insurance Beneficiary Designation in Community Property States

In the nine (9) community property states, courts may also enforce “equitable division” of paid-up “whole life” policies regardless of who is the named beneficiary.

If term life insurance premiums were paid with marital assets, the spouse or ex-spouse may be entitled to some or all of the death benefit regardless of who is the named beneficiary.

State law varies on these issues, and federal ERISA law may override state life insurance law if the policy is group life insurance through an employer. Check out the life insurance rules in NY, the life insurance rules in Texas, the life insurance rules in Florida, and the life insurance rules in California.

An example of a life insurance policy after a divorce

Let’s take the example of Mary, Bill, and John.

Mary and Bill married, had children, and divorced. The divorce decree gave full custody of their children to Bill, who receives monthly child support payments from Mary.

The decree also specified that Mary maintain her existing life insurance policy to provide extra financial security for Bill and their children.

Years later, Mary marries John and files a change of beneficiary form with her insurance provider such that John is now listed as beneficiary in place of Bill.

When Mary passes away, the insurance company pays John the death benefit. However, this goes against the divorce decree, which explicitly states that Bill should remain beneficiary.

Bill now may have legal grounds to sue either Mary’s estate or the insurance company since he, not John, was the legally valid beneficiary to Mary’s policy. This is one of the rare circumstances where the life insurance beneficiary be changed after death.

What Do I Do if I am the Named Beneficiary on a Life Insurance Policy and Someone Disputes that?

Challenging a life insurance beneficiary designation can be a complex, difficult, and heavily litigated process. Defending your designation as beneficiary in a life insurance beneficiary dispute is equally difficult. This makes it all the more important to enlist the help of an expert in either case.

We’ve gotten our clients paid in beneficiary disputes. If you are the rightful beneficiary of a life insurance policy yet your claim has been denied, or if you are defending in a beneficiary dispute, don’t hesitate to contact us for help.

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Life insurance beneficiary rules in California – 2020 Update

California Beneficiary Laws

For the most part, the process of naming beneficiaries to a life insurance policy is the same across all states. In fact, unless prohibited to do so by law, anyone can be named as beneficiary to a life insurance policy, regardless of whether he or she has any vested interest in the insured.

Complications arise in certain states, such as California, when an insured is married or divorces.

If you’re involved in a dispute regarding a life insurance policy, your can speak with a life insurance beneficiary lawyer at our firm about your case.

What is a Beneficiary in Life Insurance?

A beneficiary to a life insurance policy is someone who was named by the insured person as the person entitled to receive the death benefits upon the death of the insured.

Who Can Change the Beneficiary on a Life Insurance Policy?

Only the policy owner can change a life insurance beneficiary. Life insurance is a private contract between a policy owner and the life insurance company.

Can a Policy Owner Change the Beneficiary on a Life Insurance Policy to Someone other than his Spouse or Children?

Yes. A policy owner has the right to change the named beneficiary or beneficiaries from his spouse or children to anyone else at any time, even if he is married.  However, such a change may or may not be effective according to state law. Most life insurance policies are revocable, meaning the policy owner may change the beneficiary at any time. Some appoint irrevocable beneficiaries, in which case the beneficiary, once designated, cannot be changed.

The Effect of Divorce on Life Insurance Beneficiary Designation in California

Divorce can heavily complicate the process of changing beneficiaries, as explained in our previous post regarding how divorce affects beneficiaries of life insurance policies.

While some states have enacted laws automatically revoking ex-spouses as beneficiaries after divorce, California has not. California, a community property state notorious for having the most complex divorce law in the United States, adds an additional layer of complexity to life insurance and divorce settlements in that if premiums were paid from joint funds, an ex-spouse may be entitled to a payout or death benefits even if not named as beneficiary.

In California, Life Insurance May Be Community Property

California is one of nine (9) community property states in which all property acquired during marriage belongs equally to both parties. After divorce, the policyholder will most likely retain his/her term life policy and be allowed to name new beneficiaries in place of his/her ex-spouse.

However, the community property rule does apply to policies with an accumulated “cash value,” most often in the form of whole life or universal life policies, provided that the policy was purchased during marriage with community funds. In these cases, the policy’s cash value will be divided between the spouses, but ownership of the policy will usually transfer to the spouse listed as beneficiary. This means that the insured’s ex-spouse, who now owns the policy, is obligated to make premium payments and reserves the right to change the beneficiary.

Let’s consider an example. Willy purchased a whole life insurance policy and named his wife, Kate, as beneficiary. After years of paying on the policy and accumulating $10,000 in cash value, Willy and Kate file for divorce. The divorce decree dictates that Willy and Kate each receive $5,000 of the accumulated cash value, while ownership of the policy transfers to Kate. Now, Kate is in charge of making premium payments on the policy and will receive the death benefit if Willy passes away. Willy can no longer change the beneficiary from Kate to someone else. Kate now owns the policy, and only she has the right to change the beneficiary from herself to someone else.

How Accumulated Cash Value is Divided Varies Greatly in California Divorces

It’s important to remember that, while the above situation is often the case in California marital settlement agreements and divorce decrees, the manner in which community life insurance policies are divided is entirely circumstantial. Often, judges will use their own discretion to figure out who owns the policy based on the facts of each individual case. For instance, if the premiums for a whole life policy are fully paid up, then the death benefit, in addition to the cash value, usually gets classified as community property.

Life Insurance Spouse Beneficiary Rules in California

If the insured dies while married, the portion of the death benefit a spouse will receive when the insured named someone other than the spouse as beneficiary will depend upon how premiums were paid, when the policy was purchased, and what type of policy it is.

Is Term Life Insurance Community Property in California?

Maybe. If the insured purchased term life insurance during the marriage and dies while married, the entire policy is considered community property, giving the spouse 50% of the death benefit if income earned during the marriage was used to pay premiums. The other 50% would go to the named beneficiary.

If the insured purchased term life insurance before the marriage, then married and died while married, the spouse would be entitled to the portion of 50% of the death benefit calculated from how much of the policy premiums were paid before the marriage, and how much were paid after.

For example, if Mary buys a term life insurance policy two years before marrying John in California, then dies a year later, and John finds out Mary named her boyfriend Sam as beneficiary, John is entitled to one-third of 50% of the death benefit and Sam would receive the remainder.

Is Permanent Life Insurance Community Property in California?

Maybe. If the policy in question is a form of permanent life insurance, such as whole life or universal life, again, the spouse is entitled to the portion of 50% of the accumulated cash value according to the amount of premiums paid with income earned during the marriage, even if someone else is named beneficiary.

ERISA Supercedes California Life Insurance Beneficiary Law

If the life insurance policy in question was obtained through employment as a benefit, it is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).  Employment-obtained life insurance policies are not subject to ERISA if the employment involved the government or a church. One provision of ERISA provides that the named beneficiary is always honored, regardless of the insured’s marital status and who the named beneficiary may be.

In states that have laws automatically invalidating an ex-spouse as life insurance beneficiary, if the policy was a benefit of employment, the ex-spouse remains beneficiary if still named. As explained previously, this is not the case in California.

In California, ERISA may dictate that the death benefit is paid to someone other than the spouse despite community property laws. But because beneficiary disputes are expensive, often the named beneficiary and spouse are willing to settle the matter outside of court with the help of their attorneys.

Consult with an Experienced Life Insurance Beneficiary Lawyer

In cases of divorce or death of the insured, or when the policy is governed by ERISA, when the named beneficiary is not the insured’s spouse, disputes often arise over who is the rightful beneficiary. For example, an ex-spouse and a family member of the insured or the girlfriend or boyfriend of the insured may both file claims for the same death benefit. Who gets paid according to California life insurance beneficiary laws?

In these situations insurance companies will frequently pay the named beneficiary without consulting relevant family law. If your claim has been wrongfully denied because you are not the named beneficiary and you are thinking of contesting the life insurance beneficiary designation, it is in your best interest to have a lawyer concentrating in this area evaluate your case.

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How to Find a Life Insurance Policy After Death

Life Insurance Companies May Not Contact Beneficiaries

After facing a loved one’s death, life insurance can help provide necessary financial security to pay for funeral expenses and supplement lost income. In most cases, when someone takes out life insurance, he or she lets the named beneficiaries (often family members of the insured) know about it. That way, when the policyholder dies, the beneficiary or beneficiaries will know to file a claim with the life insurance company.

However, policyholders often neglect to discuss their policies with family members. Although the subject may be difficult or personal, failing to let family members know about your life insurance policy can prevent them from obtaining benefits.

In many states, insurance companies are not required to contact the beneficiaries in the event of the policyholder’s death. If your beneficiaries don’t know about the death benefit, then your policy might end up lost and unclaimed. This can create a problem for beneficiaries. How can they find out whether their loved one took out a life insurance policy?

Keep a Copy Of The Death Certificate

To make the process of claiming the death benefit easier, you’ll want to obtain a copy of the death certificate. The local county in which the person passed or the mortuary that managed their funeral will usually have paperwork. This document will provide the life insurance company with the necessary information like the date of the passing and cause of death.

Steps To Uncover a Life Insurance Policy

Looking Through Your Loved One’s Documents

The first step in finding out whether your deceased loved one had a life insurance policy is to look through their records. For instance, bank statements may record monthly premium payments, or the deceased might have received updates from the life insurance company by mail.

Searching through mail, bank statements, contact lists, taxes, etc. can shed light on whether your loved one had life insurance. Additionally, if the deceased had a lawyer, accountant, or close friend oversee his or her finances, there’s a good chance that they would know about any life insurance policies.

Looking Through a Loved One’s Digital Documents

With password encryption, it can be difficult to uncover a file on a computer or hard drive. If the file is located on a server you may be able to contact the email service or cloud storage company with proof of death.

If you do gain access to your loved one’s computer or phone, check their email for the insurer’s name. You can also try checking their cloud storage for records from the life insurance company.    

Check Insurance Databases To Verify a Loved One’s Records

The National Association of Insurance Commissioners (NAIC) maintains a list of state-by-state insurance departments which may keep records of your loved one’s life insurance. They also run a “Policy Locator Service” in which the NAIC will contact insurance companies on your behalf.

The National Association of Unclaimed Property Administrators (NAUPA) uses a similar search tool. You can also pay a company to speak directly to insurance companies and find a missing policy. Policy Inspector is one such example, which charges via a $99 flat fee.

Check To See If The Deceased Has a Group Policy

Some employers may offer life insurance as part of their benefits. In order to obtain the benefits, you will need to reach out to the company’s benefits administrator.

One thing to note is that typically the life insurance policy does not carry over if your loved one left the company. The life insurance policy may also have been offered through the deceased person’s union. If this is the case, a union representative will typically reach out to the beneficiary.       

Do I Really Need To Hire An Attorney For a Life Insurance Case?

Though it may seem like a cut and dry process, if a life insurance company has the opportunity to reject a claim with any plausible excuse, they won’t hesitate to do so. It’s important to always consult an attorney with the skills and experience to get you the benefits you deserve. If you’re experiencing any kind of push back from a life insurance company, call our firm today at 1-855-865-4335

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Can an interpleader take money from the winner of a contested insurance policy to pay court costs?

Ideally, the death benefit on a life insurance policy is paid directly from the insurance company to the named beneficiary or beneficiaries. However, disputes frequently arise over who is rightfully entitled to the death benefit. One claimant might allege that the other claimant changed the insured’s beneficiary designation through forged paperwork, or that the named beneficiary is invalid because he or she was responsible for the insured’s death. When multiple parties claim the same death benefit, an insurance company may choose to file an interpleader action.

Defining interpleader

“Interpleader” refers to a specific type of lawsuit. Instead of a single claimant suing a single stakeholder, interpleader involves multiple claimants suing one another for rights to the stakeholder’s property. For instance, let’s say that John owned a house. In his will, John dedicated the property to his daughter, Kate, but John also verbally agreed to give the house to his son, Ben. After John dies, the executor of his estate doesn’t know to whom he should give the house. The executor then files an interpleader action, such that Kate and Ben are now litigating against one another for rights to John’s house. This allows the executor to avoid any liability resulting from paying the wrong person.

Similarly, life insurance companies may encounter multiple parties who all claim the same death benefit. The company may choose to file an interpleader action, such that the claimants are fighting against one another instead of against the company. The company is acknowledging it owes the benefit to someone but requests that the court determine the correct party.

Court costs & attorney fees

Generally speaking, when a “neutral stakeholder” such as a life insurance company asks for reimbursement of any court/attorney fees, the court will grant reimbursement by taking from the winning claimant’s death benefit. If a winning interpleader claimant were to receive a $10,000 death benefit, the insurance company (as neutral stakeholder) could subtract $500 in attorney and court fees, leaving $9,500 to the winning claimant. These fees are usually insignificant, as the stakeholder is only filing, drafting, and serving a few documents. However, in a more complex case, the costs may be substantial.

Dealing with competing claims for a life insurance policy’s death benefit can be a complex, heavily litigated process. If your claim has been wrongfully denied, don’t hesitate to contact an experienced life insurance lawyer.

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Do life insurance companies have a statute of limitations on payments?

Waiting for a claim to be paid out can be a frustrating process. Generally speaking, claims should be processed and paid out within a month, but this is often not the case. Some claims can take several months before being approved or denied, often being delayed several times by the insurer. Beneficiaries might begin to wonder if they’ll ever get paid, or if there are any deadlines by which the insurance company is legally obligated to respond.

The statute of limitations

The “statute of limitations” is defined as the amount of time under which a dispute can be legally contested. It varies depending on the type of dispute (e.g. personal injury, written contract, oral contract, specific types of insurance, etc.) as well as by state. As applied to life insurance cases, this means that once the statute of limitations has expired, the beneficiary or beneficiaries can no longer file suit against the insurance company.

The statute of limitations does not function as a deadline by which insurance companies must pay out on claims. In life insurance cases, the statute of limitations is designed to help the insurance company, not the beneficiary or beneficiaries. However, many states incentivize prompt payment through regulations.

State-by-state regulations

The vast majority of states have so-called “prompt payment” laws with deadlines and conditions under which claims must be paid. For instance, Michigan’s insurance code dictates that if benefits are not paid within sixty days after the claimant provides proof of loss to the insurer, the insurer will have to pay extra interest. South Carolina, on the other hand, begins accruing interest thirty days after proof of loss. Many states also have regulations requiring payment of claims in a “reasonable” time. Insurance companies that fail to comply with these regulations may be subject to fines or penalties imposed by state departments of insurance.

Although there is no strict “deadline” on life insurance payments, the accrual of interest usually incentivizes insurers to pay out within a month. However, it is not uncommon for life insurance companies to unjustly delay claims as a precursor for denial. If your life insurance claim has been unlawfully delayed, an experienced attorney can help move things along and be prepared in the event that your claim gets denied.

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Why Would a Life Insurance Policy Need Probate Papers?

Does a Life Insurance Policy have to go through Probate?

Generally speaking, no.

Usually, life insurance death benefits are paid out directly from the insurer to the beneficiary or beneficiaries without going through probate. Life insurance is not part of the insured’s estate and is not subject to debt collection, payment of the insured’s bills, or taxation as inheritance.

However, there are circumstances under which the death benefit from a life insurance policy is transferred to the insured’s estate rather than to a beneficiary. Under these circumstances, the life insurance proceeds will be subject to the probate process.

Having trouble with your life insurance claim because of a vague, invalid, or out-of-date beneficiary designation? Are you an ex-spouse entitled to the life insurance death benefit? Do you think you should be the beneficiary of an employer-provided life insurance policy? Call us for your free, no-obligation case evaluation.

Are life insurance proceeds considered part of an estate?

No. Life insurance death benefits pass to beneficiaries by operation of state law, not through the insured’s estate. Keep in mind that a will does not supersede a beneficiary designation in life insurance.

Are life insurance proceeds public record? No.

How do life insurance proceeds end up in the decedent’s estate?

When is Life Insurance Part of the Estate?

When there is an invalid or out-of-date beneficiary designation, or the designated life insurance beneficiary is deceased or cannot be found, the life insurance company pays the death benefit to the estate of the insured.

What happens when life insurance goes to the estate?

When there is no beneficiary on a life insurance policy, the life insurance beneficiary rules dictate that the death benefit will be subject to the probate process.

“Probate” refers to the process by which a deceased individual’s estate is distributed. The executor uses the deceased’s will to determine who are the beneficiaries entitled to a portion of the insured’s estate. If the deceased had no will, the estate is distributed according to the state’s laws of intestacy.

Unlike the process of claiming the death benefit as a beneficiary, which is streamlined and private, the probate process varies greatly state-to-state basis and is a matter of public record. And especially in the case of high-value estates, probate can be a heavily-litigated process, with multiple parties claiming conflicting amounts of the deceased’s assets.

Is the beneficiary of life insurance responsible for debt? Can life insurance proceeds be taken by creditors?

No, and this is one of the reasons going through probate is disadvantageous even if the estate value ends up being distributed appropriately.

If the insured was in debt at the time of death, their estate will first be used to pay off any outstanding debts. When the remains of the estate is distributed to the insured’s heirs, those proceeds may be subject to estate taxes. In contrast, if a beneficiary receives the insured’s death benefit directly from the insurance company, the beneficiary will receive the full amount without debt collection or tax collection.

Many states exempt a specified amount of life insurance death benefits (e.g. up to $50,000) from debt and/or tax collection even after the death benefits are transferred to the insured’s estate, but this depends on the laws in your state.

How an Insured Can Avoid Leaving the Death Benefit to Their Estate

It is in everyone’s best interests that an insured keep their beneficiary designations as up-to-date as possible to avoid probate, debt collection, creating a public record, and possible estate tax.

Designating multiple life insurance beneficiaries such as more than one primary beneficiary or a secondary or contingent beneficiary can provide an effective safeguard in case something happens to a primary beneficiary.

National Beneficiary Lawyer to Help You With Your Life Insurance Claim

Unfortunately, when there is a vague, invalid, or out-of-date beneficiary designation, or if the named beneficiary is deceased, there is frequently litigation over who is rightfully entitled to the policy’s death benefit. This litigation is called a life insurance beneficiary dispute. If the court determines that none of the litigants are rightful beneficiaries, the death benefit goes to the insured’s estate.

If you believe your life insurance claim has been wrongfully denied or that you are entitled to a death benefit that seems to be going to the estate instead, you need the advice of an experienced life insurance beneficiary lawyer. Call us – we get our clients paid!

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