Life insurance benefits battle: Did farmer die on a tractor or a ‘motor vehicle’?
Murder, suicide and fraud are common exclusions in life insurance policies. But what if you die while driving a tractor on your farm?
In an unusual Minnesota lawsuit filed in May 2012, Annalee Balk alleges the National Rifle Association wrongfully refused to pay on a $150,000 accidental life insurance policy after her husband, John Balk, died in a tractor rollover accident on his farm on Sept. 28, 2010.
Motor vehicle or machine?
The NRA, which sold the policy to John Balk, refused to pay, claiming a policy rider said it didn’t have to pay for a death that occurred “while operating a motor vehicle under the influence of alcohol,” Minnesota attorney Todd Coryell, who’s representing Annalee Balk, wrote in the lawsuit.
But the widow argues the John Deere tractor that her late husband was driving is not a motor vehicle under Minnesota law, and the NRA was wrong to reject the claim, Coryell wrote.
“My first blush on this case is that a farm tractor is never a motor vehicle,” says Frank Darras, an insurance attorney in California. “It wasn’t on the road or the highway. This tractor wasn’t required to be licensed as a motor vehicle in Minnesota. It wasn’t being used to transport passengers on a road or highway. It was a piece of farm equipment that at the time of the accident was being used to haul and compact dirt on the gentleman’s farm.”
Darras points out that Balk didn’t live in a residential neighborhood and wasn’t driving his tractor in a cul de sac. Balk lived on a farm in the small farming community of Belle Plaine, Minn.
“It also wasn’t an accident where he crashed into a car or truck,” Darras says. “He rolled over on some uneven and unstable ground, and the tractor allegedly flipped on top of him. Unfortunately, he couldn’t jump or escape because he had bad knees. Tragically, he died under his tractor on his own farm.”
Balk’s attorney, Coryell, declines to comment. So does the NRA’s attorney in this case, Michael Berger of Minneapolis.
In the lawsuit, Coryell wrote that the NRA’s denial of the claim is wrong because the tractor is not defined as a motor vehicle under Minnesota law.
“The tractor was not being operated on a public road, was not required to be licensed by the state of Minnesota, and was simply used for standard farm work by the deceased,” Coryell wrote.
Kevin Lynch, an assistant professor of insurance at The American College in Pennsylvania, says laws pertaining to life insurance policies tend to favor consumers. And whenever ambiguity arises over a life insurance policy, courts tend to rule in favor of the beneficiary, Lynch says.
Lynch says he expects the court will look at the policy, evaluate what the term “motor vehicle” means under state law and likely rule against the NRA.
Reviewing life insurance claims
Life insurance expert Tony Steuer says the case is “definitely unusual,” but life insurance companies do deny claims periodically.
“I think the broader implications for (insurance consumers) to be aware of is that insurance companies are in the business of being in business and are going to review claims,” Steuer says. “I don’t think there is anything that sets a precedent in this case, but it reinforces that an insurance company is going to carefully review a claim before they pay a benefit and that some companies … might be stricter in their interpretation.”
In general, life insurance companies pay benefits on the vast majority of claims made – somewhere in the “high 90 percent range,” Lynch says.
Life insurance policies, however, do have exclusions.
The first is known as the contestability clause. Under this clause, life insurance companies closely analyze claims made during the first two years of the policy. This is when a life insurance company may have the most reasons for denying a claim. When claims are made during this time, life insurance companies often investigate to see whether the policyholder misrepresented himself on his application.
“Once that two-year period goes by, the policy becomes incontestable,” Lynch says. “For the vast majority of people making a life insurance claim, it’s usually many years after the policy was purchased. Unless there was blatant fraud – you didn’t really take your physical, you sent your twin brother in to take the physical, you paid off the doctor and the doctor lied – the company will look at the policy, make sure the forms are completed properly and pay the claim.”
Life insurance policies also include a suicide clause. This provision says benefits won’t be paid if the insured person commits suicide within the first two years of the policy taking effect.
Finally, nearly all states have laws saying that if a beneficiary murders the policyholder, the beneficiary can’t collect any benefits from that policy.
“If it’s accidental or you did it in self-defense, that’s OK, but if it’s murder, you won’t be able to collect on the policy,” Lynch says.