Transamerica Sued Over Marijuana-Linked Claim Denial
Failure to disclose occasional use on a life insurance application is not material misrepresentation, the beneficiary asserts.
A new Illinois state court case raises questions about whether leaving information about occasional marijuana use off a life insurance application is a serious enough omission to invalidate coverage.
Ashley Merced, the beneficiary of a $250,000 policy insuring the life of her mother, Yvette Nieves, sued Transamerica Life Insurance Co. over the death benefits. Transamerica Life declined to comment on the suit, filed recently in a Chicago court.
The policy: Nieves, who bought the policy in August 2020, died of COVID-19 on Dec. 29, 2020.
Merced applied for the policy death benefits.
In November 2021, Transamerica Life said it had located a medical record in which Nieves had acknowledged occasional marijuana use.
The insurer said it saw the omission of information about marijuana use on the coverage application as material misrepresentation, and it refused to pay the death benefits, according to the complaint.
Merced asserted that Nieves’ omission of information about marijuana use was not material misrepresentation because Transamerica Life regularly issues policies to applicants who admit to current marijuana use.
The defendant “is relying on representations in the insurance application as a pretext to deny the benefits of the policy,” Merced told the court.
Merced asked the court for damages over $250,000, interest, attorneys’ fees and punitive damages.