If you recently lost a loved one in an accident that was someone else’s fault or due to intentional misconduct, you might be considering filing a wrongful death claim on their behalf. New York’s wrongful death statute allows an estate’s personal representative to file a wrongful death case against the party responsible for the death. At the same time, the personal representative may be seeking benefits under any applicable life insurance policy the decedent had.
Managing multiple legal claims on behalf of a recently deceased individual can be difficult. The experienced wrongful death injury attorneys at Powers & Santola, LLP can review the circumstances surrounding your loved one’s death, identify the parties responsible, and fight to recover compensation through all available pathways. Contact us today to discuss your wrongful death case with a skilled attorney.
What Is a Wrongful Death Case?
New York’s wrongful death law defines a wrongful death as a wrongful act, neglect, or default that causes someone else’s death. If the decedent had survived the incident and had the right to file a personal injury claim against the defendant, there are grounds for the personal representative to file a wrongful death claim against them when the decedent had surviving family members. A wrongful death attorney can evaluate your case to determine if you have grounds to file this type of legal claim.
What Is Life Insurance?
Life insurance is a contract between an insurance company and a policyholder. The policyholder pays a certain premium to the insurance company. In exchange, the insurance company agrees to pay a certain amount of money to the named beneficiary or beneficiaries when the policyholder dies.
Life insurance can help provide financial security to a person’s loved ones after death. Often, people purchase life insurance as a way to replace their income, naming their spouse and/or children as beneficiaries. Life insurance proceeds could also be used to pay off a mortgage, pay for children’s college educations, or for any other means.
Various types of life insurance are sold, including:
- Term life insurance
- Permanent life insurance
- Whole life insurance
- Universal life insurance
- Variable life insurance
Regardless of the type of life insurance your loved one had, you may still be able to file a wrongful death case against the party responsible for their death. Simply because your loved one was responsible in planning how to provide continued financial support after their death does not excuse the defendant from having to be financially responsible for the harm they caused your family.
Life Insurance Vs. Wrongful Death Compensation
While life insurance can generally be used for any reason, it’s important to note that once someone receives life insurance payouts, they are generally free to use the funds as they see fit. An exception is if a trust is named as the beneficiary. In that case, the trustee must follow the instructions included in the trust as to how to manage the insurance payouts.
In wrongful death cases, the amount of compensation is for the “pecuniary injuries” that the people for whom the wrongful death lawsuit was filed suffered. These are financial expenses caused by the death, such as:
- Medical aid, nursing, and attention expenses for the decedent’s final illness or injury
- Loss of the decedent’s income
- Loss of the value of household services
- Loss of guidance the decedent would have provided
- Reasonable funeral expenses
- Interest from the date of death
While there can be some overlap in how life insurance and wrongful death proceeds are used, your loved one’s life insurance payouts should not affect wrongful death compensation. Pecuniary losses may also include the decedent’s loss of income and future income, as well as any loss of inheritance. New York courts can also award punitive damages in wrongful death cases, which punish the wrongdoer and try to deter similar conduct in the future.
While there can be some overlap between what life insurance proceeds and wrongful death compensation cover, such as compensating for expected income, life insurance benefits are generally separate from and don’t affect wrongful death compensation. An experienced wrongful death lawyer can review your case and explain the damages you may be able to seek.
Life Insurance Exclusions
Life insurance policies may include specific exclusions that prevent the policy from paying out. The policy may not cover certain causes of death. While life insurance exclusions are regulated at the state level, insurance companies decide which exclusions to include in their policies. Common life insurance exclusions include:
- Suicide – Insurance policies might include exclusions for suicide that apply if the policyholder dies from suicide within a certain amount of time after purchasing the policy.
- War or terrorism – The life insurance policy may state that death benefits are not paid as a result of wartime activities, acts of war, or acts of terrorism. This exclusion does not typically apply if the policy is designed specifically for service members.
- Criminal activities – If the death occurred while someone was committing a criminal act, the insurer may deny the death benefit claim.
- Aviation accidents – Some insurance policies contain exclusions for deaths caused by aviation accidents.
- Drug or alcohol use – If the death was due to a drug overdose or alcohol poisoning, an exclusion may apply.
- Misrepresentation on life insurance application – The insurance company could deny the claim or rescind the policy if it finds that pre-existing medical conditions or medications were not included in the application.
- Hazardous activities or hobbies – The life insurance policy could expressly exclude payment of death benefits if the death occurred due to participation in dangerous activities such as skydiving, hang gliding, SCUBA diving, motorcycling, rock climbing, auto racing,
- Hazardous occupation – Some life insurance policies exclude claims when the decedent died in a workplace accident while working in an occupation that was more dangerous than average and this information was not disclosed on the life insurance application.
If your loved one’s life insurance policy included an exclusion related to their manner of death, your exclusive legal remedy may be to file a wrongful death claim since the life insurance company will likely deny the claim for death benefits.
How Life Insurance Payouts Might Affect the Amount of Compensation Awarded in Wrongful Death Claims
Life insurance payouts will not generally affect the amount of compensation your family receives from a wrongful death claim. An experienced attorney can review your situation to determine if life insurance will affect your wrongful death claim.
Wrongful Death Payouts, Life Insurance, and Taxes
Generally, wrongful death payouts are not subject to federal income taxes. The Internal Revenue Service does not typically consider economic or non-economic damages recovered in a personal injury or wrongful death lawsuit to be income. However, the IRS does consider punitive damages as income, so you might be responsible for paying the same tax rate on these damages as you would other income. Additionally, New York law allows judges and juries to consider the amount of income tax your loved one would have been required to pay when determining how much compensation to award.
Life insurance proceeds are also generally not taxable. However, the New York State Department of Financial Services says that if you own part or all of your policy when you die, the policy’s value can be included in your gross estate for federal estate tax purposes.
A knowledgeable personal injury attorney can work with you to structure a wrongful death settlement in a way that minimizes the tax burden.
Factors Affecting Life Insurance and Wrongful Death Claims
The value of life insurance payouts will generally depend on the terms of the policy, including the applicable death benefit amount and whether the death is covered under its terms. Your loved one may have employment and workplace benefits that are automatically included as part of their compensation package or that they purchased. The terms of those policies dictate which benefits you can receive and their value.
In determining the value of wrongful death claims, insurance companies may consider factors such as:
- The decedent’s age and health before the death
- The decedent’s expected life expectancy
- The decedent’s earning potential
- The financial and emotional impact of the death on the surviving family members
In New York, juries are instructed to consider what would be fair compensation under the circumstances, considering the pecuniary injuries.
A personal injury lawyer can work to ensure that your claim is valued accurately and can fight to recover fair compensation on your family’s behalf.
The Role of Insurance Companies in Wrongful Death Claims
One important thing to know when dealing with these types of cases is that insurance companies do not have your best interests in mind. Whether you are dealing with your loved one’s life insurance company or with an insurance company reviewing a wrongful death claim, insurance companies have one goal: minimize the financial impact of the claim on their bottom line.
Insurance companies may employ various strategies to minimize the value of a claim, including:
- Delaying the claims process – Insurance companies may make the claims process take longer than necessary simply to frustrate claimants so they give up on the process or accept any amount to settle the claim because of the additional financial burden delays have caused.
- Blaming pre-existing conditions – Insurance companies may try to blame pre-existing conditions, such as those disclosed on the life insurance application, for the death rather than accept the real reason for the death.
- Disputing liability – Sadly, even in cases involving wrongful death, insurance companies may use the common tactic of blaming the victim or someone else rather than acknowledging their insured’s negligence. This may just be a ruse to get out of paying what’s fair.
- Requesting unnecessary documentation – Insurance adjusters may request exhaustive documentation, such as medical records, financial statements, and other documentation that may be difficult and expensive to acquire. The family may get frustrated with the process and abandon the claim as a result.
- Making lowball settlement offers – Insurance companies know that this time is difficult for families, which they may try to take advantage of by offering a low and unreasonable settlement value. Grieving families might be desperate to accept such an offer simply to avoid the hassle of dealing with the insurance company or a legal battle.
An experienced personal injury attorney can guide you through the claims process and advise you if the insurance company is acting in bad faith. A lawyer can help level the playing field and fight for your fair treatment.
Who Receives Wrongful Death Payouts in New York?
Insurance death benefits go to the person named as the beneficiary on the policy. However, wrongful death damages that are recovered in an action or settlement are paid to the decedent’s distributees, according to the laws of intestacy. This means they go to the family members most closely related to the deceased in the amounts designated by law, such as the surviving spouse, children, or parents.
The court holds a hearing to determine the pecuniary injuries to each affected distributee and determines the proportion of damages to award each distributee. Payment for medical expenses, funeral expenses, and the legal action may first be deducted from the award before it is divided between the distributees.
What Are the Time Limits Surrounding New York Wrongful Death Claims?
Insurance policies may include a provision regarding how long someone has to make a claim for the death benefits. Under New York’s statute of limitations, wrongful death claims must generally be filed within two years of the decedent’s death. If the death involved a criminal act and the prosecutor has filed charges against the defendant, the personal representative has up to one year after the criminal action has terminated to file a wrongful death case.
Contact Our Experienced Wrongful Death and Personal Injury Lawyers Today
If you have lost a loved one in a fatal accident, the wrongful death attorneys at Powers & Santola, LLP want to help you through this difficult time. We can seek justice and accountability against the responsible party for the economic losses you have experienced due to their negligence. Contact us today for a free case review.
