American General Life Insurance Co. markets its policies as protection for "the hopes and dreams of American families" — a promise Ian Weissberger took to heart during his losing battle with Lou Gehrig's disease.
But after the Cathedral City mortgage broker died in 2005, American General cancelled his life insurance policy and refused to pay his widow the $250,000 benefit.
The Weissbergers' premiums were paid up. There was no foul play suspected. There was no question Sheila Weissberger was the widow and sole beneficiary. And Ian's illness was diagnosed months after he took out the policy.
The problem, the insurer told Sheila Weissberger, was that Ian's application for coverage was incomplete.
American General concluded that he had failed to disclose conditions, including bipolar disorder and pulmonary disease, that, according to his doctors, he did not have.
For the company, which collected $2.3 billion in premiums last year, the amount at issue was minute. But it was no small matter for Sheila, 62, who reached a confidential financial settlement with American General earlier this year.
"I lost my house. I lost everything," she said in an interview. "It was very, very devastating."
More often than not, life insurers make good on policies, paying $38 billion in death benefits on individual policies last year. But what happened to Sheila Weissberger was not unusual. The claims of thousands of beneficiaries are denied or disputed every year — more than 5,000 last year alone — many for allegedly flawed applications, a Times review found.
Overall, the amount of money life insurers withheld from beneficiaries has more than doubled over the last decade, to $372 million last year, even as policy sales went down, according to a Times' analysis of data compiled by the National Assn. of Insurance Commissioners.
Insurers can dispute claims for a number of legitimate reasons — unpaid premiums, suicide, foul play by the beneficiary. But the No. 1 reason, accounting for about two thirds of disputes last year, is "material misrepresentation." That's failing to disclose information that insurers deem important in assessing risk, and it allows insurers to rescind coverage altogether.
To stop abuses by insurers, most states long ago banned limitless rescissions, but in California and elsewhere, they are allowed during the two years immediately after a policy is signed.
Experts and consumer advocates say some insurers have turned that into a "gotcha period," seizing on flaws after claims are made that they could have looked for before issuing coverage.
"Regulators need to come down hard on companies that are rushing applications through in order to gain premium income without taking time to screen the risks, then using rescission to control payouts and increase profits," said Amy Bach, an advisor to National Assn. of Insurance Commissioners and executive director of United Policyholders, a nonprofit consumer group.
Industry representatives say the power to rescind policies and withhold benefits is essential and fair. Accurate information is "crucial to the agreement and to the actuarially sound pricing of the product," said Steven Brostoff, a spokesman for the trade group the American Council of Life Insurers.
Yet some companies deny benefits far more than others.
American General, which ranks 11th in national market share, withheld more money than any other life insurer — $36 million — in disputes of 79 individual death claims in 2009, including several rescissions.
The company, a Houston-based subsidiary of American International Group Inc., declined to comment on the Weissberger case. In a statement, the insurer said that its record should be considered in light of its size and that it follows "the standard that has been California law for more than 100 years."
In contrast, Minnesota Life Insurance Co., another large insurer with $2 billion in annual sales, reported no disputes last year and no rescissions for three years on individual death claims.
"A life insurance policy is a promise to pay, and we at Minnesota Life are focused on keeping our promises," said Craig Frisvold, a vice president at parent company Securian Financial Group.
The company takes an average of more than two months to vet applications and, in about a third of cases, gathers medical records to corroborate or clarify the applicants' medical histories.
"The more information you get," Frisvold said, "the less surprises there are and the less rescissions there are."
Sheila Weissberger's attorney, William Shernoff, said it is a matter of acting in good faith.
"You don't wait until a guy dies to determine insurability," he said. "That's not fair."
'Nothing was hidden'
When American General sent a medical technician to examine him 2003, Ian Weissberger did not paint a rosy picture of his health.