Life insurance payout rejected after death during police arrest: Ombud explains

A life insurance claim was recently lawfully rejected after the insured died during an attempted arrest, highlighting how criminal-conduct exclusions can override cover even when premiums are fully paid.

The Life Insurance Division of the National Financial Ombud Scheme (NFO) which reviewed the claim said the public needed to be aware of the exclusion clauses.

In this case, the policy clause excluded any claim arising from criminal conduct. This included situations where the insured was under investigation, being prosecuted, or involved in a criminal offence at the time of death.

Evidence before the Ombud showed that police officers were attempting to arrest the insured when he allegedly disarmed one of them and attempted to fire the weapon. Other officers fatally shot him at the scene. No evidence was presented to dispute the police version of events.

The insurer concluded that the death resulted directly from criminal conduct and declined the claim. The Ombud agreed.

“Our office found that the insurer was not contractually obliged to pay the claim,” said Denise Gabriels, Lead Ombud of the NFO’s Life Insurance Division. “The decision to reject the claim was justified.”

The ruling reinforces a core principle of insurance: policies do not cover losses caused by illegal or deliberate acts. Exclusions are not technical loopholes, they define the limits of cover.

Criminal conduct is one of several standard exclusions found in insurance policies. Others include high-risk activities such as skydiving and scuba diving, pre-existing medical conditions, war and terrorism, and intentional self-harm, often excluded during the first years of cover.

While policyholders often focus on what is covered, exclusions frequently determine whether a claim succeeds or fails, the Ombud warned.

“Insurance exclusions are fundamental to how insurance works,” Gabriels said. “Understanding them is just as important as knowing what is covered.”

Who must prove the exclusion?

Once a beneficiary proves that a valid policy exists and that the insured event occurred, the burden shifts to the insurer. To reject a claim, the insurer must show, on a balance of probabilities that an exclusion applies, relying on evidence such as police reports, medical records, or pathology findings.

If the insurer cannot prove this, the claim must be paid.

Gabriels urged policyholders to read policy documents carefully, ask questions about exclusions they do not understand, and ensure that their policy accurately reflects the information disclosed during the application process.

“Insurance is meant to provide peace of mind,” she said.

“That peace of mind depends on knowing exactly when your cover applies, and when it doesn’t.”

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