Does Life Insurance Cover Drug Overdose? What Heath Ledger’s (Rejected) Life Insurance Payout Taught Us

If you are wondering if life insurance will cover death due to drug overdose, this example may provide some insight into how life insurance companies handle drug overdose.

Heath Ledger, the actor famous for “A Knight’s Tale”, “Brokeback Mountain,” and “The Dark Knight,” passed away in 2008.

In the settling of his estate, things became interesting when his executor went to collect on a $10 Million life insurance policy he owned through ReliaStar Life Insurance (a Voya Company.)

How Drug Overdose Can Void A Life Insurance Policy

Most life insurance policies contain a “2 year contestability period” which allows the insurance company to investigate any death within the first 2 years of coverage, to ensure the insured person did not lie or misrepresent him/herself on the original application.

Reliastar refused to pay the death benefit upon Ledger’s death, since he died within two years of the policy’s issue date and died under suspicious circumstances. 

Never Lie On A Life Insurance Application

Why is this important?

Because it turns out Ledger most likely DID misrepresent himself! Here’s how it went down:

Ledger purchased the policy in June 2007, and died just 7 months later of a supposed, accidental drug overdose in January of 2008.

This clearly fell under the policy’s two-year contestability period.

That gave Reliastar the right to do a thorough investigation of his death and review his initial application for misstatements.

Read more: Drug Use and Life Insurance

Reasons To Deny Life Insurance Due to Drug Overdose

Some possible outcomes of the life insurance company’s investigation into drug overdose would be:

Suicide

If they determined Ledger’s overdose was intentional and that he died by suicide, they could deny the claim completely.

Most policies contain a 2 year suicide provision where the policy will not pay out for suicide within the first 2 years after issue.  The insurance carrier’s liability in this case would be returning only the amount of premiums paid to them.

Lying on the Application

If they found Ledger had lied about his drug use on the application (insurance fraud), they could “contest” the claim, or in other words, not pay it out.

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Material Misrepresentation

If they found ANY other “material misrepresentation” on the application, they could have denied the claim, even if this misrepresentation had nothing to do with the cause of his death.  For example, if they found out during their investigation that Ledger smoked cigarettes and had lied about it on the application, they could have denied the claim, even though he didn’t die of lung cancer.

Message:  Never, never lie about ANYTHING on any insurance application.

Life Insurance Providers Can Delay Pay Out

Reliastar did not immediately pay out as they had about $10 million reasons to investigate first.

Sources say Reliastar wanted to do their due diligence and make sure suicide was not involved.  (BestWire, Oct. 1, 2008)

But I think Reliastar withheld the real reason they were investigating so as not to drag Ledger’s name through the mud.

The more likely concern they had was that Ledger had initially lied 7 months earlier on his application about any illicit drug use.  You’re telling me a guy who dies from a drug overdose hasn’t been doing drugs for a while?  It’s possible, but not likely.

And, as stated, if he had lied on the application, that would be another reason Reliastar could deny his payout.

How Long Does It Take For Life Insurance Companies To Investigate Drug Overdose?

Although Reliastar was clearly acting within its legal rights to investigate and refuse immediate payment to Ledger’s estate, Ledger’s custodian filed suit against Reliastar.

… this really put Reliastar (then owned by ING) under the spotlight and gave them some BAD PRESS.

People who have no idea what the policy says naturally tend to side against the insurance company in these situations.

But let me tell you right off the bat that I’m on ReliaStar’s side here.

They should have had the right to investigate!

There is no set amount of time given to the insurance carrier to conduct its investigation in cases like this, but they should have been able to take several months without getting slapped with a lawsuit.

Typically, a carrier’s investigation may include requests for medical records, an autopsy report, and a statement from the agent.  In addition, the carrier may depose the deceased’s friends and family members for questioning, as was Mary-Kate Olsen in this case.

Did Heath Ledger’s Policy Pay Out For Drug Overdose?

In the end, a settlement was reached.

It appears Ledger’s (then) 2-year-old daughter, Matilda, received a percentage of the $10 Million death benefit from the insurance carrier, ReliaStar Life Insurance Co., rather than all of it.

In the case of Ledger, ReliaStar acted correctly.  Since he died during the contestability period, there were at least three ways they could have gotten off the hook from paying this claim, so they had about 10 million reasons to do their investigation.

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What can we learn from this?

1. Don’t lie on your application
2. Don’t take drugs and overdose and leave your children without a father
3. If an insurance company does drag their feet or fail to pay a claim, unscrupulous attorneys may attack the insurance company with unfounded lawsuits resulting in some sort of payout.  Pitiful!

I think ReliaStar got a raw deal here with all the negative publicity they received while acting within policy guidelines.

Ledger died in June and a lawsuit was brought against them just two months later.  That is not nearly enough time to conduct the thorough investigation they were entitled to.

I hope Heath Ledger’s death does not lead to more unjustified lawsuits against Life Insurance carriers.