ConsumerWatch: Grieving Family Says Claim Denied Unfairly

SAN FRANCISCO (CBS 5) - One Bay Area family claims they were denied thousands of dollars in funeral costs due to unclear paperwork required by their insurance provider.

Last year, Thelma Goodall bought a $20,000 Colonial Penn life insurance policy for her daughter, Hope, who suffered from brain damage and epilepsy. Goodall said it was TV personality Alex Trebek's endorsement in the commercials that got her to purchase the policy.

The commercials boast "guaranteed" acceptance and few restrictions for people who apply. According to Goodall, all she had to do was answer four "yes" or "no" questions and have her daughter sign.

Hope died three months after the insurance policy was purchased. Goodall expected a check to come from Colonial Penn to cover insurance costs, but it was only for $42, roughly 500 times less than what the policy was worth.

"I felt like somebody had just slapped me in the face," Goodall said.

Lawyer Jerry Goldsholle, the chair of the Life Insurance Subcommittee of the State Bar, said insurance applications like those offered by Colonial Penn aren't so simple after all.

"Each one of those questions has multiple subparts, so you're really not answering four questions. You're answering many questions and there are lots of 'gotchas,'" he explained.

If death occurs within two years of the purchase of the policy, insurers like Colonial Penn will go through the application and medical history meticulously. Colonial Penn claimed that Goodall had incorrectly answered the subsections of one of the four questions. Goodall believes that question wasn't clearly written to begin with.

Colonial Penn stands by their decision and said the Goodalls' claim was processed correctly.

With the insurance policy not following through, Hope had to be cremated and not buried like the Goodall household had wanted.

"I just wanted a place to bury my daughter in case anything happened to her," she said.

Goodsholle recommends that if you do buy life insurance, buy a policy that is underwritten - meaning the provider has checked out your medical records beforehand.

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