Fort Worth life insurance attorneys and those in Dallas and Weatherford will have occasion where they see a credit life insurance policy. These are generally sold as “credit accident and health insurance.”
The Texas Insurance Code has specific sections dealing with this type of insurance. This type of insurance is generally available in several different situations. The most common are in credit cards, auto purchases, and home purchases.
Section 1153.003 tells us that “credit accident and health insurance: means insurance to provide indemnity for payments that become due on a specific credit transaction of a debtor when the debtor is disabled, as defined in the insurance policy. Credit life insurance means insurance on the life of the debtor in connection with a specific credit transaction.
Section 1153.052 says that each individual policy or group certificate of credit life insurance and credit accident and health insurance must set forth:
(1) the insurer’s name and home office address;
(2) the debtor’s name or names;
(3) in the case of a certificate under a group policy, the identity, by name or otherwise, of the person or persons insured;
(4) the full amount of premium or the total identifiable insurance charge, if any, to the debtor, separately for credit life insurance and credit accident and health insurance;
(5) a description of the coverage including the amount and term;
(6) any exceptions, limitations, and restrictions.
(7) The policy must further state that the benefits must be paid to the creditor to reduce or extinguish the unpaid indebtedness and, wherever the amount of insurance may exceed the unpaid indebtedness, that any such excess must be payable to a beneficiary, other than the creditor, named by the debtor or to his or her estate.
The issues that arise with this type of policy are the same types of issues seen with other policies. The insured makes a claim and the insurance company denies the claim based on the allegation that the policy had false statements in it. The insurance company will say that the policy would have never been issued if the false / fraudulent statements had not been made.
Here is the problem with allegations of fraud in the application. The majority of these are usually filled in by the person selling the policy, such as in an auto transaction, the finance manager at the auto dealership. The finance manager or salesman fills in the application indicating everything is fine so that they can make the sale and earn their commission and then put the application in front of the applicant and hold the pen on the line that is suppose to be signed, without reviewing it with the applicant.
The applicant, trusting the salesperson and not really understanding what is going on, signs the application with the incorrect information in it. Later, when something bad happens and a claim is made the insurance company denies the claim based on the mis-statements / fraud in the application.
Surprisingly, an experienced insurance law attorney can usually make the credit insurance companies pay the claim and then some.
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