Life Insurance Lawyers need to be aware of Texas Insurance Code, Section 705.005.
This statute says in relevant part that an insurance company may use as a defense a misrepresentation made in the application for or in obtaining an insurance policy only if the insurance company shows at trial that before the 91st day after the date the insurance company discovered the falsity of the representation, the insurance company gave notice that the insurance company refused to be bound by the policy to the owners or beneficiaries of the insurance policy, if the insured is deceased.
The above statute is discussed in a 1969, San Antonio Court of Appeals opinion styled, Prudential Insurance Company of America v. Torres.
The San Antonio Court stated they are met at the outset of the case that Prudential’s attempt to rescind the policy because of alleged misrepresentations fails because they did not establish that it gave notice Torres of its refusal to be bound by such policy within a reasonable time after discovering the falsity of the representations as required by statute. This statute requires that such notice be given the assured within a reasonable time, and further provides that ninety days is a reasonable time. This statutory notice is an essential element of a defense based on Misrepresentation.
The Court was basing it’s decision on the 1957, Texas Supreme Court opinion, Womack v. Allstate Insurance Company.
The Womack decision was a summary judgment case wherein the Court wrote, under the provisions of the applicable statute, misrepresentations made in the application for or in obtaining an insurance contract do not constitute a defense unless the insurer establishes that within a reasonable time after discovering the falsity of the representations, it gave notice that it refused to be bound by the contract. The statute also provides that ninety days shall be a reasonable time. Allstate alleged that within a reasonable time after learning the true facts notice was given to the insured that the company refused to be bound by the contract, and established by affidavit that on October 16, 1952, a letter was written to the assured denying liability under the policy and declaring the same void from its inception because of the alleged misrepresentation. The record does not show, however, when Allstate discovered the falsity of the representation, and it cannot be said that the notice was given within a reasonable time thereafter as required by the statute. Since one of the essential elements of Allstate’s defense based on misrepresentation was not established, summary judgment could not properly be predicated on that defense.