People in Grand Prairie, Arlington, Dallas, Fort Worth, Weatherford, Irving, Carrollton, and other places in Texas usually find out the hard way about areas of dispute in their insurance policies. Below is some information to be aware of.
Life insurance coverage is fairly straightforward. If the insured person dies during the policy term, the insurance company pays the benefits. The following are some ways that disputes may arise:
1) An agent may misrepresent the benefits of his insurance company’s policy to induce the insured to switch from another company. See Texas Insurance Code, Section 541.061.
2) An agent may fail to disclose that health conditions may cause the insured’s application to be rejected. If the insured was induced to let a rival policy lapse based on the expectation of replacement coverage, the insured may have no insurance. See Texas Insurance Code, Section 541.051(5).
3) The agent may fail to obtain coverage in time, and the insured dies without coverage. This violates many laws.
4) The agent may present information or illustrations in a way that creates certain expectations about premiums or cash value, and then the policy does not perform as represented. See Texas Insurance Code, Section 541.051(2).
5) The insured may have certain medical conditions that would be material to the insurer’s decisions whether to offer insurance and at what price. Because the agent fills out the application and wants the policy issued so she can earn a commission, the agent tells the insured that the answers are not important, or the agent simply puts down wrong answers. When the insured dies, the insurance company learns of the false answers and denies coverage. See Texas Insurance Code, Section 541.061.
6) The insured may have certain medical conditions that would be material to the insurer’s decisions whether to offer insurance and at what price. Because the insured wants coverage and fears being rejected, the insured provides false, more favorable answers to health questions in the application. When the insured dies, the insurer learns of the false answers and denies coverage. Sometimes this is relevant and sometimes it is not.
7) The insured may give erroneous health answers that are material to the insurer’s risk but are not made with any intent to deceive. Again, sometimes this is relevant and other times it is not.
8) The insurance company has several products — some more affordable, others that cost more but accrue cash value. The agent fails to adequately explain the different options to the insureds, so they pay more for a policy that provides less coverage. Or they buy a policy they cannot afford and it lapses, leaving them uninsured. See Texas Insurance Code, Section 541.061(2) and (3).
9) Although the insured was seemingly healthy at the time of the application and gave truthful answers, the insured’s health becomes materially worse before the policy is issued, thereby increasing the insurer’s risk. See Texas Insurance Code, Section 541.060(3).
10) The insurance company receives a death claim, but suspects the insured is not really dead. This would be fact specific as to what can be done.
11) The insurance company receives a death claim from a beneficiary who lacks an insurable interest. See Texas Insurance Code, Section 541.060(7).12) The insurance company may believe the beneficiary killed the insured. See Texas Insurance Code, Section 541.060(7).
13) The insurance company receives competing claims by different putative beneficiaries. If this happens the insurance company will file an “interpleader” in a court, usually a federal court.
14) The insured’s death may be from an excluded cause, such as suicide. If this happens, an experienced Insurance Law Attorney and possibly an investigator are needed.
15) The insurance company may wrongfully deny the claim, or may take too long to pay. See Texas Insurance Code, Section 541.060(4).
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