Fort Worth residents and insureds in Grand Prairie, Weatherford, Arlington, Dallas, Saginaw, Grapevine, Aledo, and other places in Texas would want to have some knowledge about what constitutes a “lapse” in their life insurance policy. Here is a case that gives some insight.
This is a 2000, case decided by the San Antonio Court of Appeals. The style of the case is MacIntire v. Armed Forces Benefits Association. Here are some facts.
Linda and Scott MacIntire submitted a joint application for term life insurance to the Armed Forces Benefit Association (AFBA) in April 1996. The payments were to be made automatically via a computerized bank deposit scheme, but for unknown reasons, the payments were never made. The few payments that the MacIntires did make were not enough to keep the policy in force and it lapsed on March 31, 1998 according to AFBA. Scott MacIntire died from a terminal illness in August of 1998 and Linda inquired regarding the policy in September of that year. Upon discovery of the failed automatic deposit setup, Linda tried to pay delinquent payments directly to AFBA, but AFBA denied the payments and coverage, stating that Scott’s policy had already been canceled. Linda sued AFBA, alleging violation of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act (DTPA), breach of contract, negligence, breach of duty of good faith and fair dealing, breach of implied warranty, and ambiguity of contract, seeking to recover the death benefits and additional damages. The trial court granted AFBA’s motion for summary judgment on the basis that no genuine issue of material fact existed. Linda appealed, claiming that genuine issue of material fact existed in her claims for breach of contract, breach of implied warrant and ambiguity of contract, DTPA violations, Texas Insurance Code, Section 541.060, breach of duty of good faith and fair dealing, and negligence.
On appeal, the summary judgment in favor of AFBA was upheld. The appeals court held that AFBA had no duty to advise the MacIntires of a cancellation of policy due to nonpayment. The appeals court held that the insurance contract was not ambiguous and the breach could not occur since the contract was no longer in force. Regarding implied warranty, the Court held that “implied warranty for good workmanlike performance” was applicable to tangible goods and products, and no precedent existed for applying the doctrine to insurance companies. Regarding the issue of good faith and good dealing, the Court examined the two prong test used by the Texas Supreme Court: (1) there is an absence of a reasonable basis for denying or delaying payment of benefits under the policy and (2) the carrier knew or should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim. The Court ruled that AFBA had a reasonable basis for denying the claim. MacIntire also asserted claims under the Deceptive Trade Practices Act and the Texas Insurance Code, to which the Court stated that, if an insurer had a reasonable basis for denial of a claim – however erroneous – that the insurer “enjoys immunity from statutory bad faith under the Texas Insurance Code and the Texas Deceptive Trade Practices Act.
There are many reasons a life insurance company uses for denying life insurance claims. There are also many ways of defeating these excuses. An experienced Insurance Law Attorney needs to be consulted on any and all life insurance claim denials.
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