There are a few statutes in the Texas Insurance Code that are specific to life insurance policies. These statutes are found in Sections 705.001 through 705.105.
For an insurance company to deny coverage on a life insurance policy based on a misrepresentation in an application, the insurance company has traditionally been required to establish misrepresentation by the insured that will support a defense in coverage by pleading and proving five elements. These elements are:
- the making of a misrepresentation;
- the falsity of the misrepresentation;
- reliance on the misrepresentation by the insurer;
- intent to deceive on the part of the insured in making the misrepresentation; and
- the materiality of misrepresentation.
This has been the law cited in past cases including, Union Bankers Insurance Company v. Shelton, a 1994, Texas Supreme Court opinion, Mayes v Massachusetts Mutual Life Insurance Company, a 1980, Texas Supreme Court opinion.
In 1991, the Texas 1st Court of Appeals stated that mere knowledge of one’s health condition is insufficient to prove intent as a matter of law. This case is styled, Flowers v. United Insurance Company of America.
In the 1993, San Antonio Court of Appeals opinion styled, Garcia v. John Hancock Variable Life Insurance Company, the insurance company asked the court to determine that “intent to deceive” was proven as a matter of law where the alleged misrepresentation was the decedent’s failure to disclose that he had been treated for diabetes. He had visited the doctor on February 18th and filled out his first life insurance application on February 25th. He was taking prescription medicine for diabetes when he executed a second application on March 19th. He was taking prescription medicine for diabetes when he executed a second application on March 10th. The court did not agree that this sequence of events proved intent to deceive as a matter of law based upon the number, frequency, and proximity of the alleged misrepresentations to the medical treatment.
In the 1989, El Paso Court of Appeals opinion styled, Southwestern Life Ins. Co. v. Green, Green had applied foe insurance. A few months later, he was hospitalized with a diagnosis of chronic alcoholism, alcoholic hepatitis, and early cirrhosis. He died the nest year from liver failure. The insurance company argued this evidence established his intent to deceive, as a matter of law. The court rejected this argument, in part, based on testimony from a counselor that an alcoholic is often in denial about his alcoholism, and may deny excessive alcohol use and other physical problems, withut intending to deceive anyone.