Grand Prairie lawyers who handle insurance cases and attorneys in Dallas, Fort Worth, Benbrook, Burleson, Cedar Hill, Duncanville, De Soto, Mansfield, and other places in Texas need to know about this insurance case.
The case is from the Houston, 1st District, Court of Appeals. The style of the case is, Republic-Vanguard Life Insurance Company v. Beth Walters. Here is some of the relevant background.
Beth Walters sued on a life insurance policy covering her deceased husband. Republic denied the claim based on misrepresentations in the policy application. A jury decided in favor of Walters, finding that Republic knew facts that would have caused a prudent person to inquire about and discover material facts intentionally omitted by the decedent in his application for the policy.
The main question on appeal was whether, in seeking to avoid a policy on the basis of misrepresentations by the insured, an insurer may justifiably rely on representations that were obviously false at the time they were made.
In 1981, the decedent, James Walters, applied for mortgage protection life insurance. In the application he stated he knew of no impairment to his health, and that he had visited a doctor during the previous two years for treatment of a sprained and bruised back.
He submitted to an examination by a registered nurse. She learned he had been hospitalized within the previous five years for hernia repair and back treatment; that he had been treated in 1957 for a lung ailment; that he had gained 50 pounds in the previous year “due to beer drinking”; that he had been wounded in Vietnam; and that he underwent an annual electrocardiogram at the Marine Hospital in Galveston.
Mr. Walters denied any other problems for sight, hearing, sickness, mental illness, injury, cancer, growth, rupture or syphilis. Also he provided the names and addresses of his doctors.
Republic requested and received medical records related to Walters hernia and back treatment, but that was all. On November 1, 1981, Republic issued the policy.
On December 23, 1982, Beth shot and killed James after a violent struggle wherein James was threatening the life of their son.
A claim for policy benefits was made and Republic began an investigation. The investigation revealed that James had been treated for depression beginning in 1977; that he was hospitalized for three months of 1977 and for two weeks in 1979 and in February of 1979 had been hospitalized after he had taken an overdose of a drug prescribed for his depression. The claim for benefits was denied due to James having represented a history free of mental illness.
As stated earlier, in response to special issues, the jury found that Republic knew facts that would have caused a prudent person to inquire further, and that such an inquiry would have disclosed omissions in the application.
Earlier court rulings have declared that an insurer is not entitled to rely on its insured’s representations when an investigation reveals the falsity of the representations or discloses facts that would put a prudent person on further inquiry. This applies when an insurers independent investigation reveals that an applicant’s case involves unusual circumstances that warrant further inquiry. The rule does not apply when the insurer is unable to learn the truth from its investigation, and in fact relies on the representations.
Stated another way, the courts have said that “in an arms-length transaction the defrauded party must exercise ordinary care for the protection of his own interests and is charged with knowledge of all facts which would have been discovered by a reasonably prudent person similarly situated. And a failure to exercise reasonable diligence is not excused by mere confidence in the honesty and integrity of the other party.”
The special issue submitted to the jury in this case related to an essential defensive element. The finding by the jury that Republic failed to make prudent inquiry was material to the question of reasonable reliance, and it did not conflict with the finding that Republic did in fact (though perhaps unreasonably) rely on the falsehoods.
Attorneys for Republic argued that the evidence was not enough for them to search further before issuing the policy.
Attorneys for Walters argued that the medical examination revealed a range of other medical problems and a list of four other health care providers. They contended that these facts created a duty to investigate, even though they did not indicate mental illness.
These cases can be difficult. An experienced Insurance Law Attorney will know all the right arguments to help insure a recovery if it is possible to have one. One thing for certain is that the “final” decision by the insurance company should never be relied on. One must seek an attorney who handles these matters to get the advice he has to offer.
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