Fort Worth insurance attorneys and those in Benbrook, Burleson, Lake Worth, and other parts of Tarrant County need to know the effect of the representations made in an insurance application.
There is an important distinction between statements by the insured that are considered to be representations and those considered to be conditions precedent. If the insured’s statement is considered a representation, a false statement alone will not let the insurance company avoid coverage. In contrast, if the insured’s statement is considered a condition precedent, then falsity alone will allow the insurance company to void coverage.
This representation-versus-warranty dichotomy is well developed under Texas law. If the statements are representations, then to avoid liability under the policy the insurance company must plead and prove:
1) the making of the representation;
2) the falsity of the representation;
3) reliance thereon by the insurance company;
4) the intent to deceive on the part of the insured in making the same; and 5) the materiality of the representation.
The same Texas law cases recognize that if the language of the policy expressly provides that coverage does not take effect unless the applicant is in good health, the provision is enforceable as a condition precedent. When the language states that answers in the application are true and correct at the time of delivery of the policy, such requirement is merely a representation. Also, when the language of an insurance policy is susceptible to more than one construction, the policy should be construed in favor of the insured to avoid exclusion of coverage.
The United States Fifth Circuit has explained:
Short of inserting an unambiguous “good health” warranty demonstrating that the parties intended the contract to rise or fall on the literal truth of an insured’s general certification of good health, Texas has not allowed an insurer to change that result by contracting to make truthful application answers a condition precedent to coverage.
The opinion just cited added that “a warranty is a statement made by the insured, which is susceptible to no construction other than that the parties mutually intended that the policy should not be binding unless such statement be literally true.”
Further, “Warranties in insurance applications are strongly disfavored in the law, and even fairly obvious attempt to create warranties in the application process have been rejected by Texas Courts.” Courts thus have been disinclined to find that contract language creates a warranty or condition precedent unless the language allows no other construction.
Questions regarding whether or not the questions and statements in an application are warranties or representations can only be answered by an experienced insurance attorney. One thing a person should never do, is to rely only on what the insurance company says.
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