Articles Posted in Life Insurance

Life insurance lawyers need to be aware of the common types of life insurance.

Common life insurance types are term, whole life, and universal life.

“Term” policies simply provide a death benefit in return for a premium payment.  at the end of the policy year, or “term,” the insurance ends, and the policy has no value.  Term policies do not accrue cash value.  Because the insured is only paying for the death benefit, term policies are cheaper in the early years.  As the insured gets older, the risk of death increases and so does the premium, so term may become more expensive than the other types.  Insurers typically sell term policies that promise a fixed premium for a set number of years.  For example, an insurer may sell a 10 year term policy that the insured may purchase and renew for the same annual premium during those years, without having to re-qualify.

Life Insurance Lawyers need to start out with some basic knowledge.  This Blog site provides a lot of information that is vital to know when a life insurance claim is being denied.  Here is some very elementary information.

Life insurance pays a stated amount of benefits to the beneficiary upon the insured’s death.  Typically, the policy has a “face amount” — that is, a stated value that is payable upon the insured’s death.  Some policies may offer increased benefits if the insured dies from certain causes.  For example, some policies pay “double indemnity” benefits if the insured dies in an accident.

“Term” policies pay a fixed amount stated in the policy.  Whole life policies accumulate cash value, and may pay the face amount plus any accumulated cash value.  On the other hand, if the policy allows the insured to borrow against the policy, the death benefit may be reduced by the amount of any outstanding loans.

The Amarillo Court of Appeals issued an opinion on August 24, 2021, that is important to anyone having a life insurance claim denied due to an allegation that there was a misrepresentation made in the insurance application.  The style of the opinion is, Arce v. American National Insurance Company.

In this Blog we will set out the facts of the case.  The opinion itself needs to be read if you are handling a life insurance claim that is being denied.  It is important to note that as of the date of this post, the case is on appeal to the Texas Supreme Court.  This is a class action lawsuit.

Appellant, Bertha Arce, Individually and as Representative of All Others Similarly Situated challenges the trial court’s rendition of summary judgment in favor of Appellee, American National Insurance Company, on her claims for breach of contract and violations of the Texas Insurance Code, as well as her claim for recovery of attorney’s fees and class action claims.  Through two issues, Arce contends the trial court erred in (1) overruling her objections to American National’s summary judgment evidence, and (2) granting American National summary judgment on her claims.  We reverse the judgment of the trial court and remand for further proceedings consistent with this opinion.

Life Insurance Attorneys can discuss the present state of the law in Texas as it relates to life insurance policies that are governed by State Law.  However, as of the date of this post, there is a new case in the Texas Supreme Court which may change the law or confirm it, depending on your perspective.

PERSPECTIVE

In 2013, the Dallas Court of Appeals decided Medicus Insurance Co. v. Todd.  Todd follows an earlier seminal case regarding alleged misrepresentations in a life insurance application, Mayes v. Metropolitan Mutual Life Ins. Co.  In Mayes, the Texas Supreme Court held that there are five factors that must be proven before a life insurance policy can be rescinded on the basis of misrepresentations in a life insurance application: (1) the making of the representation; (2) the falsity of the representation; (3) reliance on the misrepresentation by the insurer; (4) the insured’s intent to deceive the insurer; and (5) the materiality of the misrepresentation.  In Todd, the Court found that these five factors applied regardless of whether the insurer attempted to rescind the policy for common law misrepresentations or under statutory provisions like section 705.104 of the Texas Insurance Code.  In 2020, the U.S. District Court for the Southern District of Texas added another layer to this discussion in Landeros v. Transamerica Life Ins. Co.  The Landeros Court observed that two different statutes apply to the rescission of life insurance policies – one when the policy is rescinded within two years of its issuance and the other that applies outside the two year period.  Noting that Transamerica Life Insurance Company rescinded the policy within two years of its issuance, the Court determined that section 705.051 is the applicable statute.  Although, the statutes are similar, section 705.104 (applicable in Todd) requires that the misrepresentation be made :intentionally.”  Because section 795.105 (the statute at issue in Landeros) does not contain this requirement, the Court concluded that an insurer who seeks to rescind a life insurance policy within two years from the date of issuance is not required to prove the insured’s intent to deceive.

Accidental Death Insurance claim denials are all too common.  This type of insurance is usually very inexpensive.  This is for a couple of reasons.  One is the vast majority of people die for reasons unrelated to an accident.  The other is the policies have exclusionary language in them excluding coverage for deaths that most would consider to be accidental but they are not covered because of the exclusionary language.  A common example is an exclusion for an accidental death involving drugs or alcohol.

Here is a case that does not involve drugs or alcohol.  Its exclusionary language is different.  This is a 2022 opinion from the Eastern District of Texas, Sherman Division.  It is styled, Shemily Ortiz v. Reliastar Life Insurance Company.

The deceased, William Ortiz, had an accidental death policy with Reliastar.  Upon his death, Shemily made a claim for benefits that was denied by Reliastar based on their contention that Williams death was not covered under the language stating there is no coverage for death “directly or indirectly caused by … Physical or mental illness.”

Life Insurance claims and Divorce.  Shall the two never intertwine.

Here is a 2022, opinion from the Northern District of Texas, Dallas Division, that will drive a life insurance attorney crazy.  The opinion is styled, Amy Cannon v. Mae Katheryn Bryant.

This case is a life insurance case.  The insured had a life insurance policy with State Farm.  When the policy originated, the insured was married to Ms. Cannon and named her as the beneficiary.  A year before the insured died, he and Ms. Cannon divorced.  After the death of the insured, Ms. Bryant asserts that she is entitled to the Policy proceeds as the successor beneficiary under the Policy and as the mother and heir of her son because the Insured’s and Ms. Cannon’s January 22, 2016 divorce decree did not designate Ms. Cannon as a beneficiary under the Policy, and the Insured did not redesignate Ms. Cannon as his beneficiary under the Policy after their divorce as required by Texas law and section 9.301 of the Texas Family Code.

It is often times very difficult to answer the titled question.  When there us uncertainty as to who is entitled to life insurance proceeds there is a process by which the life insurance company can “interplead” the life insurance proceeds into the registry of the Court.  These are situation where the life insurance company knows they owe the life insurance money because the insured has died.  What they sometimes don’t know is, who is entitled to the money.  This interpleader process allows those who believe they may have an interest in the proceeds to litigate their respective interests.

This issue was presented in a 2022 opinion from the Northern District of Texas, Dallas Division.  The style of the case is Sun Life Insurance Company of Canada v. Elizabeth McKinney, Tisha Diante, and Teresa Morris.

Here, Sun Life knew they owed the life insurance proceeds to someone, but was not sure who.  After filing a lawsuits to interplead the money, the life insurance company must serve the potential beneficiaries with legal papers so that they may come to court and litigate between themselves as to who is entitled to the proceeds.  In this case, Sun Life was having difficulty locating McKinney to have her served with the legal papers.

Life Insurance Lawyers know that just as there may be disputes whether coverage took effect before the insured died, there may also be disagreements over whether coverage terminated before the insured’s death.  This is illustrated in a 1979, Fort Worth Court of Appeals opinion styled, Leach v. Eureka Life Ins. Co. of America.

This case is an appeal from a court ruling against Leach after she filed suit against Eureka.  The life insurance policy at issue was a Credit Life Insurance policy.  The policy was to pay the remaining balance of a loan in the event the insured died before the loan was paid or September 13, 1977.  The insured, Tommy Leach, was killed in a car accident at or around September 13, 1977.  There were no witnesses.  The death certificate for Tommy Leach shows the time of injury and death as 12:45 a.m., September 14, 1977.

The insurance company alleged that Leach was killed September 14, 1977.

Life insurance attorneys will run into a surprising amount of cases that are unique unto themselves.  This case is that way.  The Facts are long but need to be understood to understand how the Court ruled the way it did.  This is a 1959 opinion from the Texas Supreme Court.  It is styled, Republic Nat. Life Ins. Co. v. Hall.

Ms. Hall sued Republic after Republic denied her claim for life insurance benefits for the stated reason that the contract was never completed.

There has not been any material dispute about the facts, which in substance are as follows: The deceased, who resided in California but was President of Weatherford Manufacturing Co., of Weatherford, Texas, made application at Weatherford in the latter part of March 1949, for a twenty-year-payment type of policy in the amount of $20,000 through a Mr. Coder, the local soliciting agent of petitioner, on petitioner’s usual printed form, which Mr. Hall, of course, signed.  At that time, Mr. Hall was 36 years old, and was evidently understood by himself and the soliciting agent to be in some undetermined degree “overweight” from a life-underwriting standpoint, so as probably to require of him a premium higher in some unknown amount than that of approximately $640 per year, which was normal for an applicant of his age.  The agent testified that he told Mr. Hall, “I didn’t know what the rate would be; that it would have to be a special rate case.” At the same time he testified as follows:  “Q. What did George (Mr. Hall) tell you in response to that; he told you he wanted the insurance?  A. Yes; I told him that was what we could get.”  Mr. Hall’s secretary was allowed to testify that on the date of the application and in the presence of the agent, Mr. Hall told her that he was going on a trip to the West, wanted insurance and that “when these policies came in I was to put them in the safe.”  (A “group” policy was also involved in the negotiations but not in this suit.)  Previously to these transactions, Mr. Hall had been negotiating with another company than petitioner and had been quoted an annual premium rate of $40 per $1,000 of insurance but had evidently gone no further with these negotiations, and told petitioner’s agent, “I want you to beat that other man’s premium.”  It was also understood between Mr. Hall and the petitioner’s agent that, Hall being a licensed airplane pilot, accustomed to fly the plane of his company on business trips, the insurance would include coverage for death suffered in any such flight, the additional premium for such coverage being an amount evidently not subject to variation and Hall having executed contemporaneously with his application the usual company form questionnaire describing his flying activities.