Articles Posted in Life Insurance

Here are some basics about life insurance for a life insurance lawyer to understand.

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.

Attention life insurance lawyers.  Here is one for you.  Is dying from a mosquito bite grounds for recovering under an accidental death life insurance policy?

That was the issue in the March 2018, opinion from the United States Court of Appeals for the Fifth Circuit.  The case is styled, Gloria Wells v. Minnesota Life Insurance Company.

Melton Wells died fro complications arising from being bitten by a mosquito carrying West Nile Virus.  Melton’s wife, Gloria claimed accidental death benefits under the Minnesota Life policy and the claim was denied.  The dispute is whether or not Melton’s death was accidental and an exclusion under the policy.  The lower court dismissed the case by summary judgment.  This court reversed the lower court dismissal and remanded the case for trial.

Life insurance lawyers know there are provisions that are illegal for an insurance company to put into a life insurance policy.  These provisions are found in the Texas Insurance Code, Sections 1101.051 to 1101.055.

Pursuant to these sections of the Texas Insurance Code, no life insurance policy may be issued or delivered to a person in Texas, or be issued by a life insurance company incorporated under the laws of Texas, if it contains any of the following provisions:

1.  a provision limiting the time within which any action at law or in equity may be commenced to less than two years after the cause of action accrues;

Dallas life insurance lawyers know provisions that must be included in life insurance policies.

The Texas Insurance Code, Section 1101.003(a), states that an insurance policies must contain several prescribed provisions.  Pursuant to Section 1101.002(b), a single premium life insurance policy is not required to contain a provision under this sub-chapter to the extent that the provision is not applicable to a single premium insurance policy.  Otherwise, these required provisions generally include but are not limited to:

1.  Pursuant to Section 1101.003, a life insurance policy must provide that the policy and the application for the policy constitute the entire contract between the parties.

Here is a curious 1933 opinion from the Texas Court of Commission of Appeals.  It is styled, American National Insurance Co. v. Huey.

This is a case wherein an insurance agent is alleged to have misrepresented the terms of an insurance policy wherein the insured was to receive monthly benefit.  This was not what the policy provided.  When the claim for benefits was denied, the insured filed suit alleging the misrepresentations by the agent.

It appears from the record and findings of the jury that, Huey made an application for insurance to the insurance company.  As actually written and signed, this application called for the issuance of a life insurance policy for $2,000, providing for double indemnity in case of accidental death, and waiver of premiums in case of total disability.  On March 12, 1929, a policy of insurance issued by such company was delivered to Huey in all things conforming to the application as written.

Area life insurance attorneys need to know the reasons an insurance company can rescind an insurance policy.

In addition to the common law standards, several statutory provisions regulate an insurer’s ability to avoid coverage based on a misrepresentation by the insured.  These are found in Texas Insurance Code, Chapter 705.

The statute provides:

Parker County life insurance lawyers know how the courts look at warranties in life insurance policies.

As stated in the 1997, 5th Circuit opinion styled, Riner v. Allstate Life Insurance Company, “Warranties in insurance applications are strongly disfavored in the law, and even fairly obvious attempts to create warranties in the application process have been rejected by Texas Courts.”  There is a line of cases holding the same as Riner.  Courts thus have been disinclined to find that contract language creates a warranty or condition precedent unless the language allows no other conclusion.

The language used the 1966, Texas Supreme Court case, Great American Reserve Insurance Co. v. Britton, said that “the policy shall not take effect until it has been delivered to its owner during the lifetime and good health of the Insured.”  The court found this was a condition precedent.

Aledo life insurance attorneys need to know the difference between a misrepresentation in a life insurance policy application and a condition precedent.  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 insurer avoid coverage.  Each of the elements discussed by the Texas Supreme Court in the 1980, opinion styled, Mayes v. Massachusetts Mutual Life Insurance Co., must be shown.  In contrast, if the insured’s statement is considered a condition precedent, then falsity alone will allow the insurer to avoid coverage.

This representation versus warranty issue 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;

Lawyers handling accidental death life insurance policies would want to read all cases dealing with this subject.  Here is a 5th Circuit opinion styled, Abdul Salam Badmus v. Mutual of Omaha Insurance Company.

In August 2010, Mutual issued an Accidental Death Policy to Selem Babtunde Badmus (Selem), providing a $750,000 death benefit.  The policy provided no beneficiary but was changed to designate Selem’s brother, Abdul Salam Badmus (Badmus) as beneficiary in July 2013.  In March 2013, Badmus filed a claim seeking the policy benefits, alleging Selem died in an auto accident in Lagos, Nigeria, on January 24, 2014.  Mutual sent Badmus forms to complete and requested documents in support of the claim.  They received back partially completed forms and none of the requested documents.  Upon discovery of numerous discrepancies Mutual hired Worldwide Resources, Inc. (Worldwide) to investigate the claim.  Worldwide ultimately concluded that most of the information submitted was suspect and Mutual denied the claim.

In May 2015, Badmus filed suit for breach of contract and violations of numerous sections of the Texas Insurance Code.  Again choosing to undertake an independent investigation, Mutual uncovered a series of name-change forms indicating that “Selem Babatunde Badmus,” residing at Badmus’s address in Houston, Texas, applied for a name change to “Abdul Salam Badmus” on May 21, 2016, over two years after Selem’s alleged death in Nigeria.  shortly thereafter, Badmus was indicted for felony insurance fraud based on the insurance claim he filed with Mutual.

The Northern District of Texas, Dallas Division ruled on an interpleader case recently.  It is styled, Primerica Life Insurance Company v. Sherry Purselley, et al.

The co-defendants in this case are Henslee, Lee, and Sherry Purselley.  This is an effort to determine who owns the life insurance proceeds at issue.

Lee purchased the Policy and he was owner with Sherry the primary beneficiary.  Later, Lee executed a Change Form that designated Sherry the Policy owner in 1992.  She thus, became the new owner.