Articles Posted in Life Insurance

Mason Texas insurance attorneys need to know a few basics about insurance law when discussing potential cases and the surrounding facts with a client.

To begin with – When is a representation in an insurance application important?  According to a line of cases, including (1) a 2014 federal case styled, Weidner v. Nationwide Property & Casualty Insurance Company, (2) a 1995 Houston Court of Appeals [1st Dist.] styled, Darby v. Jefferson Life Insurance Company, (3) a 1965 Austin Court of Appeals case styled, Manhatten Life Insurance Company v. Harkrider, a “representation is material if it actually induces the insurance company to assume the risk.”

According to a 1976 Waco Court of Appeals opinion styled, Westchester Fire Insurance Company v. English, the insurer must show that it was induced to assume the risk by the misrepresentation.  According to the Texas Insurance Code, Section 705.004(c), this determination is a question of fact — the very language of the statute makes that “fact” clear.  (It is a question of fact whether a misrepresentation made in the application for the policy or in the policy itself was material to the risk or contributed to the contingency or event on which the policy became due and payable.)  This is backed up by case law in a 1985 Corpus Christi Court of Appeals opinion styled, Carter v. Service Life & Casualty Insurance Company, holding that the statute provides the materiality of any false representation is a question of fact.

Mason life insurance lawyers must understand that for an insurance company to prevail on a defense of misrepresentation, the insurer must prove the intent to deceive.  This is discussed in a 2013, Dallas Court of Appeals opinion styled, Medicus Insurance Company v. Frederick Todd, II, M.D.

Medicus provides medical malpractice insurance to physicians and health care providers.  Dr. Todd submitted a two page application for insurance.  The application asked if Todd had “ever been the subject of an investigation by any … licensing authority,” and he checked the “No” box.  In fact, Dr. Todd had been twice investigated by the Texas Medical Board for having three or more medical malpractice claims in a five-year period.  The credentialing application also asked if he had “ever had any malpractice actions within the past 5 years (pending, settled, arbitrated, mediated or litigated),” and Dr. Todd checked the “Yes” box and attached a description of four lawsuits filed against him between May 2000 and when he signed the application in May 2005.  Dr. Todd omitted one lawsuit from the list of claims filed between May 2000 and May 2005.  Dr. Todd also failed to disclose another lawsuit filed between his signing the credentialing application and his applying to Medicus.

The underwriter suggested to Medicus that the application be denied but Medicus decided to accept it.

Llano County life insurance lawyers need to know about this 1989, Corpus Christi Court of Appeals opinion.  The case is styled, Maria C. Soto v. Southern Life & Health Insurance Company.

Maria C. brought suit against the Southern Life to collect $4,000.00 in benefits as the beneficiary of a life insurance policy which was issued to her now deceased husband, Jesus G. Soto.  Southern Life denied liability based on misrepresentations made on the application for insurance regarding Mr. Soto’s condition of health and plead the affirmative defense of misrepresentation and fraud.  A jury subsequently found that Mr. Soto had represented in the application for life insurance that (1) he was in good health and free from all disease; (2) he had not been under observation or treatment in a clinic or hospital between May 23, 1980 and May 23, 1985; (3) he had not been attended by a physician between May 23, 1982 and May 23, 1985; and (4) he had no physical defect or infirmity in the form of lung disease.  The jury further found that both Jesus knew these representations were false and that they were intended to induce or deceive Southern Life into issuing Mr. Soto a life insurance policy.  The jury also found that these representations were material to the risk and that Southern Life would not have issued the life insurance policy had it known the true state of Jesus’s health.  Based on these findings, the trial court ordered that Soto take nothing by her suit.  This court affirmed the judgment of the trial court.

Soto states that she testified at trial that she provided Mr. Nava the information for the application, that she informed the agent, Enrique Nava, of Mr. Soto’s hospitalization, illness, and physician name, but that she did not read the application before she signed it.  Soto argues that Mr. Nava failed to write the correct information on the application.

Life insurance lawyers will eventually see a situation where a client has bought or sold a life insurance policy to or from a third party.  Insurancenewsnet.com published an article dealing with this subject that is worth reading.  The title is, 5 Key Questions Asked About Selling A Life Insurance Policy For Cash.

Today’s seniors face many unforeseen challenges, particularly as costs continue to rise for everything from groceries to medications.  Further, many retirees are just scraping by without any cushion to pay for emergency expenses.

This ongoing erosion of assets threatens an entire generation of seniors who currently are struggling to pay retirement costs.  And unfortunately, it might be even worse for baby boomers and Generation X  according to an Associated Press analysis of savings data from the Federal Reserve.  The study found that 35 percent of households in their prime earning years have nothing saved in a retirement account and no access to a traditional pension.  For seniors facing a financial crisis or for those just looking to bolster their emergency funds, a life settlement may be an answer.

Life insurance attorneys can tell you that the life insurance application is very important.  This is illustrated in a 1997, United States 5th Circuit opinion.  The case is styled, Riner v. Allstate Life Insurance Company.

Following his divorce in 1994, Mr. Marriott wanted to replace his life insurance policy, which named his ex-wife as beneficiary, with a new policy naming his daughters (Riner and Ms. Marriott) as beneficiaries.  Mr. Marriott had endured five back surgeries and was in chronic pain at the time the Allstate agent took his application.  In the application, Mr. Marriott disclosed that he had chronic back problems and certain other medical problems.  The application, however, was marked “no” with respect to whether he had ever received treatment for the use of alcohol or depression within the last three years.

After completing the application, the agent accepted an initial premium check which was completed by the agent because Mr. Marriott was too affected by the pain killers to do so.  The agent then issued a “Receipt and Temporary Insurance Agreement” which he left with Mr. Marriott.  The agent did not leave a copy of Mr. Marriott’s application with Mr. Marriott.  The Agreement provided that the temporary coverage would start when Mr. Marriott’s medical examination was completed.  The medical examination was completed on July 26, 1994.  Six days later, Mr. Marriott died of either an aneurysm or heart disease.  Allstate refused to pay under the Agreement because Mr. Marriott failed to reveal his prior treatment for the use of alcohol and depression.

Life insurance lawyers will see a situation where a client’s life insurance claim is denied due to a suicide exclusion in the policy.  The 1998 Austin Court of Appeals issued an opinion that deals with this issue.  The case is styled, Butler v. Group Life and Health Insurance Company.

During a social occasion, the decedent and a number of his friends picked up an unloaded gun, and began to point the gun into their mouths and pull the trigger.  At some point, ammunition was placed in the gun.  Decedent did not know this.  After the gun was loaded, but while decedent still believed it was not loaded, decedent picked up the gun, pointed it in his mouth, pulled the trigger and killed himself.  Decedent’s beneficiary made a claim for life insurance benefits, accidental death benefits and attorney’s fees and interest as provided by the Prompt Payment of Claims Act.  The policy in question was issued by Group Life and Health Insurance Company under the terms of the Texas Employees Uniform Group Insurance Act.  The Board administering the policy denied the claim because decedent died as a result of intentionally self-inflicted injuries and because his death was not accidental.  The district court affirmed and Butler appealed.

The Court ruled accidental death and life insurance benefits are payable but because the Prompt Payment of Claims Act is inapplicable the trial court’s denial of attorney’s fees and statutory interest is affirmed.

The application for a life insurance policy has to be attached to a life insurance policy.  This is illustrated in a 1994, Texas Supreme Court case styled, Fredonia State Bank v. General Life Insurance Company.

The insured died as the result of a gunshot wound to the head.  Prior to his death, he had purchased two life insurance policies, each in the amount of $250,000.00 issued by General.  General denied the beneficiary’s claim for benefits.  Fredonia State Bank, an assignee of one of the two policies and executor of the insured’s estate, sued to collect the proceeds of the policy.

General asserted as defenses that the insured had committed suicide and that the insured had made misrepresentations regarding his medical history, which were material to the risk assumed by General.

Life insurance lawyers need to know this 2008, 5th Circuit opinion.  It is styled, Liu v. Fidelity and Guaranty Life Insurance Company.

The importance of this opinion is the court stating that warranties are not favored in life insurance policies.

Liu filled out a life insurance application which stated that he had not been diagnosed with cancer within the previous ten years.  The policy was issued two days after he was diagnosed with cancer.  The carrier denied coverage arguing that the representation in the application was a condition precedent to coverage.  The trial court found coverage which was affirmed on this appeal.

Life insurance lawyers will have potential new clients call up and say they have been served with legal papers.  These papers will state a life insurance company has death benefits they want to pay but the life insurance company is unsure who to pay the benefits to and so, they are interpleading the life insurance proceeds into the court, notifying people who have a possible interest in the benefits and letting the court and parties decide who is entitled to the proceeds.

A Western District, San Antonio Division opinion styled, Erika Sanchez v. Prudential, sheds some light on this subject.

Following the death of the insured, the OSGLI received three different SGLI Election and Certificates form the U.S. Army Reserves.  One certificate dated June4, 2011, designates the insured’s sisters, Middleton and Vial, as co-beneficiaries of the Death Benefit.  The June 2011 Certificate bears the insured’s electronic signature and indicates that it was received and/or accepted by the appropriate branch of service.  A second Certificate, dated August 6, 2011, designates Sanchez, the insured’s estranged wife, as a primary beneficiary of 75% of the Death Benefit and Middleton as the primary beneficiary of 25% of the Death Benefit.  The August 2011 Certificate also named Vial as a secondary beneficiary.  However, there is no indication that the August 2011 Certificate was submitted, received, and/or accepted by the applicable branch of service.  The final Certificate, dated September 30, 1975, designates Sanchez as the sole primary beneficiary of the Death Benefit.  The Sanchez Certificate bears what purports to be the Insured’s signature; however the Insured’s date of birth is listed as the date he signed the Sanchez Certificate.  Richard Teniente, the Insured’s Army Reserve Unit Administrator, is listed as the personnel clerk who allegedly completed the Sanchez Certificate.  However, Mr. Teniente states in a letter that he is unable to validate the Sanchez Certificate because it appears to have been altered.