Denial Of Life Insurance Claim Based On A Misrepresentation In An Application

Dallas insurance lawyers will see lots of situations where a person has their life insurance claim denied for the stated reason that the insured made a misrepresentation in the application for insurance. There are a few common law rules standards that apply. It is also important at this stage to understand what the Texas Insurance Code states.
There are several statutory provisions regulating an insurance company’s ability to avoid coverage based on a misrepresentation by the insured in their application for insurance. These statutes are found in the Texas Insurance Code sections 705 and 1201.
Texas Insurance Code, Section 705.003 states: A provision stating that a misrepresentation in a proof of loss makes the policy void or voidable is of no effect and is not a defense, unless the misrepresentation was:
(1) fraudulently made;
(2) misrepresented a fact that was material to the insurer’s liability; and (3) misled the insurer and caused it to waive or lose a policy defense.
Texas Insurance Code, Section 705.004 states: A provision stating that a misrepresentation in the application makes the policy void or voidable is of no effect and is not a defense, unless the misrepresentation was material to the risk, or contributed to the contingency or event on which the policy became due and payable.
Texas Insurance Code, Section 705.005(b) states: To rely on a misrepresentation in an application as a defense, the insurer must prove it gave to the insured or beneficiary notice that it refused to be bound by the policy, before the 91st day after discovering the falsity of the representation.
Texas Insurance Code, Section 705.051 states: A misrepresentation in an appliction for a life, accident, or health insurance policy does not defeat recovery under the policy unless the misrepresentation was of a material fact and affects the risks assumed.
Texas Insurance Code, Section 705.103 states: A life insurance policy must be accompanied by a copy of the application and any questions and answers.
Texas Insurance Code, Section 705.104 states: A defense based on a misrepresentation in a life insurance application is not valid after the second anniversary of the policy, if the premiums have been paid, unless:
(1) the insurer notified the insured of its intention to rescind the policy because of the misrepresentation; or
(2) the misrepresentation was material to the risk and was intentionally made.
Texas Insurance Code, Section 1201.272 states: The falsity of a statement in an application for an individual accident and health insurance policy does not bar a right to recovery under the policy unless the statement materially affected the acceptance of the risk or the hazard assumed by the insurer.
Knowing and understanding the above statutes goes a long ways to helping clients with claims that have denied based on the allegation of a misrepresentation being made in an application for insurance.