Insurance Company Trying To Rescind A Policy

Life insurance lawyers need to know the facts in a 1980, Texas Supreme Court case. It is styled, Mayes v. Massachusetts Mutual Life Insurance Co. This case is important because a life insurance company often times to rescind a policy based on misrepresentations made in the policy application.
In Mayes, Massachusetts tried to rescind three policies of insurance on the life of Albert Hayes after he died. Mayes did not disclose that certain answers which were correct when made became false by the time the policies were delivered.
On May 6, 1976, Albert Mayes signed and delivered to an agent of Massachusetts Part 1 of two applications for life insurance. These applications had been filled out by the agent and his secretary from information secured from a previous policy issued to Mayes through this agent. The applications are identical except for the amount of insurance requested by each application. On page three of each application is the following paragraph:
614 SIGNATURE SECTION MUST BE COMPLETED IN ALL CASES To the best of my (our) knowledge and belief, all answers and statements contained herein are full, complete and true and were correctly recorded before this application was signed; and it is agreed that: (a)if the first premium on the insurance herein applied for has been paid to the Company’s agent in exchange for the Company’s Conditional Receipt signed by said agent, the Company shall be liable only under and pursuant to the terms and conditions set forth in said receipt; (b)if the first premium on the insurance herein applied for has not been paid, the Company shall incur no liability under this application unless and until the application has been completed and approved and the policy has been issued and delivered to the owner designated therein and the first premium specified in the policy has been paid during the lifetime of each person proposed for insurance and then only if at the time of said delivery and payment all answers and statements contained in Parts 1 and 2 of this application and any amendments thereof and supplements thereto are then full, complete and true to the best of my (our) knowledge and belief as though given at the time of said delivery and payment; (c)no agent of the Company has authority to make, alter or modify the terms of this application or of any policy issued hereon or to waive any of the Company’s rights or requirements or to extend the time for the payment of premiums, and (d)acceptance of any policy issued on this application will constitute ratification of any correction or amendment of the application made by the Company as shown in the Amendment of Application attached to the policy, provided, however, that any such correction or amendment of application relating to amount, classification, plan or additional benefits shall be agreed to in writing.
If this application is also signed by a purchaser, such purchaser ratifies the representations, declarations, statements, answers and agreements contained in Parts 1 and 2 of this application and any amendments of and supplements to this application, and agrees to be bound thereby.
Both applications required a physical examination of this forty-year-old prospect and the information relative to this examination is contained in Part 2 of the applications. Although Part 2 was filled out by Dr. Rattan, the insurer’s medical examiner, it contains a number of answers to medical history questions propounded to the insured by the doctor on May 27, 1976 when the physical examination was had. Question 4 inquired as to whether the insured within the past five years: (A) had been treated by a physician; (B) had been treated or observed in a hospital; or (C) had undergone an electrocardiogram. Only question 4A was answered in the affirmative and the explanation given related only to a 1974 physical examination which Mayes had undergone in connection with a prior policy issued by Massachusetts Mutual. Questions 5A and 6A inquired if he had been treated for or had any known indication of any disorder of the heart or if he had experienced any pain, pressure or discomfort in the chest. Both of these questions were answered in the negative.
Part 2 of the applications were referred to the home office of insurer and, because the first examination showed an elevated blood pressure, the medical examiner was directed to make a recheck of the blood pressure. This reexamination was made by Dr. Rattan on July 14, 1976. At this time, the medical examiner determined, at the request of the insurer, that the proposed insured had not had any recent medical or dietary treatment for hypertension. The policies were issued to Mayes at a higher premium because of the elevated blood pressure. The policies were delivered to Mayes by the agent on August 17, 1976 after Mayes agreed to the higher premium.
On June 29, 1976, Mayes attempted to drink cold water while having a cup of coffee. He was unable to swallow the water and felt a pain in his chest. Mayes’ next door neighbor, who was a general practitioner, was called; pursuant to this 615 doctor’s advice, Mayes went to the hospital so that Dr. Schilling, a specialist in internal medicine, might examine him. Mayes was kept in the hospital overnight by Dr. Schilling while a number of tests were made. Dr. Schilling was unable to arrive at a definite diagnosis, but concluded that the chest pain was probably the result of esophagitis, which is an inflammation of the esophagus. Dr. Schilling advised Mayes that he did not think Mayes had heart disease, but that he could not exclude that possibility. Mrs. Mayes testified she understood that the problem in Mayes’ chest related to the esophagus.
Dr. Schilling next saw Mayes on July 28, 1976 at the doctor’s office. Mayes complained of two more episodes of chest pain under circumstances similar to the initial episode. He was given a stress electrocardiogram to see if heart disease was involved. Again the doctor was unable to pin down the cause of the chest pain. Dr. Schilling advised Mayes of his high blood pressure and told him certain things to do to correct it. Mayes was advised that he was overweight and smoked too much. The doctor did not diagnose heart disease, but said again that he could not rule it out. He did not see Mayes again professionally. Mayes died suddenly on July 25, 1977 from a heart attack of some undetermined variety.
A lawsuit was filed and the jury found in favor of Mayes but the judge granted Massachusetts JNOV. This appeal followed.
It is now settled law that if the answers to the questions in the application were untrue at the time they were given, the untrue answers constituted misrepresentations. There is no logical reason to give the failure to correct these same answers at a later time any greater significance than we give to answers which were originally untrue. In fact, there would be a greater chance that an insured was acting in good faith when he failed to report a change of condition than he would be in his originally making an untrue answer. Furthermore, the insurer knows the length of delay between the completion of the application and the issuance of the policy. If this period was significant, the insurer could easily ensure that the answers were still correct at the time of issuance of the policy either by putting a good health provision in the application or by requiring a supplemental statement of health. Here the insurer’s medical doctor made a limited second physical examination of insured shortly before the policies were delivered. It is hard to understand why inquiry was not routinely made by the doctor at that time regarding the insured’s recent health. The agent personally delivered the policies to the insured and persuaded the insured to accept the policies with the increased premium. It is not contended that the insured made a false statement to the doctor or the agent.
Under these circumstances the court held that Mayes’s failure to advise the insurer of the changes in his prior answers were misrepresentations. It is now settled law in this state that these five elements must be pled and proved before the insurer may avoid a policy because of the misrepresentation of the insured: (1) the making of the representation; (2) the falsity of the representation; (3) reliance thereon by the insurer; (4) the intent to deceive on the part of the insured in making same; and (5) the materiality of the representation. Here, although the jury found that these misrepresentations were material to the risk and were relied on by the insurer, the insurer failed to establish the legal defense of misrepresentation because it failed to secure a jury finding of intentional deception.
So, in this case Massachusetts did not get a jury finding showing element (4) above.
It is not enough that a person makes a misrepresentation. It also must be shown that the misrepresentation was made intentionally.