Life Insurance – Misrepresentation In Application

Anybody with life insurance in Dallas, Fort Worth, Grand Praire, Arlington, Weatherford, Garland, Mesquite, Mansfield, or anywhere else in Texas who has life insurance would have had to fill out an application for that insurance. So what happens if the life insurance company denies benefits under that policy and cites the reason as there being a misrepresentation in the application for the policy? Continue reading to get some guidance as to what might happen.
For a life insurance company to establish misrepresentation by the insured as legally sufficient grounds for denying benefits, the life insurance company must prove five elements in any lawsuit brought trying to get the benefits paid to the benficiary. Here are those five elements:
1) the making of a misrepresentation;
2) the falsity of the misrepresentation;
3) reliance on the misrepresentation by the life insurance company’
4) intent to deceive on the part of the insured in making the misrepresentation; and 5) the materiality of the misrepresentation.
The preceding is the law as stated by the Texas Supreme Court in the 1994 case, Union Bankers Insurance Company v. Shelton.
The Texas Insurance Code has relevant statutes that come into play when there are allegations by the life insurance company that the insured made misrepresentations in obtaining the life insurance coverage. These statutes are, Sections 705.001 to 705.004 and Sections 705.101 to 705.105.
The 1991 case styled, Betty Flowers v. United Insurance Company of America, decided by the Fourteenth District Court of Appeals in Houston, provides some further insight into how a misrepresentation claim will be handled.
In the Flowers case the trial court ruled against the beneficiary but the appeals court reveresed the judge and sent the case back for a trial.
The basic facts of the case are not in dispute. In November 1987, Betty Flowers and her husband, Edward Flowers, applied for and were issued a joint life insurance policy with United Insurance Company of America (United). In the application for the policy, Mr. Flowers was asked a series of questions regarding his health history. In pertinent part, the question asked:
10. Has any Proposed Insured or Payor to be covered ever had:
a. High blood pressure?
b. Disease or disorder of heart or circulatory system?
……
11. …..
a. Have you ever had a physical examination, consulted a physician, or been in a clinic, hospital or institution for surgery, diagnosis or treatment within the past 5 years?
Mr. Flowers answered “no” to each health question. He did not give any explanations of health problems in the space provided. Mr. Flowers executed the application stating “I certify that I have read all the questions and answers on this application.” As it turns out, three years before applying for the life insurance, Mr. Flowers was incarcerated in the Texas Department of Correction (TDC). On the TDC medical intake form Mr. Flowers stated that he had high blood pressure. While in prison Mr. Flowers took medication for the condition for approximately two years. Further, while he was in prison, he was admitted to the hospital for an injured wrist; and during hospitalization he was diagnosed with borderline cardiomegaly, enlargement of the heart.
In 1998, approximately a year after the life insurance policy was taken out, Mr. Flowers was killed in a motor vehicle accident. Ms. Flowers, as beneficiary, brought the lawsuit to collect benefits.
In reversing the trial court, this appeals court stated that United failed to prove the five elements above. The appeals courts centered on there being no proof by United that Flowers “intended” to deceive United when he filled out the application. The court stated that while there was some evidence of the intent to deceive there was not enough conclusive evidence for the judge to dismiss the case without allowing Ms. Flowers the opportunity to prove the point to a jury.
Important to know from this case is that just because there is a misrepresentation in a life insurance policy, that by itself is not usually sufficient to justify a denial of benefits. Each of these situations need to be evaluated on an individual basis. To make sure that a person’s rights are properly protected, it is important to seek the advice of an experienced Insurance Law Attorney.