Dallas Fort Worth Insurance Lawyer Blog
Life Insurance claims denial attorney are well aware of this 2023 opinion from the Texas Supreme Court. The opinion is styled, Arce v. American National Insurance Company.
In the opinion the Texas Supreme Court discussed “intent.”
American National argued that, because the Texas Legislature included the word “intent” in other provisions of the Texas Insurance Code, the absence of such a phrase in Section 705.051 indicated the Legislature’s intent Not to require “intent.”
The word “intent” only appears twice in Section 705, both times in Section 705.104, which states: “A defense based on a misrepresentation in the application for, or in obtaining, a life insurance policy … in a suit brought on a policy on or after the second anniversary of the date of issuance of the policy … is not valid or enforceable … unless:
(1) the insurer has notified the insured of the insurer’s intention to rescind the policy because of the misrepresentation; or,
(2) it is shown at trial that the misrepresentation was:
(A) material to the risk; and,
(B) intentionally made.”
Based on the Legislature’s use of the word “intent,” American National further argued Section 705.104 imposed an “intent” requirement for suits brought on a policy more than two years after policy issuance, but if a suit was brought less than two years after the policy was issued, Section 705.051 would apply, and an insurer would no longer have to prove intent.
The Texas Supreme Court once again found American National’s arguments unpersuasive.
The Court reasoned that Section 705.104 simply set a different statutory “floor” for a materially different situation and was not therefore inconsistent with a common-law “intent to deceive requirement. Section 705.104 prevents a misrepresentation defense when the insurer raises the defense on a policy issued more than two years earlier. In such a case, the policy is “incontestable” except for nonpayment of the policy premium.
The Court reasoned it was not for the Legislature to, on the one hand, specifically require “intent” to void polices more than two years after issuance and, on the other, to allow application of the common law’s “intent” requirement was not repugnant to, nor displaced by, Section 705.051, noting that stare decisis has its “greatest force” when the Legislature could have, but did not, change the common law rule. In other words, the Legislature could have drafted the Texas Insurance Code to explicitly eliminate the common-law “intent to deceive” test, but it did not.
Instead, the Legislature enacted a statute that is silent on intent, which allows courts to overlay a common-law “intent to deceive” requirement. Thus, the Texas Supreme Court held that “insurers must plead and prove intent to deceive to avoid contractual liability based on a misrepresentation in an application for life insurance, whether the policy is contestable or not.”