Misrepresentation In Insurance Application By Applicant

Life insurance policy holders in Weatherford, Mineral Wells, Aledo, Azle, Peaster, Brock, Millsap, Hudson Oaks, Willow Park, Springtown, and other places in Parker County would be interested in this case.
The case was decided by the Texas Supreme Court in 1978. The case is styled, James D. Robinson v. The Reliable Life Insurance Company. The insured beneficiary in this case lost at the trial court level and the first appeals court level and in the Supreme Court.
The question on appeal was whether an insurance company, in order to avoid liability of a policy of life insurance for the reason of false representations in the insurance application, must establish both that (1) the misrepresentation was material to the risk and that (2) the condition about which the misrepresentation was made contributed to the death of the insured.
The lawsuit was filed by the beneficiary to recover on a $2,000 life after insurance policy after the death of his son. The insurance company denied liability and counterclaimed for cancellation of the policy because of false representations in the application for the policy. The application contained questions inquiring whether the son had been treated by a doctor within the past five years, whether the son had any injury, illness or operation in the past five years, and whether the son had ever been confined to a hospital or sanitorium. It was found that the answers to each of the questions was false. That each of the questions was material to the risk assumed by the insurance company and each was relied on by the insurance company in issuing the policy. And that the policy would not have been issued but for the false statements. This false information was not discovered until shortly after the death of the insured. The evidence showed that the son had been afflicted with cickle cell anemia for several years prior to his death. He was under treatment by a doctor and hospitalized for about two weeks for intestinal hemorrhaging and sickle cell anemia less than two years before the application was submitted. However, the only evidence as to the cause of death of the son is the following statement on the death certificate: “There were no marks on body that indicate violence, apparently died from natural causes.” The uncontroverted evidence at trial in this matter was that a prudent insurer would not have issued a policy on the life of a young boy afflicted with sickle cell anemia.
The Texas Insurance Code, Section 705.004, allows a policy to be void if it is shown at trial that the matter misrepresented in the application (1) was material to the risk; or (2) contributed to the contingency or event on which the policy became due and payable.
In the appeal of this case, Robinson urged the court to read the word “or” in the statute to mean “and.”
Here, due to the statement in the death certificate, Robinson argued there was no proof that the matters concealed in the application contributed to his son’s death. Thus a reading of the statute wherein the word “or” is construed as the same as the word “and” would cause him to prevail in the lawsuit.
This court responded to Robinson’s argument by pointing out that there is a long line of cases supporting Reliable’s argument that the statute wording is correct as it is. Which is, that the materiality of the risk must be viewed as of the time of the issuance of the policy, rather than at the time the loss occurred, and that the principle inquiry in determining materiality is whether the insurance company would have accepted the risk if the true facts had been disclosed. The cases recognize the concept that a condition material to the risk assumed by the insurance company is quite distinct from the cause of the loss.
Portions of Section 705.004 and Section 705.003 are stated and interpreted in such ways as to help insureds who have errors or misrepresentations in their applications and statements of loss. It is important to seek the advice of an experienced Insurance Law Attorney whenever an insurance company denies a claim based on misrepresentations by the insured in the policy application of in any claim for loss.