Dallas Fort Worth Insurance Lawyer Blog

Are there ways the named beneficiary of a life insurance policy can be defeated for the life insurance proceeds?  Rarely.

Here is a 1998 opinion wherein a wife contested the named beneficiary of a life insurance policy.  The opinion is from the Corpus Christi Court of Appeals and styled, Camp v. Camp.

The Husband purchased a life insurance policy as an employment benefit while he was still single and without children.  He named his mother beneficiary to the policy.  When he later married, he did not change the insurance policy’s beneficiary designation to his wife.  Premiums for the policy were paid from the husband’s employment earnings during the years of his marriage to wife until his death in 1996.

Does the estate of the deceased have legal standing to challenge the distribution of life insurance proceeds?  Probably not.

This is the issue in the 2009, San Antonio Court of Appeals opinion decided in Irwin v. Irwin.

Barbara Jane Irwin and the decedent, Richard Lee Irwin, were married while Richard was employed by the Drug Enforcement Agency (DEA).  While employed by the DEA, Richard participated in a life insurance program and designated Barbara as his primary beneficiary and his sons from a prior marriage, Mike and John, as his contingent beneficiaries.  Richard retired in 1995, and he elected to receive reduced life insurance coverage.  In 2006, Richard and Barbara divorced; their Agreed Divorce Decree awarded Richard all policies insuring his life.  During the pendency of the divorce, Richard signed a new will in which he stated he had filed for divorce in April 2005 and it was his “specific intent not to provide for [Barbara] in this will and to hive his entire estate … to Mike and John ….”  Richard died on April 11, 2007, and his beneficiary at the time of his death was Barbara Irwin.  Pursuant to his beneficiary designation, the Office of Personnel Management paid the proceeds of Richard’s policy to Barbara.

Can a life insurance company deny a life insurance claim due to an alleged misrepresentation in the application?  Maybe not.

Here is a 1996 opinion from the United State Southern District of Texas.  The opinion is styled, Bates v. Jackson National Life Insurance Company.

Bates’ children sued Jackson National for proceeds of a life insurance policy issued to Bates.  They asserted causes of action for breach of contract, bad faith, and Insurance Code violations and DTPA violations.

Attorneys who handle life insurance cases can tell you that the application being attached to the policy is one of the basic rules of life insurance.  This is illustrated in the 1994, Texas Supreme Court opinion styled, Fredonia State Bank v. General Life Insurance Company.

In this case, the insured died as a result of a gunshot wound to the head.  Prior to his death, he had purchased two life insurance policies, each in the amount of $250,000.00 issued by General American Life Insurance Company.  General American denied the beneficiary’s claims for benefits.  Fredonia State Bank, an assignee of one of the two policies and executor of the insured’s estate, sued to collect the proceeds of the policy.

General American asserted as defenses that the insured had committed suicide and that the insured had made misrepresentations regarding his medical history, which were material to the risk assumed by General American.

The life insurance application has to be attached to the life insurance policy when it is delivered to the owner of the policy.

Here is a case from the United States Fifth Circuit Court of Appeals.  It is a 1997 opinion styled, Annette Riner; Suzette Marriott v. Allstate Life Insurance Company.

Following his divorce in 1994, Mr. Marriott wanted to replace his life insurance policy, naming his daughters (Riner and Ms Marriott) as beneficiaries.  Mr. Marriott had endured five back surgeries and was in chronic pain at the time the Allstate agent took his application.  In the application, Mr. Marriott disclosed that he had chronic back problems and certain other medical problems.  The application, however, was marked “no” with respect to whether he had ever received treatment for the use of alcohol or depression within the last three years.

Here is a 1998, opinion issued as the result of an employer purchasing a life insurance on an employee and naming itself as the beneficiary.  The opinion is from the Tyler Court of Appeals and styled, Stillwagoner v. Travelers Insurance Co.

The decedent was a registered nurse employed by Advantage Medical Services, Inc.  Unbeknownest to the decedent’s family, the employer took out a $200,000 life insurance policy insuring against accidental death, dismemberment, and total disability from Travelers designating Advantage as the beneficiary of the policy.  Advantage purchased such life insurance policies covering all of its employees.  The decedent was killed in a car accident while driving a company car.  Although Travelers disputed that the decedent was in the course and scope of her employment at the time of her death, Travelers eventually settled with Advantage and paid Advantage $190,000.

The decedent’s husband discovered the policy and sued Advantage and Travelers.  Judgment in favor of Advantage and Travelers is reversed and rendered.  Advantage did not have an insurable interest and, therefore, the proceeds belong to the decedent’s estate.

Life Insurance Lawyers should find this interesting in case they did not already know it.  It is a 2023 opinion from the U.S. Court of Appeals for the Fifth Circuit.  The opinion is styled, In The Matter Of Frank W. Gordon; Judith B. Gordon, John Patrick Lowe v. Frank W. Gordon; Judith B. Gordon.

Lowe is the duly appointed Chapter 7 Trustee of the bankruptcy estate of the Gordons.

The Gordons claimed the surrender value of two life insurance policies as exempt from the bankruptcy proceedings under Texas state law..  Lowe objected to the exemption and the bankruptcy court overruled the objection.  This appeals Court affirms the District Court ruling.

Life Insurance Attorneys need to understand that an employer cannot make itself the beneficiary of an employees life insurance policy.  This is discussed in a 1998, opinion from the 14th District Court of Appeals.  The opinion is styled, Tamez, et al v. Certain Underwriters at Lloyd’s, London, International Accident Facilities, Inc., et al.

In 1991, National Convenience Stores (NCS) purchased an accidental death insurance policy from Lloyd’s.  The policy provided that Lloyd’s would pay NCS $250,000 upon the accidental death of any NCS Texas employee killed during the course and scope of employment with NCS.  NCS did not have workers’ compensation insurance.

Ramon Tamez and Cheryl McCarthy were both killed while employed by NCS, although it was disputed whether McCarthy was in course and scope.  NCS filed a claim for proceeds under the policy as a result of the death of both individuals.  NCS was paid by Lloyd’s, but NCS later returned the benefits paid as a result of McCarry’s death stating McCarty was not in course and scope at the time of her death.  The representatives of both Tamez and McCarty sued Lloyd’s and NCS in an attempt to recover the benefits under the policy.  The primary issue in dispute is whether NCS had an insurable interest in the life of its employees.  The causes of action asserted against Lloyd’s included breach of contract, breach of the duty of good faith and fair dealing, conspiracy, conversion, and violations of the Texas Insurance Code.  As to NCS, the representatives alleged that NCS held the insurance benefits in a constructive trust for their benefit.

Here is a 2004 opinion from the Dallas Court of Appeals that just does not seem right.  The opinion is styled, Royal Maccabees Life Insurance Company v. James.

The insurer was sued by the surviving spouse of a police officer seeking an additional 50,000 in life insurance proceeds after the insurer paid the basic $50,000 upon the officer’s death.  It was undisputed that the insured applied for and paid premiums for over four years for the additional $50,000 in coverage.  It was also undisputed, however, that the insurer never sent a letter to the insured approving the disputed benefit as required by the life insurance policy.  The insurer denied the additional $50,000 in coverage and refunded the premiums paid for this coverage.  The trial court entered judgment on the jury finding that the insurer breached the contract, committed fraud, and violated the DTPA, the Texas Insurance Code, and the duty of good faith and fair dealing.  The judgement included mental anguish damages, punitive damages, attorney’s fees and pre-judgment interest.  This appeal followed.

The Dallas Court of Appeals reversed and rendered judgment in favor of the insurer on the breach of contract, bad faith and the Insurance Code claims and remanded the remaining claims for a new trial.  The appellate court concluded that an insurer’s acceptance of premiums for additional life insurance coverage for more than four years prior to the insured’s death did not waive a policy provision that written approval from the insurer was required before the employee would be entitled to additional life insurance benefits.  he Court began it’s analysis by reviewing the breach of contract claim and recognizing well established principles of Texas insurance law holding that waiver and estoppel cannot be used to create insurance coverage.  The court reviewed policy language that the insured alleged was conflicting, ambiguous and supported a finding of coverage.  Applying equally well settled principles of Texas insurance law holding that jurists should attempt to harmonize two allegedly conflicting provisions, the court found that one of the provisions applied to the first $50,000 of coverage which did not require the insurer’s written approval, while the other provision required written approval for amounts above $50,000.