Dallas Fort Worth Insurance Lawyer Blog

With regards to life insurance policies, what if the insurance company denies a claim for benefits based on their assertion that a misrepresentation was made in the policy application?

This is covered by the Texas Insurance Code, Sections 705.001 to 705.005 and 705.101 to 705.105.  This is also addressed by a San Antonio Court of Appeals opinion from 1969.  The style of the San Antonio case is, The Prudential Insurance Company of America v. Ignacio Torres et ux.

The facts in Torres are substantially undisputed.  Torres was an employee of Gonzaba, who had six employees.  Gonzaba was considering purchasing group life and health insurance for his employees and their families when he eventually purchased a policy through a new employee, Avalone, of Prudential.

Life insurance lawyers might know this law but most other people do not.  The law is found in the Texas Insurance Code, Sections 705.101 thru 705.105.

These Insurance Code sections require that an application for insurance be attached to the policy when the policy is sent to the applicant.

This issue was before the Texas Supreme Court in a 1994 opinion styled, Fredonia State Bank v. General American Life Insurance.

The Law Office of Mark S. Humphreys, P.C. is pleased to announce the settlement of a life insurance denial case. Mark’s client was the daughter of a lady who had applied for a small life insurance policy about a year and a half before the mother’s death. Her death was within the two year look-back period allowed to life insurers in the State of Texas. This “look-back”allows an insurance company to investigate for misrepresentations made in a life insurance policy if the insured’s death occurred within two years of the application date.
The lady had severe mental issues but also she had significant health issues that were not disclosed in the insurance application. The plus for Mark’s client is that the insurance company agent who took the application information would have been aware of the health problems of the insured because the agent was present in the house of the lady and actually would have seen the insured’s oxygen machine and medications, yet these were not disclosed in answers to relevant questions on the application for life insurance. Mark’s argument was that the agent is who made the misrepresentations, not the mother. The agent had financial incentive to make the misrepresentations because the only way the agent received commissions for the sell of the life insurance policy was if the sell was made.

An often seen reason for denying a claim for life insurance benefits is the accusation by the insurance company that the insured committed suicide.

As is pointed out in the 1982, 14th District Court of Appeals opinion, Parchman v. United Liberty Life Ins. Co., life insurance policies typically exclude suicide as an assumed risk.  However, this exclusion is virtually always limited to a suicide that takes place within two years of the inception date of the policy.

In the Parchman case, the policy excluded suicide as an assumed risk for two years from the policy date and provided a reduced benefit of the return of all premiums paid if death resulted from suicide within that period.