Dallas Fort Worth Insurance Lawyer Blog

Here is an interesting case form the U.S. Northern District, Dallas Division, regarding payment on a life insurance policy.  The case is styled, Metropolitan Life Insurance Company v. Michael Wayne Battle II.

Metlife offers life insurance to federal employees through a program referred to here as FEGLI.  The Office of Personnel Management (OPM) administers the program.  Metlife is required to pay FEGLI benefits when a beneficiary establishes a valid claim under FEGLI.  FEGLI payments are prioritized thus: first, to the employee’s designated beneficiary; second, if there is no designated beneficiary, to the employee’s surviving spouse; and, third, if neither is present, to the employee’s child or children.  This is pursuant to 5 U.S.C. Section 8705.

Battles’ father, Michael Battle (Michael), was covered under the plan and had coverage totaling $475,000 at the time of his death.  Michael had not designated a beneficiary.

Exclusions in life insurance policies are common.  The Texas Insurance Code, Section 1101.055 limits the permissible life insurance exclusions to suicide, stated hazardous occupations, and aviation activities.  Courts have construed this list to render void other exclusions, such as one excluding a loss caused by a preexisting condition.

A 1921, Texas Supreme Court case does a good job of explaining limits on exclusions.  The opinion is styled, First Texas State Insurance Company v. Smalley.

As explained in Smalley:  It was formerly usual for policies of life insurance to contain numerous conditions on which the amount or amounts promised to be paid on the death of the insured might be reduced or entirely defeated.  Among common conditions were those relating to the insured’s occupation, habits, residence, and suicide.  Not infrequently the amount of the insurance was stated in bold type, on the face of the policy, while the conditions were inconspicuously put on the back.  Such policies could be used to lead the unwary into the belief that they held enforcible promises of real and substantial benefits, when the promises were so limited and conditioned as to have slight actual value.  In this way premiums could be collected from the insured in exchange for apparent, rather than real, obligations on the part of the insurers.

This may seem strange but there are times an insurance company will deny a claim for life insurance benefits based on their assertion that the insured has not been proven to be dead.  This is discussed in the 1987, Texas Supreme Court opinion styled, Davidson v. Great National Life Insurance Company.

Here are some interesting facts.  In May 1980, a man identifying himself as Dauod Alquassab applied for a $1,000,000 life insurance policy with Great National.  Alquassab had previously used the names of David Kassab and David Kay; was a convicted of felony fraud charges under a different name.  Alquassab named Ilan Eiger, his partner in a real estate business, as the beneficiary when Great National issued the policy in June 1980.  In September 1980, Alquassab changed the beneficiary designation from Eiger to Phyllis Davidson, his former wife from whom he was divorced in 1968.  Alquassab then traveled to Tel Aviv, Israel, in February 1981.  Prior to his departure, the record indicates that Alquassab allegedly defrauded First City Bank in Houston, of approximately $1.5 million dollars, and committed additional acts of fraud upon other banking institutions.

On Wednesday, February 11, 1981, a body was discovered approximately 100-200 yards from the hotel where Alquassab was registered.  The body, which Davidson claims was Alquassab, had been struck by a car and then dragged face down.  Great National was notified of Alquassab’s alleged death on February 12; the body was buried the following day, Friday, February 13.  After Davidson made a formal claim under the policy to Great National on June 1, Great National rescinded the policy because of Alquassab’s alleged fraud in procuring the policy, and refused to pay any beneficiary proceeds to Davidson.