Here is an interesting case from the 14th Court of Appeals. It is a 1998, opinion styled, Tamez v. Certain Underwriters at Lloyd’s.
Two employees of a Stop-n-Go (NCS) store were killed while on duty. NCS, as the employer had life insurance policies on the employees and made a claim for benefits and were paid by Lloyd’s. The representatives of the estates of the employees sued NCS and Lloyd’s.
Summary judgments were granted in favor of NCS.
Disability claims filed under an ERISA plan are different than disability claims that are not governed by ERISA. The United State District Court, Northern District, Dallas Division, issued an opinion in 2018, that discusses these types of cases. The case is styled, Aaron Rome v. HCC Life Insurance Company.
This is a dispute between a former professional hockey player (Aaron) and his insurer (HCC).
Aaron suffered a career ending injury. He sough benefits under the HCC policy and was denied. Aaron filed suit in State Court including claims for violations of State law and the case was removed to Federal Court where HCC filed motions to have have the State law claims dismissed under Rule 12(b)(6) or in the alternative a motion for summary judgment.
Life Insurance Lawyers can inform their clients that a creditor can have an insurable interest in a life insurance policy. There is a caveat. A creditor may designate itself the beneficiary of a policy purchased by it on the life of its debtor, but its insurable interest is limited to the loan balance at the insured’s death; the rest of the policy proceeds belong to the insured’s estate. This is confirmed in the 1968, Texas Supreme Court opinion styled, McAllen State Bank v. Texas Bank & Trust Co.
The bank asserted rights to the life insurance policy as a beneficiary of the proceeds of the policy in this case. The insured had pledged policy proceeds as security for the debt.
The assignment or pledge of a policy as security creates a lien on the proceeds on behalf of the assignee. While some authorities limit the rule, it is generally held that the rights of an assignee under a valid assignment of the policy for security are superior to those of the beneficiary to the extent of the indebtedness secured where the policy provides that insured has the right to change the beneficiary, especially where the beneficiary joins in the assignment; but the beneficiary is entitled to the excess of the proceeds over the amount of the indebtedness secured.
Life insurance lawyers will see fights over who is entitled to life insurance proceeds. One of the fights is over whether or not the named beneficiary had an insurable interest in the life of the insured.
The main case cited for dealing with this issue is a 1942, Texas Supreme Court opinion styled, Drane v. Jefferson Standard Life Insurance Co.
In the Drane case, Harry E. Ezell, Jr. was named as the beneficiary under two policies insuring the life of Dorothy A. Drane. Hugh Drane, the executor of Dorothy’s estate filed a lawsuit seeking to prevent Ezell from recovering the money and for the money to go to Dorothy’s estate.
Not just anybody can be a beneficiary to a particular life insurance policy. The person must have an insurable interest.
A 1894, Texas Supreme Court case styled, Cheeves v. Anders, makes clear that it is well settled that a life insurance beneficiary must have an insurable interest in the insured’s life.
The basis for this rule is twofold: 1) no one should have a financial inducement to take the life of another; and 2) a life insurance policy for the benefit of one without an insurable interest is a wagering contract. (It should be pointed out there are legal ways to have a life insurance policy on another).
The law in Texas is pretty clear, an insurance company is entitled to received a notice before a lawsuit is filed. This is recently illustrated in a Southern District, Houston Division, opinion styled, Jose Luis Perrett v. Allstate Insurance Company.
This is a dispute arising out of damage caused by Hurricane Harvey. Perrett sued Allstate and Allstate moved to have the case abated due to Perrett’s failure to comply with Texas Insurance Code, Section 542A.003, which requires a presuit notice. The Court granted Allstate’s motion.
542A.003 says:
Employee Retirement Income Security Act (ERISA) cases are difficult at best. But finally, here is a win in the courts. The 5th Circuit issued a ruling on June 13, 2018, in favor of a claimant. The case is styled, Ester Hill White v. Life Insurance Company of North America.
Among other issues, the Court first addressed whether LINA had a conflict of interest. This issue arises when the insurer of the plan also determines whether the claimant is entitled to benefits. A conflict of interest, such as the one in this case, should prove more important where circumstances suggest a higher likelihood that it affected the benefits decision.
The Court was concerned with LINA’s failure to address Dr. Fochtman’s report in its denial of life insurance benefits. White argues that such failure amounts to procedural unreasonableness. Procedural unreasonableness is important in its own right and also justifies the court in giving more weight to the conflict.
Married persons naming their spouse as a beneficiary in a life insurance policy is common and maybe even the most often seen beneficiary under a life insurance policy.
However, Texas law makes clear that a spouse can designate his or her estate as the beneficiary of the policy, at the expense of the other spouse, absent a showing of actual or constructive fraud. This was made clear in the 1994, Fort Worth Court of Appeals opinion styled, Street v. Skipper.
In the 1981, Eastland Court of Appeals opinion styled, Pilot Life Insurance Co. v. Koch, the policy at issue contained provisions automatically divesting the spouse of any interest in the proceeds, if the parties are “legally separated” or divorced. Also, the divorce decree may divest the former spouse of any right to the insurance proceeds. This was made clear in the 1987, 14th Court of Appeals opinion styled, Novotny v. Wittner. By statute, a divorce invalidates any pre-divorce designation of the former spouse as beneficiary, unless the former spouse is re-designated. If the pre-divorce designation is invalidated, the proceeds may go to any alternate beneficiary or to the insured’s estate. If the insurer pays the former spouse based on an invalidated designation, the insurer is liable to pay the proper beneficiary. This is made clear in the Texas Family Code, Section 9.301.
Here a situation that is not seen very often, but it does occur. This 2018, case is from the Tyler Court of Appeals and is styled, In Re: Metropolitan Property And Casualty Insurance Company, et al.
This is a mandamus action wherein Metropolitan is appealing the trial court’s decision of denying Metropolitan’s Motion to Transfer Venue.
Coverage for punitive damages are not always covered in an insurance policy. This issue came up in the 2018, case styled, Richard Brett Frederking v. The Cincinnati Insurance Company, Inc. The case is from the U.S. District Court, Western District of Texas, San Antonio Division.
This is a summary judgment case if favor of Cincinnati. The Court held that the insurance policy at issued does not afford coverage for the punitive damages award attributed to the negligence of Carlos Sanchez.
Frederking was injured when his vehicle was struck by an intoxicated driver, Carlos Sanchez. A trial was held in State Court and the jury found Sanchez was grossly negligent and awarded Frederking $207,550.00 in punitive damages plus interest. The issue is whether the policy held by Sanchez’s employer covers this punitive damages award.
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