Dallas Fort Worth Insurance Lawyer Blog

Pinning down the exact date coverage begins can sometimes be a tricky proposition.  If an insured dies before a policy becomes effective, there is no coverage.  This was discussed in the 1950, Texas Supreme Court opinion, Republic National Life Insurance Company v. Hall. and the 1980, Eastland Court of Appeals opinion, Durham Life Insurance Company v. Cole, and both are worth reading to understand the issues the courts look to, for their decisions.

A policy may also contain a “good health” clause that requires that the insured be in good health at the time the policy is issued or the coverage will not take effect.  This is discussed in the 1979, Texas Supreme Court opinion styled, Washington v. Reliable Life Insurance Co. and the 1977, Amarillo Court of Appeals opinion styled, United Savings Life Insurance Company v. Coulson.  A good health clause renders the policy void if the insured was  not in good health.  In contrast, a false representation of good health provides a defense only if other elements, such as intent to deceive, are proved.

Keep in mind that just as there are disputes whether coverage took effect before the insured died, there may also be disagreements over whether coverage terminated before the insured’s death.  This is discussed in a 1985, San Antonio Court of Appeals opinion styled, Eagle Life Insurance Company v. G.I.C. Insurance Company and in the 1979, Fort Worth Court of Appeals opinion styled, Leach v. Eureka Life Insurance Co. of America.

Life insurance lawyers will see many reasons for denial of life insurance benefits.  Occasionally, one of the reasons is that the policy had not become effective at the time of death.

Most policies state the “effective date” of coverage.  This date may be earlier than, or later than, the date the first premium is paid or the dates the policy is issued or delivered.  Often, a policy may have an effective date, an issue date, and a policy date, and may all be different, causing confusion or misunderstanding.  If the dates differ, disputes may arise over when the policy actually took effect or terminated.  The effective date can be important in setting the due date for subsequent premiums and thus the date of any lapse or failure to pay a premium.

The 1980, Texas Supreme Court opinion styled, Life Insurance Company of the Southwest v. Overstreet illustrates how confusion can sometimes create problems for the beneficiary.  In Overstreet, a policy provided that its effective date was March 15th and each annual premium was due on the anniversary of that date.  The insured did not pay his first premium until April 18th.  Two years later, the insured died while his premium was due.  If the effective date was measured from March 15th, he dies outside the grace period and had no coverage.  If measured from April 18th, he died within the grace period, and within coverage.  The Texas Supreme Court held there was no coverage, following the majority rule that “a definite statement in the policy of the date on which annual premiums will be due is the due date.  Such a statement of the due date controls even over a provision stating that a policy will not be in force until it is initially delivered and the first premium is paid during the good health of the insured.

Life insurance policies are required to have certain provisions.  To begin with, all life insurance policy forms have to be approved by the Texas Department of Insurance.

Texas Insurance Code, Section 1101.004 requires that all policies allow a grace period of at least a month.

Section 1101.003 requires that the submitted application be part of the life insurance contract.

Life insurance lawyers will at one time or another see most of the types of disputes that arise in life insurance disputes.  When there is a dispute, finding an attorney who deals with life insurance cases who can discuss your case can make a big difference.  Here are some of the areas in which disputes arise:

1. An insurance agent may misrepresent the benefits of an insurer’s policy to induce the insured to switch from another company.
2. An insurance agent may fail to disclose that health conditions may cause the insured’s application to be rejected.  If the insured was induced to let a rival policy lapse based on the expectation of replacement coverage, the insured may have no insurance.

Here are some basics about life insurance for a life insurance lawyer to understand.

Common life insurance types are term, whole life, and universal life.

“Term” policies simply provide a death benefit in return for a premium payment.  At the end of the policy year, or “term”, the insurance ends, and the policy has no value.  Term policies do not accrue cash value.  Because the insured is only paying for the death benefit, term policies are cheaper in the early years.  As the insured gets older, the risk of death increases and so does the premium, so term may become more expensive than the other types.  Insurers typically sell term policies that promise a fixed premium for a set number of years.  For example, an insurer may sell a 10 year term policy that the insured may purchase and renew for the same annual premium during those years, without having to re-qualify.