Fort Worth Insurance Attorneys need to know an important statute in the Texas Insurance Code.
That statute is Section 705.105.
The 1969, San Antonio Court of Appeals case, Prudential Insurance Company of America v. Torres, does a good job of explaining the statute. Here are some relevant parts of that case:
Prior to January 5, 1967, Torres was an employee of Gonzaba Lumber Company, which was owned by Luis Gonzaba, brother of Mrs. Bertha Torres. For some time, Luis Gonzaba and some of his six employees had considered securing a group insurance policy to provide hospitalization and medical benefits. Mr. Gonzaba had discussed such a policy with several people, including Herbert A. Avalone, whose wife was a distant cousin of Gonzaba and Mrs. Torres. Avalone had worked about two months as an agent for Penn Mutual Insurance Company under Jerry Jost, who was then the general agent in San Antonio. Avalone had no prior experience in the life or health insurance business and held only a 90-day temporary license. Avalone advised Jost of Gonzaba's interest in a group policy. Penn Mutual did not write group insurance for groups of less than ten employees; however, Jost was also a licensed agent of Prudential and authorized to broker policies with it. At the request of Jost, Prudential's employees prepared a proposal to insure Gonzaba and his employees, which proposal was discussed with Gonzaba by Jost and Avalone and accepted. Avalone secured the necessary application forms from Prudential's San Antonio office, together with some general instructions from the clerks in this office.
Each Gonzaba employee was required to submit an application for insurance and Avalone contacted Torres for the purpose of completing his application form while the latter was busy loading lumber. Torres had a limited education and read very little English, and therefore requested that he be permitted to take the form home and let his wife examine it. Avalone advised him that such was not necessary and that as soon as Torres signed the application form all employees would be covered. The application signed by Torres contains three false answers which are urged by Prudential as the basis for rescission and cancellation of the policy. The form is checked to indicate that neither Torres nor Mrs. Torres had previous trouble with diabetes, and that neither had been hospitalized or had consulted a physician during the past five years. Actually, Mrs. Torres suffered from diabetes for which she not only had consulted a physician but for which she had been twice hospitalized within the past five years. Avalone marked these erroneous answers in the application, and it is not established whether he did so before or after Torres signed same. Avalone admits that he deliberately did not ask Torres about the physical condition of Mrs. Torres because Avalone did not think that such information was required for this type policy. Actually, it would not have been required if there were more than ten employees involved. Also, there is a false certificate on the back of the policy whereby Jost certified that he had personally seen the insured on the day the application was completed and that each of the questions had been separately asked and correctly answered to the best of his knowledge. Jost testified that he signed this false certificate because Avalone had only a temporary license.
The applications were submitted along with the initial premium, and the policies subsequently issued to Gonzaba and each of his employees. Torres' policy was kept in the safe of the lumber company until after the claim arose. An underwriter for Prudential testified that the questions falsely answered were material to this type risk and that the policy would not have been issued if such application had reflected Mrs. Torres' correct medical history. On February 25, 1967, Mrs. Torres consulted a doctor relative to a severe abdominal pain which subsequently led to her hospitalization for a hysterectomy operation. On August 15, 1967, the son was hospitalized for a tonsilectomy.
Here the record does not show when Prudential discovered the false answers in the application of January 5, 1967. It was not until September 5, 1967, that Prudential wrote Torres a letter and advised that unless they agreed to exclude Mrs. Torres as an additional medical insured, the policy would be rescinded. Torres did not respond to such offer, and this suit was subsequently filed. No explanation is given for the delay in not paying or denying the claim of Mrs. Torres which had accrued in March, 1967. The September 5th letter infers that an investigation was begun shortly after the claim accrued and it is reasonable to assume that Mrs. Torres' health history was learned shortly thereafter, in that the information was easily available. This court could not say from this record that Prudential established as a matter of law that the letter of denial was written within ninety days after it learned of such false answers.
The basic question presented is whether the insurer or the insured as to be charged with responsibility for the ignorance, negligence, or mistake of the agent Avalone, who was responsible for the false answers. The trial court did not err in refusing to submit Prudential's requested issues in that the evidence was undisputed as to how the false answers were made. Thus, the trial court finding in favor or Torres was upheld.