Dallas Fort Worth Insurance Lawyer Blog

A natural question for someone in Grand Prairie, Fort Worth, Dallas, Arlington, or anywhere else in Texas to wonder about. Can the policyholder sue? Can the beneficiary sue? Can an estate administrator sue? The answer is one of those that depends on the facts and circumstances. Here is a case that gives some guidance.
The case is out of the San Antonio Court of Appeals and the opinion was issued in 1996. The style of the case is Mendoza v. American National Life Insurance Company. Here are the facts:
Jerry Mendoza purchased a $25,000 life insurance policy from American National on August 1, 1991. Carrion was a named beneficiary of the policy. The October premium was not paid. The policy provided for a 31 day grace period. On November 1, 1991, the last day of the grace period, American National's district manager, Sitka, verbally agreed to extend the grace period until November 4, 1991. The policy, however, specifically provided that only American National's president, vice-president or secretary had the authority to extend this time period. Jerry Mendoza died in an automobile accident on November 3, 1991. The premium was never paid. In a prior appeal, this court affirmed a summary judgment in favor of American National on Mendoza's breach of contract, negligence and bad faith claims. This appeal concerns the trial court's granting of summary judgment on Mendoza's claims for intentional infliction of emotional distress, Insurance Code and DTPA violations.
In its' opinion the court said that in order to qualify as a consumer under the DTPA, a person must seek to acquire goods or services by purchase or lease and those goods or services must form the basis of the complaint. Lack of privity between a plaintiff and defendant does not preclude a plaintiff from establishing consumer status. Section 541.060 provides standing to "any person" who has been injured by another's engaging in an unfair or deceptive act or practice in the business of insurance. Therefore, a plaintiff may assert causes of action under the DTPA even though the plaintiff is not a consumer. Carrion, a named beneficiary of the policy, would clearly be injured as a result of Sitka's alleged misrepresentations. Therefore, Carrion has standing. Mendoza's mother, in her capacity as representative of his estate, however, does not have standing.
Although the policy provides that Sitka does not have authority to extend its termination date, it is well settled in Texas that such provisions are ineffectual to prevent parol waiver of such provisions and conditions by an authorized agent acting within the scope of his authority. Assuming Sitka exceeded his authority in modifying the agreement, because American National selected Sitka as its agent, American National assumed the risk for Sitka exceeding his instructions. American National cannot escape liability for Sitka's misrepresentation that coverage would be extended until November 4, 1991. The fact that American National conducted an investigation after Mendoza's death to determine if the accident was alcohol related was not conducted in an outrageous manner and could not support an action for intentional infliction of emotional distress.
Only Carrion has standing to assert Insurance Code or DTPA claims. Accordingly, the summary judgment as to Carrion was reversed.
A reading of the above should be confusing to most people. The case serves as yet another illustration for why an experienced Insurance Law Attorney needs to be involved in a claims when an insurance company denies a claim for benefits.

Residents of Grand Prairie, Arlington, Fort Worth, Dallas, and other areas in the State of Texas would want to understand what happens when a policy payment is missed. The following case is one where the policy ended up lapsing. An experienced Insurance Law Attorney may have been able to get a different result.
The case is State Farm Life Insurance Company v. Beaston. The case decided in 1995, by the Texas Supreme Court. Here is some background.
Beaston purchased a graded premium whole life policy from State Farm. The premium on the policy was due on 12/28/93. The thirty-one day grace period expired on 1/28/94. Three days after the expiration of the grace period, Beaston died in an automobile accident. State Farm refused to pay benefits because coverage had expired. Beaston's wife, the beneficiary, brought suit alleging that the policy remained in force because of its dividend-at-death provision. The trial court found the policy ambiguous and instructed a verdict in favor of Beaston with respect to coverage.
The jury found: (1) the defendants had engaged in unfair or deceptive acts and that such conduct was a producing cause of damages to Beaston; and (2) defendants did not: (a) engage in any false, misleading or deceptive act or practice; (b) engage in any unconscionable action or course of action; (c) commit negligence; or (d) commit gross negligence. The jury awarded no policy benefits but awarded $200,000 for past mental anguish and attorney's fees in the amount of forty percent of her recovery. Based on the court's directed verdict and the jury's findings, the court entered judgment in favor of Beaston in the amount of $598,000. The court refused to award damages for mental anguish or to treble the award pursuant to Texas Insurance Code, Section 541.060, because there was no finding the defendants acted knowingly. The Court of Appeals held that mental anguish damages should have been awarded and actual damages should have been trebled. The Court of Appeals further held that Beaston's contingent attorney's fees should be calculated from the total recovery and not the total damages.
In it's analysis of this case, the court said that the interpretation of an insurance contract is governed by the same rules of construction applicable to other contracts. The policy, viewed in its entirety, unambiguously provides that State Farm would use "any available dividend accumulations" to pay all or part of the unpaid premium. Beaston's policy had not accumulated any dividends on its first anniversary and the policy lapsed before its second anniversary. Therefore, no dividend had accumulated. As a result, there were no dividend accumulations available to cure the lapse. Accordingly, Beaston had no coverage under the policy. On an issue of first impression, the Court held a "knowing" violation is required for an insured to recover mental anguish under Section 541.060. Thus, the judgment of the Court of Appeals was reversed and judgment rendered that Beaston take nothing.
This case has a harsh result.
Referring to the first paragraph above, this author is not saying that an experienced Insurance Law Attorney would have resulted in a favorable outcome. Rather, this author is saying that there are many ways to get around late payments and missed payments and that the odds of knowing about these ways are greatly increased with an attorney who has dealt with the situation in the past.

People in Weatherford, Mineral Wells, Aledo, Hudson Oaks, Willow Park, Brock, Millsap, Springtown, Cool, Peaster, and other places in Parker County might be interested in this life insurance case.
The case is a 1996, opinion issued by the Southern District of Texas. The style of the case is Bates v. Jackson National Life Insurance Company. Here are some facts.
Bates' children sued Jackson National for proceeds of a life insurance policy issued to Bates. The children asserted causes of action for breach of contract, bad faith, Insurance Code violations and DTPA violations.
On October 31, 1991, and November 1, 1991, Bates was diagnosed with phlebothrombosis and diabetes, respectively. On November 12, 1991, Bates submitted an application to Jackson National in which he represented he had not consulted or been treated by a physician in the last five years and that he had not submitted to an x-ray or any laboratory studies or tests. Furthermore, Bates represented in the application that he had not been told he had any disease, abnormality or diabetes. The policy issued and the application was attached to and made a part of the policy.
On November 11, 1992, Mr. Bates was murdered by an ex-lover of his girlfriend / common law wife. The kids timely filed a claim with Jackson National. Jackson National denied coverage based on material misrepresentations made by Bates in the application for insurance.
The kids acknowledge that the application contained false representations and that Jackson National relied on those representations. The kids dispute, however, that Bates intended to misrepresent information to Jackson National or that the misrepresentations were material.
The court held that a material misrepresentation in an insurance application does not defeat recovery if the misrepresentation was made innocently and in good faith. An insured's mere knowledge of his or her health condition is insufficient to prove intent to deceive as a matter of law. Accordingly, a fact issue exists as to whether or not Bates intended to deceive Jackson National. What this means is that Jackson National cannot get a favorable ruling in a declaratory judgment action or a motion for summary judgement, which means the kids get to present their case to a jury.
In 2003, the Texas Legislature passed relevant laws dealing with this issue.
Texas Insurance Code, Section 1101.006 says:
(a) ... a life insurance policy must provide that a policy in force for two years from its date of issue during the lifetime of the insured is incontestable, except for nonpayment of premiums.
This means that misrepresentations do not matter after a person has had and been paying for the policy for a period of two years.
Texas Insurance Code, Section 1101.007 says:
A life insurance policy must provide that, in the absence of fraud, a statement made by an insured is considered a representation and not a warranty.
This means that a wrong statement has to be proven to have been made intentionally and not by mistake before the insurance company can hope to avoid payment on the policy.
What is relevant to the reader is that life insurance companies will look long and hard to find ways to keep from paying a policy claim. Upon being notified of a death, they will immediately order all the medical records they can on the insured, then compare those records to the application. When a claim is denied, for any reason, an Insurance Law Attorney needs to be consulted as soon as possible.