Insurance adjusters who are inexperienced and do not know what they are doing can hurt insureds who just want their claim paid.  Reuters ran a story on September 11, 2017, dealing with the shortage of trained and experienced insurance adjusters after Hurricanes Harvey and Irma.  The story is titled “Insurers Ache For Qualified Inspectors After U.S. Hurricanes”.

Insurance companies were scrambling to find adjusters in Texas and Florida after hurricanes Harvey and Irma hit within two weeks of each other, causing tens of billions of dollars’ worth of property damage.

Although insurance companies maintain a number of adjusters across the U.S. year round, there is a need to redeploy staff from other areas or hire contract adjusters to fill gaps when catastrophes like Harvey and Irma hit.  It is important that these adjusters get deployed quickly because payments on claims is critical to residents and business owners awaiting these insurance payments.

Arlington life insurance lawyers know the requirements insurance companies must meet to successfully defend a life insurance case based on the defense of misrepresentation.  Misrepresentation in the policy application is the most common reason for denial of a claim for benefits.

The Texas Insurance Code, Sections 705.001 to 705.005, prohibits a defense to coverage based on misrepresentations in an application, unless the application is attached to the policy.  The statute is affirmed in the 1994, Texas Supreme Court opinion, Fredonia State Bank v. General American Life Insurance Co.

As was stated in another Texas Supreme Court opinion in 1975 styled, Johnson v. Prudential Insurance Co. of America, “Applications for insurance and other written statements made in that connection are often filled out or written by insurance agents or others and only signed by the insured.  It has often been held that it is the underlying legislative intention to require that the insured have the material terms of the contract at hand during his lifetime in order that he might examine and correct any misrepresentations which have been made the basis of the insurance coverage.”

Grand Prairie life insurance lawyers know that for a life insurance company to establish misrepresentation as a defense for refusing to pay on a claim, that the life insurance company must plead and prove five elements:

  1.  the making of the misrepresentation;
  2.  the falsity of the misrepresentation;

A 1982, 14th Court of Appeals opinion recognizes and upholds that life insurance policies typically exclude suicide as an assumed risk of the carrier.  The opinion is styled, Parchman v. United Liberty Life Insurance Co.

In Parchman the policy excluded suicide as an assumed risk for two years from the policy date and provided a reduced benefit of the premiums paid if death resulted from suicide within that period.

As another example, a 1986, Amarillo Court of Appeals opinion styled, Southern Farm Bureau Life Insurance Co. v. Dettle, provided:  If the insured within two years from the date of issue of this policy shall die by his own hand or act whether sane or insane, the liability of the Company shall be limited to an amount equal to the premiums actually paid, without interest.

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.  This preexisting condition exclusion is discussed in the 1921 Texas Supreme Court opinion, First Texas State Insurance Co. v. Smalley and in the 1935 opinion, Atlanta Life Insurance Co v. Cormier.  It is also discussed in the 1942 Austin Court of Appeals opinion, Cook v. Continental Casualty Co. and the 1938 Dallas Court of Appeals opinion, Universal Life Insurance Co. v. Grant, which discussed an exclusion for death while committing crime.

In First Texas State when discussing the exclusion, the court stated: “It was formerly usual for policies of life insurance to contain numerous conditions on which the amount or amounts paid on the death of the insured might be reduced or entirely defeated.  Among common conditions were those related 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 enforceable 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.  The above were evils to be remedied by the statute, which was enacted in the interest of the insured.  To accomplish the legislative intent, the language of the statute must be given such signification as to afford a reasonable remedy for these evils.  The public policy declared is that the amounts promised to be paid on the death of the insured are not to be withheld nor diminished under limitations or conditions, except to the extent of subsisting the indebtedness to the insurer, including premiums, save in the specially enumerated instances of the insured’s death by suicide or from following specified hazardous occupations.  In this way the contract in this state as to benefits from life insurance is rendered simple and easily understood by all, including those lacking legal or business experience ….  Provisions inconsistent with the statute are void.”

For a beneficiary to recover death benefits, the insured must be dead.  Doubt may arise when the insured disappeared or when there is uncertainty over the identity of the dead body.  This is illustrated in the 1987 Texas Supreme Court case, Davidson v. Great National Life Insurance Co. and in the 1892 U.S. Supreme Court opinion, Mutual Life Insurance Co. of New York v. Hillmon.

Proof of the insured’s death may be aided by a legal presumption.  After a person is absent for seven years, the law will presume the person is dead.  This is pursuant to the Texas Civil Practice and Remedies Code, Section 133.001.

In Davidson, the insured traveled to Tel Aviv, leaving behind some questionable financial dealings.  A badly disfigured body was found near the hotel where he was registered.  His wife claimed the body was his, and she sought death benefits.  The insurer asserted there was a conspiracy to commit fraud and to fake the insured’s death.  Relevant evidence included testimony from an Israeli police officer identifying photos of the body as being photos of the insured.

If insurance benefits are paid to a beneficiary who does not have an insurable interest, that beneficiary holds the proceeds for the benefit of those entitled by law to the proceeds according to a 1894, Texas Supreme Court opinion styled, Cheeves v. Anders.  This proposition was upheld in a Tyler Court of Appeals opinion from 1998, styled, Stillwagoner v. Travelers Insurance Co.

An insurer that knows of an adverse claim but pays the proceeds to someone without an insurable interest may be liable to the proper beneficiary or to the insured’s estate for the full amount of the benefits.

While Texas law requires that the designated beneficiary have an insurable interest, it is not essential to the validity of the contract, and the insurance company may not raise the beneficiary’s lack of an insurable interest as a defense of payment.  When an insurer issues a policy to someone without an insurable interest, the insurer must pay, and the law will decide who gets the proceeds.  This is also from the Cheeves case and the Stillwagoner opinions.

Who has an insurable interest in the life of someone else?

The Texas Supreme Court in 1968, declared that 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.  The opinion is styled, McAllen State Bank v. Texas Bank & Trust Co.

In 1942, the Texas Supreme Court said a person that has a reasonable expectation of pecuniary benefit or advantage from the insured’s continued life has an insurable interest.  This was in Drane v. Jefferson Standard Life Ins. Co.

As it relates to homeowner’s policies, the Texas courts have adopted a rigid rule for when a loss occurs.  The Texas Supreme Court in, Don’s Building Supply, Inc. v. OneBeacon Ins. Co. has emphasized that the applicable rule for when a loss occurs depends upon the language in the policy.

In Don’s Building Supply, the Court interpreted a policy that provided coverage for “bodily injury” or “property damage” that was “caused by an ‘occurrence’ that takes place in the ‘covered territory;'” and “occurs during the policy period.”  The policy defined “property damage” to mean “Physical injury to tangible property, including all resulting loss of use of that property.  All such loss of use shall be deemed to occur at the time of the physical injury that caused it,” or “Loss of use of tangible property that is not physically injured.  All such loss shall be deemed to occur at the time of the ‘occurrence’ that caused it.  Based on this language, the court determined that “property damage under this policy occurred when actual physical damage to the property occurred.”

In Don’s Building Supply, the Court stressed that it was not attempting to fashion a universally applicable rule.  Accordingly, the actual injury or injury-in-fact rule may not apply in all situations.  For example, other cases have determined that a “loss” occurs when the physical damage first manifests itself or becomes apparent.

Insurance attorneys need to read an August 2017, opinion from the 14th Court of Appeals.  It is styled, Tiffany Falkenhagen Thompson v. Geico Insurance Agency, Inc.

Texas Personal Automobile Policy’s require the policyholder to notify the insurer of the policyholder’s acquisition of a replacement vehicle for the coverage to extend to damage to the newly acquired vehicle.  This case is presented on cross motions for summary judgment regarding the notification requirement in the policy.  Tiffany says the policy provision does not apply to leased vehicles or alternatively, the policy language is ambiguous.  Geico says they were not timely notified of the replacement vehicle and thus, there is no coverage.  The trial court ruled in favor of Geico and this appeals court upholds that ruling.

Tiffany owned a 201  Infiniti G37 auto and secured insurance from Geico.  She traded in the G37 and leased a 2015 Infiniti Q50 auto.  A few months later while driving the Q50, Tiffany was involved in an accident.