When Can An Insurance Company Declare A Policy Void?

If you live in Grand Prairie, Arlington, Fort Worth, Saginaw, Haslet, Newark, Rhome, Benbrook, Lake Worth, Crowley, Mansfield, or anywhere else in North Texas, there is a chance you have a life insurance policy. Naturally you would expect that the policy would pay the intended beneficary. Well, that is not always the case, particularly if the insurance company can show misrepresentations in the policy application. Whenever they try to do this, it is vital that an experienced Insurance Law Attorney be contacted.
The Texas Supreme Court took on this issue in a case decided in 1980, styled, Mattie Emmaline Mayes v. Massachusetts Mutual Life Insurance Company. Here are some of the facts in the case.
On May 6, 1976, Albert Mayes signed and delivered to an agent, Part 1 of two applications for life insurance. Mays had not disclosed to Mutual Life that certain answers in his application which were correct when made had become false by the time the policies were delivered. The two policies were identical except for the amount of coverage.
Page three of each of the applications contained a paragraph stating that “To the best of my (our) knowledge and belief, all answers and statements contained herein are full, complete and true and were correctly recorded before this application was signed; …
Both applications required a physical examination of this forty year old prospect and the information relative to this examination is contained in Part 2 of the applications. Part 2 was filled out by Dr. Rattan, Mutual Life’s medical examiner and it contained a number of answers to medial history questions as the result of a May 27, 1976, examination. Question 4 inquired as to whether Mayes within the past five years: (A) had been treated by a physician; (B) had been treated or observed in a hospital; or (C) had undergone an electrocardiogram. Only question 4A was answered yes and the explanation given related to a 1974 physical examination in connection with a previous policy. Questions 5A and 6A inquired if he had been treated for or had any known indication of any disorder of the heart or if he had experienced any pain, pressure or discomfort in the chest. Both were answered no.
The home office of Mutual Life required a reexamine based on elevated blood pressure which was conducted on July 14, 1976. This was cleared and the policies were issued to Mayes but at a higher premium due to the elevated blood pressure.
On June 29, 1976, Mayes felt a chest paid and went to the hospital and was checked out and sent home with the explanation that the pain was probably the result of esophagitis. He had been kept overnight and a number of tests were conducted but the doctor did not believe Mayes had suffered a heart attack.
On July 28, 1976, Mayes saw his doctor and complained of two more episodes of chest pain. Again, the doctor was unable to determine the cause of the pain nor did he diagnose heart disease. On July 25, 1977, Mayes died suddenly of a heart attack.
Here is the question in the case:
Since Mayes heath had changed between May 27, 1976 and the date the policies were delivered, August 17, 1976, did the extent to which his answers to the questions were now changed, was it a misrepresentation by him to Mutual Life thus making the policies void?
The statutes that address this are found in the Texas Insurance Code, Section 705.003 and Section 705.004.
Case law says that an insurance company cannot avoid liability on the ground of misrepresentation by the insured unless there is a finding that the insured intended to procure issuance of the policy by representations known to be false.
These policies did not contain a “good health” contractual provision which would have required that Mayes disclose the medical conditions that changed before the policy was delivered on August 17, 1976.
It is settled law that if the answers to the questions in the application were untrue at the time they were given, the untrue answers constituted misrepresentations, but that is not the case here.
There are five elements that must be pled and proved by an insurance company wishing to void a policy based on the misrepresentation of an insured:
1) the making of the representation;
2) the falsity of the representation;
3) reliance thereon by the insurer;
4) the intent to deceive on the part of the insured in making same; and
5) the materiality of the representation.
In discussing this case the court stated “Insurance policies are traditionally contracts uberrimae fidei and a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer’s option …”
The problem for Mutual Life in this case was that even though Mayes had some problems after signing the application, his doctors led him to believe that it was probably nothing serious.
This case was remanded to the first level appeals court for further consideration so it is not known exactly what happened. But this case is a good read for understanding how misrepresentations in an application for insurance are examined by the courts,