Life Insurance Claim Denied

A person in Weatherford, Mineral Wells, Aledo, Azle, Springtown, Peaster, Willow Park, Millsap, Brock, Hudson Oaks. or anywhere else in Parker County who has a life insurance policy might want to know about the following case.
The case was decided by the El Paso Court of Appeals in 1989. The style of the case is Southwestern Life Insurance Company v. Doris L. Green.
Here is some background.
James Green had two existing life insurance policies with Southwestern when he was convinced to exchange them for one universal life policy in the amount of $50,000.
In regard to the new $50,000 policy, certain disclosures were made by James on the exchange policy’s supplemental application form. He stated he was a current pack-a-day smoker and also that his gall bladder had been removed. He stated the name of his surgeon and question number 24 was:
24. Who is the doctor who can give us the most up-to-date information concerning your present health?
James responded with the name of Dr. Cavenaugh. The questionnaire then asked for the date of the most recent visit and the reason for the last visit. James answered “flu shot,” and returned the application. James had informed a medical examiner hired by Southwestern that he had been treated for hemorrhoids, gallbladder, and had had a cholecystomy.
He died later from liver failure. It appeared from medical records that James had other problems he had not disclosed, i.e., chronic alcoholism, alcoholic hepatitis and early cirrhosis, spastic bladder, mild cerebral atrophy and depression.
When Doris filed for benefits, Southwestern denied the claim for benefits stating that James had misrepresented the state of his health in the application.
This case was tried to a jury who found in favor of Doris, and Southwestern filed this appeal. This court upheld the jury verdict.
There were multiple points of appeal but the part relevant to the policy was whether or not James “intended to deceive” Southwestern. In that regard, the appeals court had to decide whether “as a matter of law” James intended to deceive Southwestern by his misrepresentations.
Attorneys for Doris, called as a witness, a certified alcoholism and drug abuse counselor, who taught an alcohol and drug abuse course. This witness also held a college degree in counseling psychology and was owner and director of a counseling service. His qualifications were not challenged. He was asked the following questions.
Q. If an individual with alcoholism or an alcohol problem that had not received treatment or joined AA, would answer a question relating to excessive use of alcohol by that individual in the negative, they wouldn’t be answering that to deceive anyone?
A. No.
Q. If you assume with me also those same set of facts that a question was posed to that individual of whether they had live problems, if they would answer that in the negative, would that be consistent with denial also?
A. Yes.
Q. Do people that use too much alcohol deny their other physical problems?
A. Typically so, yes.
Q. All of them?
A. Yes.
The court said this constitutes some evidence that prohibits the court from finding as a matter of law, that the deceased intended to deceive Southwestern into issuing the exchange policy. Plus, this was not a situation where the prospective applicant sought out the company but where the company sought out one of its present policyholders.
The court went on to say the law required for Southwestern to plead and prove five elements before it could avoid a policy based on misrepresentations of the insured. Those five elements are:
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; and
5) the materiality of the representation.
A negative finding on any one of these elements would prevent an insurer from avoiding liability in a misrepresentation. This is currently codified in the Texas Insurance Code, Section 705.004.
These types of cases are great examples of cases where an Insurance Law Lawyer can make a significant difference.