Misrepresentation In Purchase Of Insurance Policy

Weatherford attorneys and those in Mineral Wells, Aledo, Azle, Springtown, Peaster, Millsap, Brock, Hudson Oaks, Willow Park, and other places in Parker County would want to read the case decided in July 2011, by the San Antonio Court of Appeals. The case is styled, Texas Farm Bureau Mutual Insurance Co. v. Shannan Rogers and Cristen Bazan et al. Here is some background.
In 2008, Cynthia Bazan purchased a house in Kerr County with a mortgage from Regency Solutions, which required her to obtain insurance on the house. Bazan purchased a policy from Farm Bureau. On January 14, 2009, a fire completely destroyed her house and all of its contents. She made a claim and Farm Bureau began a criminal background check of Bazan and the cause of the fire. The fire was determined to be of “undetermined” origin. Bazan, in her interview admitted to a criminal history. However, she had denied the criminal history in her application for insurance. In fact, she had a lengthy criminal history. Farm Bureau made a decision to rescind the policy, thus denying Bazan policy benefits for the fire loss.
The specific policy language relied on by Farm Bureau read:
2. Concealment or Fraud. This policy is void as to you and any other insured, if you or any other insured under this policy has intentionally concealed or misrepresented any material fact or circumstance, made false statements or committed fraud relating to this insurance, whether before or after a loss.
In its denial letter to Bazan, Farm Bureau informed Bazan, “Due to the material representation on the original application concerning your prior criminal convictions, we consider the above contract null and void.”
Bazan subsequently sued Farm Bureau for breach of contract, DTPA violations, unfair and deceptive acts or practices under the Texas Insurance Code, and negligence. She sought damages for mental anguish, treble damages under the DTPA, and attorney fees.
Bazan died before trial but her heirs continued with this lawsuit.
At the conclusion of the jury trial, the jury fund in favor of Bazan in a number of counts and against her in others.
Both sides appealed and there were many legal points regarding this appeal that will not be discussed here. The point that will be discussed relates to the misrepresentation made by Bazan in the policy application.
Farm Bureau argued that because the contract as to Bazan was void based on Bazan’s material misrepresentation there was no coverage.
This court pointed out well settled law as it relates to a misrepresentation. – To void an insurance policy based on the insured’s misrepresentations in the policy application, the insurer has the burden to plead and prove the following: (1) the insured made a representation, (2) the representation was false, (3) the insurer relied upon the false representation, (4) the insured made the false representation with the intent to deceive the insurer, and (5) the false representation was material.
The jury had answered “Yes” as to there being a material misrepresentation, but due to some of the other legal issues presented, which was that there had been a “ratification” of the policy by Farm Bureau, there was a favorable finding for Bazan. However, this favorable finding was reversed by this court based on the “Yes” finding, thus making the policy void and could not be ratified.
This case has to be read carefully to get a good understanding of what happened. It is a must read for Insurance Law Attorneys so that they can learn to distinguish facts and situations and how the law applies, so as to be better able to advise clients as to probable outcomes in their own cases.