Life Insurance And Good Health Provision

Grand Prairie life insurance attorneys need to know about this 1979, Texas Supreme Court case. It is styled, A. W. Washington v. The Reliable Life Insurance Company. Here is the relevant information.
In October 1974 Reliable issued three life insurance policies pursuant to separate applications made by the insured, Ozell Washington, who named her son, A. W. Washington, as beneficiary.
The facts and circumstances surrounding the issuance of these policies are as follows.
Ozell Washington was a very sick woman during the last few months of her life. She was a patient in Parkview Hospital in Midland from September 16 to October 11, 1974. Medical records from the hospital show that she was treated for chronic gomerulo nephritis and congestive heart failure. Her feet and ankles were very swollen. She had shortness of breath, which made it difficult for her to speak. It was difficult to obtain a history from her because the effort to talk only enhanced her shortness of breath. Notations in the records categorized her as a “Class IV cardiac” patient and “very, very acutely ill.” Her prognosis was “guarded and grave.” A doctor continued to see her at least twice a week after she left the hospital.
Upon her discharge from the hospital, Ozell went to the home of her son, A. W. Washington, beneficiary of the policies, who lived in Midland. Sometime before October 15, Luther “Luke” Armstrong, an agent for Reliable, came by A. W. Washington’s home and talked to Ozell about taking out some life insurance. She signed two applications for two $1,000 policies. Reliable issued Policy A on October 21 and Policy B on October 15, each in the amount of $1,000 and each naming A. W. Washington as the beneficiary. About this time, Ozell moved into the home of her sister, Viola Smith, who also lived in Midland. There she was visited by Fred Jones, another agent for Reliable, who took her application for a third policy. Reliable issued Policy C on October 28, again for $1,000 and again naming A. W. Washington as beneficiary.
Ozell’s condition thereafter worsened and she entered Odessa Medical Center Hospital on December 16, where she remained until her death on January 20, 1975. The medical records from that hospital showed that she was still having shortness of breath, swollen feet, and heart and lung problems. The death certificate listed the causes of death as cerebral infarction; arterial occlusion acute, intracerebral; and arteriosclerosis. Reliable was duly notified of her death.
Policy A and Policy C contain identical “good health” clauses, which read as follows:
“This Policy shall become effective on the Policy Date if the Insured is then alive and in good health, but not otherwise.”
The parties stipulated that Ozell Washington, the insured, was not in good health within the meaning of the terms of these two policies on their effective dates. A. W. Washington, the beneficiary, urges, however, that the “good health” clauses were waived as a matter of law in that Reliable’s agents knew that Ozell was not in good health at the time the applications were procured. Waiver was an affirmative defense upon which Washington had the burden of proof.
Policy A. Agent Armstrong obtained the application for this policy at the home of A. W. Washington, with whom Ozell was living at the time. Armstrong testified that he had known Ozell for five or six years and that he did not know she was ill. On the day in question, she appeared to him to be in good health. Even A. W. Washington testified that on that day she looked “pretty good” and was “feeling Okay.” This testimony fails to establish as a matter of law that Agent Armstrong knew Ozell was not in good health and that he waived the “good health” provision of the policy. The court of civil appeals therefore correctly held that recovery on this policy was barred.
Policy C. This policy presents a somewhat different situation. Agent Jones obtained the application for this policy at the home of Viola Smith, Ozell’s sister. Three people were present when Ozell signed the application: Agent Jones, Ozell, and Viola Smith. Agent Jones did not testify and there is nothing in the record to indicate or explain his unavailability. Mrs. Smith testified that Ozell looked “horrible,” “like a skeleton,” and “durn near dead.” She stated that Ozell could not sit erect, could not get out of her chair, had difficulty talking and breathing, and that “everybody” who visited commented about her swollen legs. Most importantly, Mrs. Smith testified that she warned Ozell that the insurance company would not accept her because of her poor health.
“Q Well, I understand from your testimony that you do remember your saying that this insurance won’t pay because you are in bad health?
“A Sure did. That was what I said. I said that.
“Q All right. And what did the agent say to you and to Ozell when you said that?
“A He said, ‘Oh, yes, they will pay, they will pay. It is good. They will pay.’ And I never did believe it, and I spoke it.”
On this point, Mrs. Smith was adamant and unswerving, returning to it several times during her testimony. Nevertheless, the court of civil appeals held that Mrs. Smith was “at best . . . an interested witness” and that as such her testimony did not establish waiver as a matter of law.
The court’s judgment was that the cause of action on Policy A be that Washington take nothing.
This can be confusing and illustrates why an experienced life insurance attorney needs to be consulted in these cases.