Misrepresentations In Life Insurance Policy

Weatherford lawyers who handle life insurance disputes need to know the law relating to when an insurance company can void a policy after it has learned of a misrepresentation. The particular statute can be found in Texas Insurance Code, Section 705.005.
A 1969 case from the San Antonio Court of Appeals helps to show how this statute works. The style of the case is, Prudential Insurance v. Torres.
The facts are substantially undisputed. Prior to January 5, 1967, Torres was an employee of Gonzaba Lumber Company, which was owned by Luis Gonzaba, brother of Mrs. Bertha Torres. For some time, Luis Gonzaba and some of his six employees had considered securing a group insurance policy to provide hospitalization and medical benefits.
Each Gonzaba employee was required to submit an application for insurance. Torres had a limited education and read very little English, and therefore requested that he be permitted to take the form home and let his wife examine it. The application signed by Torres contains three false answers which are urged by Prudential as the basis for rescission and cancellation of the policy. The form is checked to indicate that neither Torres nor Mrs. Torres had previous trouble with diabetes, and that neither had been hospitalized or had consulted a physician during the past five years. Actually, Mrs. Torres suffered from diabetes for which she not only had consulted a physician but for which she had been twice hospitalized within the past five years.
The applications were submitted along with the initial premium, and the policies subsequently issued to Gonzaba and each of his employees. Torres’ policy was kept in the safe of the lumber company until after the claim arose. An underwriter for Prudential testified that the questions falsely answered were material to this type risk and that the policy would not have been issued if such application had reflected Mrs. Torres’ correct medical history. On February 25, 1967, Mrs. Torres consulted a doctor relative to a severe abdominal pain which subsequently led to her hospitalization for a hysterectomy operation. On August 15, 1967, the son was hospitalized for a tonsilectomy.
This Court was met at the outset by Torres’ cross-point that Prudential’s attempt to rescind the policy because of alleged misrepresentations fails because Prudential did not establish that it gave notice to Torres of its refusal to be bound by such policy within a reasonable time after discovering the falsity of the representations as required by Art. 21.17, V.A.T.S. Insurance Code. (currently Texas Insurance Code, Section 705.005) This statute requires that such notice be given the assured within a reasonable time, and further provides that ninety days is a reasonable time. This statutory notice is an essential element of a defense based on misrepresentation.
Here the record did not show when Prudential discovered the false answers in the application of January 5, 1967. It was not until September 5, 1967, that Prudential wrote Torres a letter and advised that unless they agreed to exclude Mrs. Torres as an additional medical insured, the policy would be rescinded. Torres did not respond to such offer, and this suit was subsequently filed. No explanation is given for the delay in not paying or denying the claim of Mrs. Torres which had accrued in March, 1967. The September 5th letter infers that an investigation was begun shortly after the claim accrued and it is reasonable to assume that Mrs. Torres’ health history was learned shortly thereafter, in that the information was easily available. The Court could not say from this record that Prudential established as a matter of law that the letter of denial was written within ninety days after it learned of such false answers.
In any event, the trial court correctly concluded that under the undisputed facts in this case Prudential was not entitled to rescind the policy in question because of the false answers in the application signed by Torres.
This case serves of a good example of some the legal points that an experienced Insurance Law Attorney must know in order to fully help their client.