Statement In Insurance Application

Dallas life insurance lawyers need to read this 1979, Amarillo Court of Appeals opinion. It is styled, Allied Bankers Life Insurance Company v. Mary De La Cerda.
On December 27, 1976, Paul A. De La Cerda secured a $9,000 group credit life insurance certificate from Allied. The certificate contained a statement that the insured had not been, nor was being, treated for certain diseases and that he was in good health.
On February 3, 1977, insured died. The cause of death was diagnosed as acute myocardial infarction superimposed upon a previous anterolateral infarction. The bank filed its claim under the certificate, which was denied by Allied. Thereafter, the bank assigned its interest to Mrs. De La Cerda.
Mrs. De La Cerda brought this action against the Allied to recover the proceeds under the life insurance certificate. Allied defended on the grounds that insured breached the good health warranty and made false representations concerning his good health which rendered the certificate unenforceable. Trial was to a jury, who found that insured did not know that any statements in his application were false at the time it was made.
Allied maintained that the trial court erred in overruling its motion for instructed verdict and motion for judgment notwithstanding the verdict because the breach of warranty defense was conclusively established as a matter of law, or alternatively, that the court erred in failing to submit the warranty defense to the jury because it was raised by the evidence. Both of these points are predicated upon a determination that the good health statement in the certificate is a warranty rather than a representation.
The Texas Supreme Court has recognized that a warranty in an insurance contract is ” ‘a statement made therein by the insured, which is susceptible of no construction other than that the parties mutually intended that the policy should not be binding unless such statement be literally true.’ ” In other words, the parties must have intended that the policy stand or fall on the literal truth or falsity of the statement in question. Such warranties which cause forfeiture are disfavored in the law.
A representation is “an oral or written statement which precedes the contract of insurance and is no part thereof, unless it be otherwise stipulated, * * * and relates to the facts necessary to enable the underwriter to form his judgment whether he will accept the risk, and at what premium.” Thus, by definition a representation is not a part of the contract. This, however, does not preclude the inclusion of representations within the policy itself. “Such statements will be given effect only as representations and not as warranties when it is expressly stipulated that they are merely representations, or if it appears from the contract read as a whole that they were so intended.”
In this case, the certificate of insurance signed by Mr. De La Cerda contains the following statement:
I hereby certify that I am not being treated, nor have I been treated for any disease or disorder of the heart, the liver, stroke, high blood pressure, tuberculosis, emphysema, ulcers, paralysis, urinary or kidney disorder, cancer, diabetes, and to the best of my knowledge and belief I am in good health as of the above effective date.
The certificate further provides:
In consideration of the premium and The representation of good health and gainful employment, as shown above, hereby insures the person/persons named above as Insured Debtors for the benefits under the Plan or Plans for which premiums are specified in the Schedule above (but none other), subject to all of the terms, conditions and provisions of this Policy (emphasis added).
This language is clear and unambiguous. The certificate expressly provides that the named person is insured “in consideration of the premium and the Representation of good health.” In light of the rule of contract construction providing that clear and unambiguous terms be given their plain and ordinary meaning, this Court was persuaded that the good health statement is a representation rather than a warranty. Moreover, it found no provision in the certificate which requires a construction that the parties mutually intended that the certificate of insurance not be binding unless such good health statement be literally true.
The Court concluded, as a matter of law, that the statement of good health is a representation rather than a warranty and affirmed the jury findings.