Temporary Life Insurance Policy

Here is an interesting twist for local life insurance attorneys. This is a 1997, Fifth Circuit Court of Appeals case. It is styled, Riner v. Allstate Life Insurance Company.
Riner sued Allstate after Allstate refused to pay benefits under a temporary insurance agreement on the life of her father, Robert Marriott. Allstate defended on the theory that alleged misrepresentations in the insurance application absolved it of liability . The district court granted summary judgment (MSJ) in favor of Allstate, and Riner appealed. The Court reversed the MSJ and ruled in favor of RIner.
Prior to 1994, Mr. Marriott had five back surgeries, which left him with chronic back pain and in depression. Riner wanted to take a life insurance policy naming Riner as beneficiary. On June 29, 1994, Allstate sent an agent to Mr. Marriott’s home to take his application information. Allstate’s lengthy standardized application contained a list of medical questions. The applicant responded to those questions by checking boxes marked “yes” or “no.” When a box was marked “yes,” the application contained additional space for further explanation by the applicant. Mr. Marriott disclosed that he had chronic back problems and certain other medical problems. Mr. Marriott’s application is marked “no,” however, with respect to whether he had ever received treatment for the use of alcohol or received treatment for depression within the past three years.
Mr. Marriott explained to the agent that he was “groggy” from medication he was taking for back pain. After completing the application, the agent requested an initial premium check in the amount of $276.23. The record reflects that Mr. Marriott was too affected by the painkillers he was taking to complete the check. For that reason, the agent completed the premium check, which was then signed by Mr. Marriott. In return, the agent issued a “Receipt and Temporary Insurance Agreement” to Mr. Marriott. Although the agent left a copy of the agreement, the agent did not leave a copy of Mr. Marriott’s application with Mr. Marriott. The temporary insurance agreement provided that Mr. Marriott’s premium was received as “payment for life insurance” in the amount of $100,000. The agreement further provided that temporary coverage would start when Mr. Marriott’s medical exam was completed. Mr. Marriott completed the medical exam on July 26, 1994.
Six days after the exam, Mr. Marriott died suddenly of either an aneurism or heart disease. A claim for benefits was made. Allstate denied liability because it concluded that, contrary to Mr. Marriott’s answers in the application, he had received treatment for his use of alcohol and for depression. Riner sured for violations of the Texas Insurance Code.
The Court ruled, after lengthy discussion, that the coverage under the temporary policy began once Mr. Marriott completed the medical exam.
The Court also ruled that misrepresentations made in a life insurance application are an affirmative defense to payment of the policy benefits. That defense is qualified, however, by the statutory rule that statements made in a life insurance application are not admissible to establish a misrepresentation unless the application is attached to and made part of the insurance policy and this rule includes temporary policies.
Allstate warns that including temporary insurance agreements within that group of contracts subject to Texas Insurance Code, Section 705.103, will render insurers unable to protect themselves from uninsurable risks. The Court responded by pointing out that Allstate could have protected itself from the effect of any misrepresentations by simply attaching a copy of the Mr. Marriott’s application to the temporary insurance agreement.