Credit Life Insurance Policy

Insurance lawyers in Menard, Junction, Mason, Fredricksburg, and Kerrville need to read this case from the Southern District Court, Houston Division.  It is styled, Ruben N. Saenz, Individually and as Representative of the Estate of Decideria Saenz, Deceased v. Transamerica Life Insurance Company.

This lawsuit arise out of the denial of an insurance claim for credit life insurance purchased at the time a car was purchased and financed.  Saenz wife died and Ruben Saenz made the claim for benefits.  Transamerica filed a motion to dismiss the case alleging that Saenz does not have proper standing to file the lawsuit.

Because Transamerica’s motion contains factual evidence, the court treats the motion as a factual attack.  As a factual attack, there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of power to hear the case.

The Court has to determine whether the plaintiff has standing, i.e., standing is demonstrated by a plaintiff who has a personal interest in the outcome of the controversy.  For a litigant to have standing to sue in Federal Court, he or she must demonstrate that the actions complained of cause him injury in fact different from that suffered by citizens at large.

Transamerica claims that the real parties in interest — the only parties who have standing to bring suit — are the designated beneficiary of a life insurance policy which in this case is the bank.  The bank is the designated beneficiary because of the lien on the car until it is paid in full.

The court found Saenz has standing under a theory that turns on a surviving spouse’s ability to collect claims due to the community estate.  The Texas Estate Code, Section 453.003(a)(1), states, “If there is no qualified executor or administrator of a deceased spouse’s estate, the surviving spouse, as the surviving partner of the marital partnership, may … sue and be sued to recover community property.”  It is well settled that a surviving spouse has the power to sue to collect claims due to the community estate.

Under Texas law, life insurance proceeds are community property if the premiums on the policy were paid for with community property.

Even though the insured has designated a beneficiary, the surviving spouse is entitled to half the insurance proceeds if the policy was paid for with community property.

Because Texas is a community property state, the insurance company has to pay the beneficiary fifty percent of the policy proceeds and reserve the other half until the claim between the surviving spouse and the named beneficiary can be resolved.  The surviving spouse is entitled to half of the insurance proceeds, even though he is not designated a beneficiary.

Here, it is undisputed that the life insurance policy was purchased while Ruben and his spouse were married, using community property funds.  As the insured, the spouse held an undivided one-half interest in the policy and her husband holds the other one-half interest.  Upon her death, Saenz, as the surviving spouse, held one-half interest in the policy, and he would be entitled to half of the proceeds paid on the policy.

Thus, as the surviving spouse, Saenz has standing to bring suit against Transamerica.