Articles Posted in Interpreting An Insurance Policy

The above title is a good question. Here is my good answer. See an attorney who handles Insurance Law issues.

A Dallas County case decided in 2008, confronted this issue when trying to decide what “replacement” meant in an insurance policy issued by three underwriters on some apartments. On July 2, 2004, fire damaged the property in dispute. A claim was made under the insurance policy for the loss, and the underwriters paid the insureds almost $300,000 as the actual cash value of the property. The apartments were eventually demolished, and the lots remained vacant.

On March 14, 2006, the insureds purchased an interest in an industrial property located in Houston. The insureds notified the underwriters that they were now “replacing” their previous loss and because the insurance policy provided for more money in “replacement” costs, the insureds sought to recover a little over $200,000 more.

The court in this case went into a discussion of various policy terms and the meaning of those terms. A lot of the discussion was favorable to the insureds but eventually the court decided that replacement meant something more similar to what originally existed. In this case it was apartments that were destroyed and the insured did not have to rebuild or replace on the same lot some more apartments. But replacing the apartments with an industrial building in Houston was too much of a stretch.

These cases can be difficult to analyze. Giving good advice to a client who wants to know all their advantages and benefits under a policy of insurance can be difficult for even an experienced insurance attorney. The thing to know is that an attorney who practices law in this area is most familiar with the way the courts analyze these issues.
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Every time a Texas resident in the Dallas Fort Worth area purchases a life insurance policy they are going to be asked who they want to be named as the beneficiary of the insurance policy. The beneficiary “is the person to whom the insurance policy is payable“.

The beneficiary can be an estate, a trust, a trustee, and other people or entities. Most of the time the life insurance is going to name a spouse or child, a spouse being the most common.

What happens if the spouse is named as a beneficiary and the next day, the next year, or 20 years later you divorce your spouse? Easy – just change the name of the beneficiary whom you want to receive the monies upon your demise. Ok, but what if you forget?

This issue was recently discussed in the case, Rachael Ruiz v. The Prudential Insurance Company of America. This was a United States District Court Case filed in the Fort Worth Division of North Texas. The exact residence of the parties is unknown but may have been in the Grapevine, Weatherford, Azle, or Colleyville areas of Tarrant or Parker County.

In this case, the deceased husband had named his wife as a 25% beneficiary of his life insurance policy in October 2005. The couple got divorced in September 2006 in Arkansas, then the husband died in October 2006, without having changed or removed his ex-wife from being named as the beneficiary on the policy. The case addresses other legal questions but points out and discusses how complicated the issues regarding the named beneficiary can sometimes be.

In Texas, the issue of a couple getting divorced without making changes in their insurance policies is addressed in the Texas Family Code. The Family Law statute renders the provision in the policy in favor of the insured’s former spouse as “not effective”. There are a few exceptions that have to be looked at carefully.
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