Articles Posted in Life Insurance

Life Insurance Claim Denials are getting more and more common.  But, the insurance companies are beginning to jump ahead of the denials and starting to rescind the policies based on their assertion that there were/are misrepresentations in the insurance application.

Statutory Requirements – In addition to common law standards, several statutory provisions regulate an insurer’s ability to avoid coverage based on a misrepresentation by the insured.  These are found in the Texas Insurance Code, Chapter 705.

The statutes provide:

Life Insurance Lawyers who handle claims denied due to the claim that a misrepresentation was made in the life insurance application must read this 2021, opinion from the Amarillo Court of Appeals.  It is styled, Bertha Arce, Individually And As Representative Of All Others Similarly Situated v. American National Insurance Company.

The deceased insured, Sergio Arce, Jr. took out a policy of life insurance with American.  Within days, Sergio was killed in a car accident and a claim for benefits was made by Bertha Arce (Arce).  American denied the claim based on the assertion that Sergio misrepresented his health condition in the application for the life insurance.

American filed a motion for summary judgment in the trial court which was granted and this appeal followed.

Life insurance claims can take many turns, as any attorney who handles very many of these life insurance claims can tell you.  Here is a 2021, opinion from the Southern District of Texas, Houston Division.  It is styled, New York Life Insurance Company v. Srinivas Varati.

New York has filed a Rule 12(b)(6) motion to dismiss and a motion for judgment on the pleadings.  The Court granted the motions.

Here is some background.  Varati is the administrator for the estate of Shanti Nakirekanti.  Shanti died on February 18, 2019, the same day as her late spouse, Sreenivas Nakirekanti (Sreenivas).  Sreenivas died by suicide.  On March 30, 2017, New York had issued a term life policy to Sreenivas.  The policy had a face value of $500,000 and listed Sreevinas as the sole “owner.”  The policy, and Sreenivas’s application for the policy, listed Sreenivas’s children Pranay and Nitya, each as 50% beneficiary.  Section 3.4 of the Policy’s base provisions (the Base Policy) defines “Beneficiary” as “the person or entity named in the application, or in a notice you sign that gives us [the Company] the information we need[.]”

Life insurance claims attorneys are needed any time an insurance company denies a claim.  Some cases the attorney will help the client make a recovery and other cases, at least the client had the claim investigated.

The Northern District of Texas, Dallas Division, issued an opinion in July 2021, dealing with a claim for accidental death life insurance benefits.  The styled of the case is, Damon Stewart, et al v. Mutual of Omaha Insurance Company.  The facts of the case are tough.

The insured had an accidental death policy with Mutual of Omaha.  The insured is alleged to have died after suffering a fall and hitting his head that caused his death.  A claim for benefits was denied and this lawsuit was filed.  Mutual of Omaha filed a motion for summary judgment based on the records they obtained in their investigation and there being no reliable evidence to the contrary.

Life insurance denials are much more common than people realize.  Most people would be of the opinion that once a person had paid for life insurance and then a death occurs, that the policy would pay.  That is not the case.

Here is an opinion from the Southern District of Texas, Houston Division.  It is styled, Sydney Joe Gray v. Minnesota Life Insurance Company.  This case involves an accidental death policy that is governed by the Employee Retirement Income Security Act of 1974 (ERISA).

The lawsuit is brought under 29 U.S.C., Section 1132(a)(1)(B).  The deceased, Michael Gray had an accidental death policy he obtained through his employment.  Sydney Gray is the beneficiary of the policy.

Life Insurance lawyers often see disputes over who is entitled to life insurance proceeds.

A 2021, opinion from the Southern District of Texas, Houston Division, is a dispute over who is entitled to life insurance proceeds.  Also, the life insurance policy at issue in this case is governed by the Employee Retirement Income Security Act of 1974, (ERISA).  The opinion is styled, Christine and Denise Morgan v. Prudential Life Insurance – Prudential Life Insurance v. Linda Arriazola and Elvia Barrera.

This case was decided on competing motions for summary judgment.

There are a few statutes in the Texas Insurance Code that are specific to life insurance policies.  These statutes are found in Sections 705.001 through 705.105.

For an insurance company to deny coverage on a life insurance policy based on a misrepresentation in an application, the insurance company has traditionally been required to establish misrepresentation by the insured that will support a defense in coverage by pleading and proving five elements.  These elements are:

  1. the making of a misrepresentation;

Life Insurance claims attorneys need to understand the important distinction between statements by the insured that are considered to be representations and those considered to be conditions precedent.  If the insured’s statement is considered a representation, a false statement alone will not let the insurer avoid coverage.  Each of the elements required by the 1980, Texas Supreme Court opinion styled, Mayes v. Massachusetts Mutual Life Insurance Co., must be shown.  In contrast, if the insured’s statement is considered a condition precedent, then falsity alone will allow the insurer to avoid coverage.

It may seem confusing but this representation versus warranty issue is well developed under Texas law.  If the statements are considered representations, then to avoid liability under the policy the insurance company must plead and prove: 1) the making of the representation, 2) the falsity of the representation, 3) reliance thereon by the insurance company, 4) the intent to deceive by the insured in making the same, and 5) the materiality of the representation.  This is discussed in the 2003, Tyler Court of Appeals opinion styled, Protective Life Insurance Co. v. Russell, the 1996, Austin Court of Appeals opinion styled, American National Insurance Co. v. Paul, and the 1983, 1st District Court of Appeals opinion styled, Cartusciello v. Allied Life Insurance Co.

The same cases recognize that if the language of the policy expressly provides that coverage does not take effect unless the applicant is in good health, the provision is enforceable as a condition precedent.  When the language states that answers in the application are true and correct at the time of delivery of the policy, such a requirement is merely a representation.  Also, when the language of an insurance policy is susceptible to more than one construction, the policy should be construed in favor of the insured to avoid exclusion of coverage.  As was explained by the U. S. 5th Circuit in the 1997, opinion styled, Riner v. Allstate Life Insurance Co., “Short of inserting an unambiguous “good health” warranty demonstrating that the parties intended the contract to rise or fall on the literal truth of an insured’s general certification of good health, Texas has not allowed an insurer to change that result by contracting to make truthful application answers a condition precedent to coverage.”  The same Riner court added that “a warranty is a statement made by the insured, which is susceptible to no construction other than that the parties mutually intended that the policy should not be binding unless such statement be literally true.”

Life insurance lawyers deal with many situations and reasons that life insurance companies use for denying a claim for benefits.  A twist to not paying is where the insurance company does not technically deny the claim, rather the company rescinds the policy.

As a general legal principle, prior to a loss an insurance company has the right to rescind the policy procured through mutual mistake or fraud.  This was stated in a 1931, Amarillo Court of Appeals opinion styled, Forrester v. Southland Life Insurance Company.

The benchmark case on this issue was issued by the Texas Supreme Court in 1980, in an opinion styled, Mayes v. Massachusetts Mutual Life Insurance Co.  In Mayes, the court stated that an insurance company may rescind a policy based on the insured’s misrepresentation, if the insurer pleads and proves the following elements:

Life insurance lawyers will have situations where a person has died and the issue is whether or not the death was an “accidental death” and did any exclusion apply to the accidental death.

Here is a 2021, opinion that deals with an accidental death policy with an exclusion and on top of that, the policy is governed by the Employee Retirement Income Security Act (ERISA).  The opinion is from the United States Court of Appeals, 5th Circuit.  It is styled, Luis Lebron v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania; AIG Claim, Incorporated.

Luis had an accidental death policy he purchased through his employer that insured himself and his wife, Barbara.  The policy was issued by National Union and contained an exclusion for death caused “in whole or in part” by “illness, sickness, disease, bodily or mental infirmity, medical or surgical treatment (unless treating a covered injury), or bacterial or viral infection, regardless of how contracted (except when bacterial infection results from an accidental cut or wound or accidental food poisoning).”  Under this ERISA plan National Union had authority to determine benefit eligibility as the plan administrator.

Contact Information