Articles Posted in Life Insurance

What is a First Party claim versus a Third Party claim?

A “first party” policy typically involves insurance that provides policy benefits directly to the insured or beneficiary in the event of a loss.  The Texas Insurance Code, Section 541.051(2) defines “first party claim” as a claim “by an insured or policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract that must be paid by insurer directly to the insured or beneficiary.  These types of policies generally include health insurance, life insurance, disability insurance, auto policy insurance, homeowner’s property insurance, and commercial property insurance.

In contrast, “third party coverage” is generally considered to include all forms of liability insurance.  This type of insurance is designed to insure against loss to third parties caused by the insured or another covered person for whom the covered person may be legally responsible.

Employee Retirement Income Security Act (ERISA).  These cases are tough even under the best of circumstances.  Lawyers who handle ERISA cases do not spend time advertising their great results.  The reason is the ERISA law prohibits “great” results.  A win is just getting what you should have received in the first place.  But wins are few and far between, especially in the United States Fifth Circuit.

Here is a case from the Northern District of Texas, Wichita Falls Division.  It’s styled is, Edythe Koch v. Metropolitan Life Insurance Company.

In this case, the Court denied MetLife’s motion for summary judgment which is unusual in these cases, thus, at first blush one thinks a win is coming.  But when the Judge conducted it’s own review of the record, the Court upheld the plan administrator’s denial of accidental life insurance benefits.

Many employer based insurance plans fall under ERISA.  Understanding how the courts look at ERISA cases is important for life insurance lawyers to be able to discuss a case with a client.

The United States Court of Appeals for the Fifth Circuit recently ruled on a case that involved a life insurance policy that was governed by ERISA.  The styled of the case is Jason Freeman v. Securian Life Insurance Company.

Jason Freeman was the father of 17 year old Adrian.  Adrian died instantly when he pulled the trigger of a revolver, the barrel of which he had inserted in his mouth immediately after he had spun the gun’s cylinder and twirled the gun around his finger.  Soon after the death of Adrian, it was determined that the revolver had only one cartridge in the cylinder.  The conclusion by the Deputy Medical Examiner of Bexar County, Texas, was that Adrian’s death was the result of a suicide.

The Texas Insurance Code requires that life insurance policies contain incontestability clauses.  These are a provision that a policy will be incontestable after it has been in force during the lifetime of the insured for two years from its date, except for nonpayment of premiums.  This is found in Section 1131.104 for individual life insurance policies and Sections 705.101 – 705.105 for group life policies.  The effect of these clauses is to limit defenses so they can apply only during the first and second policy years.

The Texas Supreme Court, in 1972, stated the purpose of an incontestability clause is to protect the insured from a contest as to the validity of the policy after the set period has expired.  The opinion is styled, Minnesota Mutual Life Insurance Company v. Morse.

A problem has arisen from the statutes in that they do not specify whether the policy date or the effective date is considered its date; this creates an ambiguity that must be construed against the insurer.  And an insurer may not place a more onerous incontestability clause in the policy than the one prescribed by statute, although it may provide a shorter period than that prescribed.  This was made clear in the 1982, Houston 14th Court of Appeals opinion styled, Parchman v. United Liberty Life Insurance Co.

Life insurance lawyers need to be know this 1990, opinion from the Texas Supreme Court.  It is styled, Koral Industries v. Security-Connecticut Life Insurance Co.

It is not uncommon for a beneficiary of a life insurance policy to concede that misrepresentations regarding health were made on an application for life insurance.  What they will contest is that the insurance company should have known of the misrepresentations.

In the Koral case, Koral sought insurance on one of its key employees, Lewis Lindsey.  Lindsey did not disclose on the insurance application his medical history regarding treatment over the previous five years a history which included hospitalization in 1981, 1982, and 1983, and counseling and treatment for depression and excessive use of alcohol.  Further, he had been treated for mental or nervous disorders from 1976-78, and his physician had treated him for anxiety.

Life insurance lawyers will get calls from people who may or may not be entitled to life insurance proceeds after someone has died.  In these situations, that being situations where more than one person is making a claim for life insurance benefits, the insurance company will usually file a lawsuit against the claimants.  In the lawsuit the insurance company will inform the Court that a person has died, that the life insurance company is unsure who the correct person is to receive the life insurance proceeds, and then asks the Court to make the determination and to allow the insurance company to get out of the lawsuit while the people contesting for the insurance benefits remain in the lawsuit.  This is called an Inter-Pleader Action.

This was situation in a lawsuit in the U.S. Southern District of Texas, Houston Division, recently.  The case is styled, Colonial Life & Accident Insurance Company v. Aletha Burke Wade, Serbrina Wade, Lekisha Wade, and Frank Hollingsworth.

Kendrick Wade purchased a Life Policy in 2012 and designated his mother, Helen Wade, as beneficiary.  In 2014, Kendrick purchased an Accidental Death Policy designating his sisters, Lekisha and Serbrina, as co-equal beneficiaries.  Kendrick married Aletha Wade in 2015 and never amended the policies to name her as a beneficiary.  Kendrick was killed in December 2017.  Helen pre-deceased Kendric and the terms of the Life Policy made Kendrick’s estate the primary beneficiary.

There are lots of difficult cases insurance lawyers will see, but here is one that is hard to too.

Mark Humphreys, P.C., announces the settlement of a life insurance case wherein the beneficiaries claim for benefits was declined due to the assertion by the insurance company that the insured intentionally lied on his application for life insurance.

The insured, at the time of applying for life insurance, had been diagnosed with diabetes. The diabetes had become so severe that he had a partial leg amputation by the time the life insurance was purchased.

Unfortunately, this is an issue that has to be addressed too often.  An article was written in April 2019, in Forbes, that addresses this issue.  The title of the article is “Insurance Issues To Consider In A Divorce.”

Most of the time and fighting and arguing in divorce situations is directed toward emotional, financial, and child custody issues.  What can be lost in the mix is, what is going to happen regarding insurance policies.  Usually the law of the state where the divorce is taking place deals with all these issues.

This Blog deals with Texas and when it comes to divorces and the issues surrounding divorces, the Texas Family Code is the source of information for how Texas Courts address these issues and also, insurance policies.

With regards to life insurance policies, what if the insurance company denies a claim for benefits based on their assertion that a misrepresentation was made in the policy application?

This is covered by the Texas Insurance Code, Sections 705.001 to 705.005 and 705.101 to 705.105.  This is also addressed by a San Antonio Court of Appeals opinion from 1969.  The style of the San Antonio case is, The Prudential Insurance Company of America v. Ignacio Torres et ux.

The facts in Torres are substantially undisputed.  Torres was an employee of Gonzaba, who had six employees.  Gonzaba was considering purchasing group life and health insurance for his employees and their families when he eventually purchased a policy through a new employee, Avalone, of Prudential.

Life insurance lawyers might know this law but most other people do not.  The law is found in the Texas Insurance Code, Sections 705.101 thru 705.105.

These Insurance Code sections require that an application for insurance be attached to the policy when the policy is sent to the applicant.

This issue was before the Texas Supreme Court in a 1994 opinion styled, Fredonia State Bank v. General American Life Insurance.