Articles Posted in Life Insurance

Life insurance lawyers need to read this 2022, opinion from the Fort Worth Court of Appeals.  The opinion is styled, Government Personnel Mutual Life Insurance Company v. Lincoln Factoring.

Many times where a person buys an insurance policy, where they die, where a beneficiary resides, or what the contract says may play a part in determining under which State law applies to disputes over the life insurance policy.

In this case, the question dealt with whether Texas law applied to the case or whether Louisiana law applied to the case.  The facts of the case can be gleamed from reading the opinion.  Here is a brief way the Court looked at the case and what life insurance lawyers need to know about when filing a lawsuit.

Life Insurance claims are usually the type of claims that involve an interpleader action.  Here is a 2022, opinion from the El Paso Court of Appeals that involves an interpleader, however, the interpleader is related to the proceeds of an auto liability policy that involved a death.  Irregardless of the reason for the interpleader, this opinion points out some of the proper procedural aspects related to an interpleader case.

The style of the case is, Theresa Ruebbling, Individually and As Heir Of Victoria Rangel, Deceased v. Foremost County Mutual Insurance Company.

This case stems from a February 19, 2021 automobile accident that killed Victoria Rangel.  Foremost insured the vehicle Rangel was a passenger in at the time of the crash.  It agreed to pay Rangel’s heirs, her parents Theresa Ruebbling and Jorge Rangel, the $100,000 policy limit for bodily injury liability.  Foremost filed an interpleader petition under Texas Rule of Civil Procedure 43 alleging a dispute between Ruebbling and Jorge Rangel regarding the division of the insurance proceeds had caused it “reasonable doubt about how to disburse the settlement proceeds.”  Ruebbling and Jorge Rangel were both named defendants.

The incontestability period of an insurance policy is one of the most important parts of a life insurance contract.

Life insurance policies must contain an incontestability clause — a provision that the 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 requirement is found in Texas Insurance Code, Section 1131.104.  It is also found it sections 705.101 thru 705.105.  The effect of these clauses is to limit the misrepresentation defenses so they can apply only during the first and second years.

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

Life Insurance Lawyers need to be aware of Texas Insurance Code, Section 705.005.

This statute says in relevant part that an insurance company may use as a defense a misrepresentation made in the application for or in obtaining an insurance policy only if the insurance company shows at trial that before the 91st day after the date the insurance company discovered the falsity of the representation, the insurance company gave notice that the insurance company refused to be bound by the policy to the owners or beneficiaries of the insurance policy, if the insured is deceased.

The above statute is discussed in a 1969, San Antonio Court of Appeals opinion styled, Prudential Insurance Company of America v. Torres.

What if a life insurance company denies a claim for life insurance benefits based on their contention that the insured committed suicide?

A 1982, opinion from the 14th District Court of Appeals styled, Parchman v. United Liberty Life Insurance Company, correctly states that life insurance policies typically exclude suicide as an assumed risk.

In the Parchman case, the policy excluded suicide as an assumed risk for two years from the policy date and provided a reduced benefit of the return of all premiums paid if death resulted from suicide within that period.

Life insurance claims attorneys have information about how life insurance claims should be handled that is valuable to someone who believes they have been wronged by an insurance company.

It will occasionally happen that the life insurance company pays the wrong person as the beneficiary of the policy.

Texas Supreme Court law going back to 1894 says that if insurance benefits are paid to a beneficiary who does not have an insurable interest, that beneficiary holds the proceeds for the benefit of those entitled by law to the proceeds.  The 1894, case is Cheeves v. Anders.  This position is supported as late as a 1998, opinion from the Tyler Court of Appeals styled, Stillwagoner v. Travelers Insurance Company.

To be able to recover from a life insurance policy a person has to be named as a beneficiary, the majority of the time.  However, even if a person is named as a beneficiary they still have to have an insurable interest in the deceased to be able to recover.

As stated in the 1942, Texas Supreme Court opinion, Drane v. Jefferson Standard Life Ins. Co., “A person that has a reasonable expectation of pecuniary benefit or advantage from the insured’s continued life has an insurable interest.”

In the Drane case, although not related by blood or marriage to Harry Ezell, Jr., not indebted to him in any way, his godmother Dorothy Drane named him as beneficiary in two policies.  Upon her death, the executor of her estate, her brother, asserted that Ezell had no insurable interest.  The facts showed that Miss Drane had bought clothes for the boy for fifteen years, had paid for his medical care, had cared for him while his mother was ill, had taken him on vacations, and sadly was killed in a wreck as she drove to visit him his freshman year in college, “taking him a radio, a cap and an apple pie.”  The court concluded that Ezell did have an insurable interest based on a reasonable expectation of pecuniary benefit and advantage from Miss Drane’s continued life.  “We think that when Dorothy Drane was killed ‘his temporal affairs, his just hopes and well grounded expectations of support, of patronage, and advantage in life’ were impaired ….  It is inconceivable, under the facts of this record, that he would ever have been tempted to destroy her life in order to collect the proceeds of the two policies in suit.”

Experienced Life Insurance Attorneys need to understand the areas of dispute that arise in the context of life insurance.

Life insurance is fairly straightforward.  If the insured dies during the policy term, the insurance company pays the benefits.  The following are some ways that disputes may arise.

a.  The life insurance agent may misrepresent the benefits of his insurer’s policy to induce the insured to switch from another company.

Life Insurance lawyers who read this Blog, or for that matter, anybody who reads this Blog eventually learns that there are many wrongs an insurance agent will commit to get a sale.  Most of their income from an insurance company is based on getting a percentage of the premiums.  In other words, most agents work on a commission basis.

The Texas Department of Insurance regulates life insurance agents and the Texas Insurance Code also regulates insurance agents.

Today’s short focus is on a different form of fraud which is sometimes committed by an agent when selling life insurance.

Life insurance lawyers need to be aware of the common types of life insurance.

Common life insurance types are term, whole life, and universal life.

“Term” policies simply provide a death benefit in return for a premium payment.  at the end of the policy year, or “term,” the insurance ends, and the policy has no value.  Term policies do not accrue cash value.  Because the insured is only paying for the death benefit, term policies are cheaper in the early years.  As the insured gets older, the risk of death increases and so does the premium, so term may become more expensive than the other types.  Insurers typically sell term policies that promise a fixed premium for a set number of years.  For example, an insurer may sell a 10 year term policy that the insured may purchase and renew for the same annual premium during those years, without having to re-qualify.

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