Articles Posted in Life Insurance

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 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.

Life Insurance Lawyers need to start out with some basic knowledge.  This Blog site provides a lot of information that is vital to know when a life insurance claim is being denied.  Here is some very elementary information.

Life insurance pays a stated amount of benefits to the beneficiary upon the insured’s death.  Typically, the policy has a “face amount” — that is, a stated value that is payable upon the insured’s death.  Some policies may offer increased benefits if the insured dies from certain causes.  For example, some policies pay “double indemnity” benefits if the insured dies in an accident.

“Term” policies pay a fixed amount stated in the policy.  Whole life policies accumulate cash value, and may pay the face amount plus any accumulated cash value.  On the other hand, if the policy allows the insured to borrow against the policy, the death benefit may be reduced by the amount of any outstanding loans.

The Amarillo Court of Appeals issued an opinion on August 24, 2021, that is important to anyone having a life insurance claim denied due to an allegation that there was a misrepresentation made in the insurance application.  The style of the opinion is, Arce v. American National Insurance Company.

In this Blog we will set out the facts of the case.  The opinion itself needs to be read if you are handling a life insurance claim that is being denied.  It is important to note that as of the date of this post, the case is on appeal to the Texas Supreme Court.  This is a class action lawsuit.

Appellant, Bertha Arce, Individually and as Representative of All Others Similarly Situated challenges the trial court’s rendition of summary judgment in favor of Appellee, American National Insurance Company, on her claims for breach of contract and violations of the Texas Insurance Code, as well as her claim for recovery of attorney’s fees and class action claims.  Through two issues, Arce contends the trial court erred in (1) overruling her objections to American National’s summary judgment evidence, and (2) granting American National summary judgment on her claims.  We reverse the judgment of the trial court and remand for further proceedings consistent with this opinion.

Life Insurance Attorneys can discuss the present state of the law in Texas as it relates to life insurance policies that are governed by State Law.  However, as of the date of this post, there is a new case in the Texas Supreme Court which may change the law or confirm it, depending on your perspective.

PERSPECTIVE

In 2013, the Dallas Court of Appeals decided Medicus Insurance Co. v. Todd.  Todd follows an earlier seminal case regarding alleged misrepresentations in a life insurance application, Mayes v. Metropolitan Mutual Life Ins. Co.  In Mayes, the Texas Supreme Court held that there are five factors that must be proven before a life insurance policy can be rescinded on the basis of misrepresentations in a life insurance application: (1) the making of the representation; (2) the falsity of the representation; (3) reliance on the misrepresentation by the insurer; (4) the insured’s intent to deceive the insurer; and (5) the materiality of the misrepresentation.  In Todd, the Court found that these five factors applied regardless of whether the insurer attempted to rescind the policy for common law misrepresentations or under statutory provisions like section 705.104 of the Texas Insurance Code.  In 2020, the U.S. District Court for the Southern District of Texas added another layer to this discussion in Landeros v. Transamerica Life Ins. Co.  The Landeros Court observed that two different statutes apply to the rescission of life insurance policies – one when the policy is rescinded within two years of its issuance and the other that applies outside the two year period.  Noting that Transamerica Life Insurance Company rescinded the policy within two years of its issuance, the Court determined that section 705.051 is the applicable statute.  Although, the statutes are similar, section 705.104 (applicable in Todd) requires that the misrepresentation be made :intentionally.”  Because section 795.105 (the statute at issue in Landeros) does not contain this requirement, the Court concluded that an insurer who seeks to rescind a life insurance policy within two years from the date of issuance is not required to prove the insured’s intent to deceive.

Accidental Death Insurance claim denials are all too common.  This type of insurance is usually very inexpensive.  This is for a couple of reasons.  One is the vast majority of people die for reasons unrelated to an accident.  The other is the policies have exclusionary language in them excluding coverage for deaths that most would consider to be accidental but they are not covered because of the exclusionary language.  A common example is an exclusion for an accidental death involving drugs or alcohol.

Here is a case that does not involve drugs or alcohol.  Its exclusionary language is different.  This is a 2022 opinion from the Eastern District of Texas, Sherman Division.  It is styled, Shemily Ortiz v. Reliastar Life Insurance Company.

The deceased, William Ortiz, had an accidental death policy with Reliastar.  Upon his death, Shemily made a claim for benefits that was denied by Reliastar based on their contention that Williams death was not covered under the language stating there is no coverage for death “directly or indirectly caused by … Physical or mental illness.”