Articles Posted in Life Insurance

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.

Life insurance claims attorneys will eventually have a case where the life insurance company knows they owe the life insurance benefits on a policy but are unsure about who to pay.  When this situation arises the Texas Insurance Code, Section 542.058(c), has specific provisions for how the situation should be handled.  Specifically, the life insurance company, when it is unsure who it should pay the policy benefits, has 90 days to interplead the funds into the registry of the Court.

A 2021, from the Northern District of Texas, Dallas Division, discusses how the Federal Courts handle interpleader cases.  This case is styled, American General Life Insurance Company v. Carol Corzo, Brenda Lizbeth Melgar Cruz, Adan Alberto Melgar Cruz, and Daniel Melgar Cruz.

This interpleader action concerns the proceeds of a life-insurance policy issued by American GeneralIn September 2016, Ottoniel Melgar Perez purchased a $300,000 life-insurance policy from American GeneralHe named Defendants, who are his relatives, as primary beneficiaries on the Policy.  A few years later, Perez married Blanca Nelis Chicas (Chicas).  Subsequently, Perez passed away, leaving his $300,000death benefit from the Policy behind.  Chicas and Defendants both submitted claims to American General for the death benefit.

Often times when a claim for benefits is denied, the reason for the denial is that the policy has been cancelled.

“Cancellation” refers to the insurer’s termination of coverage before the end of the policy period.  A cancellation is in contrast to a non-renewal, which involves an insurer’s unwillingness to reissue the policy following the completion of the policy term of coverage.

Most insurance policies contain provisions regarding cancellation and the Courts honor this provisions as can be seen in the 1994, Waco Court of Appeals opinion styled, Truck Ins. Exch. v. E.H. Martin, Inc.  Specific provisions for cancellation of coverage must be precisely followed by the insurer and will be strictly construed by the courts.  This was seen in the 2001, Corpus Christi Court of Appeals opinion styled, Jones v. Ray Ins. Agency.

What is FEGLI?  FEGLI stands for Federal Employee’s Group Life Insurance and is a life insurance program for Federal and Postal employees and annuitants.  The law related to FEGLI is authorized by law and can be found in Chapter 87 of Title 5, United States Code.  The Office of Personnel Management (OPM) administers the Program and sets the premiums.  The FEGLI regulations are in Title 5 of the Code of Federal Regulations, Part 870.

FEGLI is group term life insurance.  It does not build up cash value.  You cannot take a loan out against your FEGLI insurance.

OPM has a contract with the Metropolitan Life Insurance Company (MetLife) to provide this life insurance.  MetLife has an administrative office called the Office of Federal Employees’ Group Life Insurance (OFEGLI).  OFEGLI is the contractor that adjudicates claims under the FEGLI Program.

Repeating what was stated in the post immediate to this one, “It is important to understand how difficult claims that are governed by the Employee Retirement Income Security Act (ERISA) can be.  The law in this area of law is very tough for claimants.”  This is illustrated again in a December 2020, opinion styled, Erica Talasek v. Unum Life Insurance Company of America, et al.  The opinion is from the Southern District of Texas, Houston Division.

The insured, Ben Talasek, had life insurance through a Plan his employer, NOV, offered.  NOV delegated authority and discretion to UNUM to handle claims and made benefit determinations.

Ben was covered by basic life insurance coverage and Ben also enrolled in a voluntary supplemental plan during November 2013.  Unlike the basic life insurance, which did not require medical underwriting, the supplemental life insurance required an employee to submit evidence of insurability and obtain approval for coverage by Unum.  On January 18, 2014, Unum sent Ben a letter informing him of an error in his application and the need for additional information.  Around this time, Ben was diagnosed with pancreatic cancer.  Ben called Unum on January 21, 2014 to check on the status of his application and was told about the January 18 letter.  Ben corrected the error on the Evidence of Insurability Form and supplied additional information.  Ben called Unum again on February 12, 2014 to check on the status of the application and was told that the standard turnaround time for a coverage decision was 4-6 weeks.  On March 3, 2014,several weeks after receiving his cancer diagnosis, Ben provided blood and urine samples and basic health history as part of Unum’s requirement that he prove insurability prior to approval of coverage.  He did not mention the cancer diagnosis.

The Employee Retirement Income Security Act (ERISA) is a confusing area of law for most people who have those type of policies and it is also confusing for attorneys.  An opinion dealing with the time periods for filing a life insurance claim are discussed at length in a 2021 opinion from the Western District of Texas, Austin Division.  The opinion is styled, Dusty Bauer and Allan Agababa v. National Union Fire Insurance Company of Pittsburg, PA and AIG Claims, Inc.

This lawsuit is concerning accidental death benefits owed upon the death of Shelly Bernstein (Decedent).

The Decedent had an accidental death benefit policy through his employer which was funded by National and AIG.  The policy limited conditions under which the death benefits would be paid by providing contractual limitations periods.  Some of those limitations periods read as follows:

This post is a continuation of Parts 1, 2, and 3, posted earlier.  This case involves a life insurance policy claim denial that is governed by the Employee Retirement Income Security Act (ERISA).

The opinion is from the Southern District of Texas, Houston Division, and is styled, Erica Talasek v. Unum Life Insurance Company of America, et al.

As in most ERISA claims, the case is being decided on competing Motions for Summary Judgement.  The Court found in favor of Unum and explained it’s finding in detail.

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