Deceptive Trade Practices And Homeowners Policy

Here is something that insured people in Grand Prairie, Weatherford, Arlington, Fort Worth, Dallas, Mansfield, and other places in Texas might be curious about. What happens if you have an insurance policy on your house. Next, the house burns down and a claim is made and denied. Next, the homeowner dies! Can the heirs pursue a claim against the insurance company for violations of the Texas Deceptive Trade Practices Act or violations of the Texas Insurance Code?
The Fourth Court of Appeals District of Texas issued an opinion on July 27, 2011, that addressed this question. The style of the case is, Texas Farm Bureau Mutual Insurance Co. v. Shannan Rogers and Cristen Bazan, as legal heirs of Cynthia Bazan, deceased. This case was tried to a jury in the 198th Judicial District Court, Kerr County, Texas, which returned a verdict favorable to the heirs. This appeals court reversed. Here is some background.
In 2008, Cynthia Bazan purchased a house and was required to purchase insurance by the mortgage company. She applied for a policy with Farm Bureau. Farm Bureau initially refused coverage based on a wood-burning stove having inadequate protection. This was remedied and a policy was issued. Later, a fire completely destroyed Bazan’s house and all the contents. Bazan made a claim and Farm Bureau began an investigation which included a background check of Bazan and a “cause and origin” investigation of the fire. Farm Bureau obtained Bazan’s criminal record. Farm Bureau’s fire investigator listed the cause of the fire as “undetermined.”
Later, Bazan admitted in an interview with a Farm Bureau investigator that she had a criminal record, although she expressly denied in both of her insurance applications that she had ever been convicted of a criminal offense. In fact, her record was lengthy. When Farm Bureau’s underwriting manager became aware of the criminal record he made the decision to rescind the policy. Farm Bureau sent notice to Bazan rescinding the policy and returning Bazan’s premium payment based on the concealment of her criminal record on the policy application. The policy contained the following provision:
2. Concealment or Fraud. This policy is void as to you and any other insured, if you or any other insured under this policy has intentionally concealed or misrepresented any material fact or circumstance, made false statements or committed fraud relating to this insurance, whether before or after a loss.
Bazan’s attorney sent a notice letter to Farm Bureau demanding payment and other damages. Farm Bureau still refused to pay and Bazan subsequently sued Farm Bureau.
Bazan later died, a few weeks before the trial. Her children filed a “suggestion of death” with the court asking to proceed as their mother’s legal heirs. Farm Bureau objected but the court allowed the heirs to proceed.
After the trial in which Bazan’s heirs prevailed, Farm Bureau filed this appeal. In the appeal Farm Bureau challenged the Bazan heirs right to pursue the DTPA claim.
This court cited Texas law that says a DTPA claim does not survive the death of the original consumer. The court held that a deceased consumer’s estate cannot pursue a cause of action under the DTPA because the statute does not expressly provide for survival and because the right to recovery under the DTPA is punitive in nature — “a purely personal right.”
As to Farm Bureau’s claim of misrepresentation being grounds to rescind the policy the court said that to void an insurance policy based on the insured’s misrepresentations in the policy application, the insurer has the burden of proving the following: (1) the insured made a representation, (2) the representation was false, (3) the insurer relied upon the false representation, (4) the insured made the false representation with the intent to deceive the insurer, and (5) the false representation was material.
As to this part dealing with misrepresentation the jury found in favor of Farm Bureau and this court upheld that finding.