Insurance lawyers will testify that one of the biggest reasons they see for denial of coverage is the insurance company allegation that there was one or more misrepresentations in the policy application.
This issue is discussed in the 1969, San Antonio Court of Appeals opinion styled, The Prudential Insurance Company of America v. Ignacia Torres et ux.
This lawsuit, a declaratory judgment action, is asking the court to rescind and cancel a policy due to misrepresentations in the policy application.
The facts are substantially undisputed. Torres purchased a policy with Prudential through a group policy with his employer.
Each employee was required to submit an application for insurance. Torres had a limited education and read very little English, and therefore requested that he be permitted to take the form home and let his wife examine it. Torres was told that was not necessary and he signed the application form. The application signed by Torres contains three false answers which are urged by Prudential as the basis for rescission and cancellation of the policy.
In this case, a former statute was cited that is now Texas Insurance Code, Section 705.005. This statute requires the insurer to notify the insured within 91 days after discovery of the alleged misrepresentation, otherwise the misrepresentation is not a defense available to the insurer.
Here the record does not show when Prudential discovered the false answers in the application of January 5, 1967. It was not until September 5, 1967, that Prudential wrote Torres a letter and advised that unless they agreed to exclude Torres as an additional medical insured, the policy would be rescinded. Torres did not respond to such offer, and this suit was subsequently filed. No explanation is given for the delay in not paying or denying the claim of Torres which had accrued in March, 1967. The September 5th letter infers that an investigation was begun shortly after the claim accrued and it is reasonable to assume that Torres’ health history was learned shortly thereafter, in that the information was easily available. The court could not say from the record that Prudential established as a matter of law that the letter of denial was written within ninety days after it learned of such false answers.