Insurance Application – Intent To Deceive

Stephenville insurance lawyers know that Credit Life and Disability claims are denied way too often.  The reason for denial is almost always the allegation that there was a misrepresentation in the policy application.  This issue is discussed in a 1983, Houston Court of Appeals [1st Dist.] opinion.  The opinion is styled, Cartusciello v. Allied Life Insurance Company of Texas.

The facts are undisputed.  Cartusciello applied for and was issued a policy from Allied Life on March 7, 1978.  She died on March 8 from coronary thrombosis with lymphatic leukemia listed as a secondary cause of death.  A claim for benefits was made.  The claim was denied due to health status misrepresentations in the application.

Allied Life filed a motion for summary judgment which was granted by the Court.

This appeals court re-stated the five elements of misrepresentation which must be pled and proven before an insurance company can properly deny a claim because of misrepresentation by the insured:

  1.  the making of the representation
  2. the falsity of the representation
  3. reliance thereon by the insurer
  4. the intent to deceive upon the part of the insured in making same, and,
  5. the materiality of the representation.

In a 1980, Texas Supreme Court opinion styled, Mayes v. Massachusetts Mutual Life Insurance Company, the court found that the signature section of the policy, which required the answers in the application be true and correct at the time of delivery of the policy, was in the nature of a representation and not a condition precedent.  The court also recognized that the policy did not contain a clear good health provision and therefore decided that the policy should be examined under the tort theory of misrepresentation.  Under this theory, a fact issue always exists regarding the insured’s intent to deceive, even if the misrepresentation were material to the insurer’s risk.

This court relied on the Mayes’ decision when it overruled a similar summary judgment decree in Estate of Diggs v. Enterprise Life Ins. Co., from the Houston Court of appeals [1st Dist.] 1982.  In Diggs, the appellee moved for summary judgment based on certain false material misrepresentations made by the deceased.  The court held that summary judgment was improperly granted because the appellee failed to include evidence “of the insured’s intent to deceive in the motion for summary judgment.”  This Court stated we find the policy language used in the present case to be similar to that used in both Mayes and Diggs.  Both of these cases teach that intent to deceive or induce the issuance of an insurance policy can never be proved as a matter of law to establish the defense of misrepresentation.  Intentional deception must be pled and proved as a matter of fact.

The motion for summary judgment was reversed and the case remanded for trial.