Insurance Application Misrepresentations And Their Importance

Mason Texas insurance attorneys need to know a few basics about insurance law when discussing potential cases and the surrounding facts with a client.

To begin with – When is a representation in an insurance application important?  According to a line of cases, including (1) a 2014 federal case styled, Weidner v. Nationwide Property & Casualty Insurance Company, (2) a 1995 Houston Court of Appeals [1st Dist.] styled, Darby v. Jefferson Life Insurance Company, (3) a 1965 Austin Court of Appeals case styled, Manhatten Life Insurance Company v. Harkrider, a “representation is material if it actually induces the insurance company to assume the risk.”

According to a 1976 Waco Court of Appeals opinion styled, Westchester Fire Insurance Company v. English, the insurer must show that it was induced to assume the risk by the misrepresentation.  According to the Texas Insurance Code, Section 705.004(c), this determination is a question of fact — the very language of the statute makes that “fact” clear.  (It is a question of fact whether a misrepresentation made in the application for the policy or in the policy itself was material to the risk or contributed to the contingency or event on which the policy became due and payable.)  This is backed up by case law in a 1985 Corpus Christi Court of Appeals opinion styled, Carter v. Service Life & Casualty Insurance Company, holding that the statute provides the materiality of any false representation is a question of fact.

According to the Texas Supreme Court opinion, Robinson v. Reliable Life Insurance Company, a 1978 opinion, the principle inquiry in determining materiality is whether the insurance company would have accepted the risk if the true facts had been disclosed.  Under Texas law, it is not necessary for the insurance company to prove that the misrepresentation contributed to the event that caused the loss.  Rather, a finding that the misrepresentation was material to the risk is sufficient ground for avoiding the policy.

A circumstance to be aware of here is as follows:  Say a person applies for life insurance and in the application the applicant misrepresents his health condition.  Then, eight months later the person, who happens to be a truck driver, dies in a traffic accident that has nothing to do with his health situation.  Is there coverage?  There may be.  But the fact that the cause of death is totally unrelated to the misrepresentation is not a defense.  However, most juries may take a different view, and that scenario certainly presents a better case for the applicant when trying the case, than a situation where the applicant misrepresents his health about a heart condition and then eight months later dies due to an issue related to the heart condition.

The wise thing to do is to see an experienced life insurance attorney any and every time a life insurance company denies a claim for life insurance benefits, regardless of the reason.