Life Insurance And Premium Payments – 2 Cases

Policy holders in Grand Prairie, Fort Worth, Benbrook, Hurst, Euless, Bedford, Saginaw, Newark, Roanoke, Keller, Grapevine, and other places in Texas might wonder about how premium payments affect coverage. Here are two cases dealing with premium payments and both might seem kind of strange but for these folks they were real and had to be dealt with.
The first case is a Dallas Court of Appeals case decided in 2004. The style of the case is Royal Maccabees Life Insurance Company v. James. Here are some of the facts.
Royal Maccabees Life Insurance Company was sued by the surviving spouse of a police officer seeking an additional $50,000 in life insurance proceeds after the insurer paid the basic $50,000 upon the officer’s death. It was undisputed that the insured applied for the additional $50,000 in coverage. It was also undisputed, however, that the insurer never sent a letter to the insured approving the disputed benefits as required by the insurance policy. The insurer denied the additional $50,000 in coverage and refunded the premiums paid for this coverage. The trial court entered judgment on the jury finding that the insurer breached the contract, committed fraud, and violated the Deceptive Trade Practices Act, the Texas Insurance Code and the duty of good faith and fair dealing. The judgment included mental anguish damages, punitive damages, attorney’s fees and pre-judgment interest. An appeal was filed.
The Dallas Court of Appeals reversed and rendered judgment in favor of the insurer on the breach of contract, bad faith and Insurance Code claims and remanded for a new trial. The appellate court concluded that an insurer’s acceptance of premiums for additional life insurance coverage for more than four years prior to the insured’s death did not waive a policy provision that written approval from the insurer was required before the employee would be entitled to additional life insurance benefits. The court began its analysis by reviewing the breach of contract claim and recognizing well established principles of Texas insurance law holding that waiver and estoppel cannot be used to create insurance coverage. The court reviewed policy language that the insured alleged was conflicting, ambiguous and supported a finding of coverage. Applying equally well settled principles of Texas insurance law holding that jurists should attempt to harmonize two allegedly conflicting provisions, the court found that one of the provisions applied to the first $50,000 of coverage which did not require the insurer’s written approval, while the other provision required written approval for amounts above $50,000.
The second case is also a Dallas Court of Appeals case. It was decided in 1997 and is styled Philadelphia Life Insurance Company v. Means. Here some of the facts in this case.
The plaintiffs brought suit against Philadelphia Life for breach of contract and other theories. Plaintiffs asserted that Philadelphia Life breached the insurance contract by increasing the premiums. The insured stopped paying the premiums and the policy lapsed. The Court of Appeals found that the Philadelphia Life policy was unambiguous and that the policy stated that the policy’s premiums were not fixed, but were flexible, several places in the policy. Therefore, Philadelphia Life did not breach its contract with the insured.
However, the insureds could assert a fraudulent inducement claim against the agent. To prove fraudulent inducement, the insureds had to show (1) a material misrepresentation, (2) the representation was false, (3) the agent knew the representation was false when he made it or he made it recklessly without any knowledge of the truth and as a positive assertion, (4) the agent made the representation intending that the insureds should act upon it, (5) the insured relied upon the misrepresentation, and (6) the insureds suffered injury due to their reliance.
The Court of Appeals indicated that the insureds had alleged that the agent told them that the policy was a fixed premium term life insurance policy and assured them that the premiums would not increase. Therefore, they could assert a claim for fraudulent inducement. The claims for fraudulent inducement were remanded to the trial court for proceedings.
Life insurance companies are going to look for every possible way to keep from paying policy benefits. When a life insurance claim is denied – it is very important that the person being denied benefits seek the advice of an experienced Insurance Law Attorney. Most of the reasons a life insurance company uses for denying a claim can be defeated.

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