Life Insurance Denial – “Good Health”

Here is a 2007, United States Fifth Circuit Court of Appeals opinion dealing with life insurance claims and “Good Health” clauses.  The opinion is styled, Assurity Life Insurance Company v. Grogan.
The insured purchased a $1,000,000.00 whole life insurance policy from the carrier with the condition precedent for coverage that the policy did not go into effect until the “first full premium was paid during the Proposed Insured’s lifetime and continued good health.”  Shortly after purchasing the policy, the insured had a biopsy performed on a lump on his neck and was diagnosed with Hodgkin’s disease.  The insured died from complications a few months later.  The carrier brought a declaratory judgement action seeking a declaration that the life insurance policy never took effect due to the failure of a condition precedent.  The wife counter-claimed for breach of contract.  The carrier subpoenaed the insured’s medical records, which showed that the insured had ongoing medical treatment for issues related to the lump on his neck for the past several years.  The trial court held for the wife, finding that the insurance policy did take effect and that the wife was entitled to the proceeds.  The carrier appealed.
The Fifth Circuit Court of Appeals reversed, holding that the “good health” condition precedent for coverage had not been met because although the Hodgkin’s disease had not been officially diagnosed before the policy took effect, it had manifested itself earlier through the insured’s ongoing neck problems.  The court found that the “good health” condition precedent was well established in Texas law and this case presented no exception which warranted coverage.  The policy unambiguously stated that in order for it to take effect, the insured/proposed insured must make the first premium payment while in good health.
In all these situations a person or their lawyer must check to make sure the law in this article is still good law.
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