Life Insurance Denial – Misrepresentation – 1

Life Insurance claims denial attorney are well aware of this 2023 opinion from the Texas Supreme Court.  The opinion is styled, Arce v. American National Insurance Company.
On April 28, 2023, the Texas Supreme Court held that a life insurer seeking to avoid a life insurance policy via a Texas Insurance Code statutory misrepresentation defense must, just like under a common-law misrepresentation defense, prove the insured had “intent to deceive” when it made a misrepresentation in a life, accident, or health insurance application.
In making this ruling, the Texas Supreme Court rejected American’s argument that Texas Insurance Code, Section 705.051 did not require intent to deceive just because the statute was silent on whether intent to deceive was required.
The Court made its by walking through the 2003 recodification of the Texas Insurance Code.  At the appellate court, American unsuccessfully argued that the recodification removed the “intent to deceive” requirement due to substantive changes to Texas Insurance Code, Section 705.51.
In it’s arguments to the Texas Supreme Court, American changed its position and argued that Section 705.051’s plain language provided a misrepresentation defense with no additional limitations.  The Texas Supreme Court noted Section 705.051 had remained the same since 1909 with no substantive amendment to the language in 2003.
The Court further noted that over twenty years before the 2003 recodification, the Texas Supreme Court had established a five part common law test, which required intent to deceive in order to void a policy based on an insured’s misrepresentation.  Thus, this Arce court reasoned the Legislature was presumptively aware of the Texas Supreme Court’s interpretation of the statute requiring an “intent to deceive” element when they amended the statute.  Accordingly, the lack of substantive alteration demonstrated the Legislature’s intent not to eliminate the common law requirement.
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