Life Insurance Attorney must read this 2023 opinion from the Texas Supreme Court. The opinion is styled, American National Insurance Company v. Bertha Arce.
This is arguably the most important life insurance opinion in many years in Texas and centers around whether or not the insurer must prove intent to deceive when denying a claim for life insurance benefits. The language of the Court in defining this issue is thus:
The primary issue before us is whether the common-law scienter requirement is repugnant to the plain language of section 705.051 of the Texas Insurance Code, which provides that “[a] misrepresentation in an application for a life, accident, or health insurance policy does not defeat recovery under the policy unless the misrepresentation: (1) is of a material fact; and (2) affects the risks assumed.”
In it’s ruling the Court stated:
We hold that section 705.051 does not displace the common-law rule because the statute prescribes necessary, not exclusive or sufficient, conditions for denying recovery under a contestable policy.
The facts of this case are short and can be read from the opinion.
This opinion and it’s backdrop are complicated unless someone understands the law in Texas prior to the decision. Having said that some of the relevant information is that for a hundred years the Courts have required that a life insurance claim denial based on a misrepresentation in an application for life insurance required a showing that the alleged misrepresentation be made intentionally. This has long been the requirement.
In recent opinions, the Federal Courts had began issuing opinions that stated it was not necessary for the life insurance company to show intent regarding any alleged misrepresentation. Some State Courts began following the Federal Courts and making summary judgment rulings in favor of the life insurance companies.
The basis for the recent Federal and State Court ruling were premised on a recodification of the Texas Insurance Code.
This Blog will not cite all of the 23 page discussion of the Texas Supreme Court on this issue. For lawyers, it must be read.
For non-lawyers who read this Blog, the important take-away is that a life insurance claim denial based on an alleged misrepresentation in an insurance application form should not be taken as final. When/if a claim for benefits is denied, it is vital that the advice of an experience Life Insurance Lawyer be obtained.