Life Insurance Lawyers – Misrepresentation

The Amarillo Court of Appeals issued an opinion on August 24, 2021, that is important to anyone having a life insurance claim denied due to an allegation that there was a misrepresentation made in the insurance application.  The style of the opinion is, Arce v. American National Insurance Company.

In this Blog we will set out the facts of the case.  The opinion itself needs to be read if you are handling a life insurance claim that is being denied.  It is important to note that as of the date of this post, the case is on appeal to the Texas Supreme Court.  This is a class action lawsuit.

Appellant, Bertha Arce, Individually and as Representative of All Others Similarly Situated challenges the trial court’s rendition of summary judgment in favor of Appellee, American National Insurance Company, on her claims for breach of contract and violations of the Texas Insurance Code, as well as her claim for recovery of attorney’s fees and class action claims.  Through two issues, Arce contends the trial court erred in (1) overruling her objections to American National’s summary judgment evidence, and (2) granting American National summary judgment on her claims.  We reverse the judgment of the trial court and remand for further proceedings consistent with this opinion.

This is a case involving the denial of a claim under a life insurance policy issued by American National.  In December 2016, Sergio Arce, Jr., Bertha Arce’s son, applied for a life insurance policy with American National.  Arce was the beneficiary of that policy.  Part of the application required that he answer the question of whether, in the last ten years, he had been diagnosed, treated, tested positive for, or been given medical advice for any disease or abnormality of the stomach, intestines, rectum, pancreas, or liver, including cirrhosis, hepatitis, and colitis.  Sergio answered that question with “no” and signed a statement affirming that his answers in the application were “full, complete and true to the best of [his] knowledge and belief.”  However, medical records showed Sergio had been diagnosed with hepatitis C three years earlier, in 2013.  At that time, he did not treat that condition or heed medical advice that he seek treatment or assistance in obtaining treatment.  Under American National’s underwriting guidelines, it would not have issued the policy to Sergio if he had disclosed his hepatitis C diagnosis.

The agent who sold Sergio the policy stated she asked Sergio all of the application questions and recorded the answers he provided.  She did not, however, determine whether he fully understood each question.  American National issued a life insurance policy to Sergio based on his application.  He also signed a form indicating his understanding that the premium he had been quoted had been modified from the original amount to a premium of $91 per month and that the accidental death benefit coverage had been denied.

The policy was issued on January 4, 2017.  It contained an incontestability provision providing that the policy could not be contested after it had been in force during the insured’s lifetime for a period of two years.  Prior to the expiration of that two-year period, American National was entitled to contest the policy for material misstatements made in the application.

Unfortunately, Sergio was in a car accident and died thirteen days after the policy was issued.  Arce submitted a claim for benefits.  American National denied the claim in July 2017, enclosing the applicable portions of the policy and Sergio’s medical records, as well as refunding the $91 premium paid, with interest.  The denial letter explained that while Sergio indicated on his application that he did not suffer from liver disease, including cirrhosis or hepatitis, medical records showed a history of liver disease, untreated hepatitis C, and continued drinking despite counseling that Sergio cease doing so.  It also explained that had Sergio provided accurate information on the application, the policy would not have been issued under American National’s underwriting guidelines.

Arce filed suit against American National in November 2017, alleging breach of contract, violations of sections 541.060, 541.061, and 542.060 of the Texas Insurance Code, and seeking recovery of policy benefits, statutory penalties, and attorney’s fees.  Arce later amended her petition to add claims for class relief.  In February 2019, American National filed a traditional motion for summary judgment, arguing Arce’s claims were barred because Sergio made material misrepresentations in his application for the life insurance policy.  The trial court granted American National’s motion in July 2019, stating it was disposing of all claims and all parties.  The trial court subsequently denied Arce’s motion for new trial and for reconsideration and overruled her objections to American National’s summary judgment evidence.  Thereafter, Arce timely filed her notice of appeal.

So, as of the date of this post, that is where the case stands.


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