Life Insurance claims attorneys need to understand the important distinction between statements by the insured that are considered to be representations and those considered to be conditions precedent. If the insured’s statement is considered a representation, a false statement alone will not let the insurer avoid coverage. Each of the elements required by the 1980, Texas Supreme Court opinion styled, Mayes v. Massachusetts Mutual Life Insurance Co., must be shown. In contrast, if the insured’s statement is considered a condition precedent, then falsity alone will allow the insurer to avoid coverage.
It may seem confusing but this representation versus warranty issue is well developed under Texas law. If the statements are considered representations, then to avoid liability under the policy the insurance company must plead and prove: 1) the making of the representation, 2) the falsity of the representation, 3) reliance thereon by the insurance company, 4) the intent to deceive by the insured in making the same, and 5) the materiality of the representation. This is discussed in the 2003, Tyler Court of Appeals opinion styled, Protective Life Insurance Co. v. Russell, the 1996, Austin Court of Appeals opinion styled, American National Insurance Co. v. Paul, and the 1983, 1st District Court of Appeals opinion styled, Cartusciello v. Allied Life Insurance Co.
The same cases recognize that if the language of the policy expressly provides that coverage does not take effect unless the applicant is in good health, the provision is enforceable as a condition precedent. When the language states that answers in the application are true and correct at the time of delivery of the policy, such a requirement is merely a representation. Also, when the language of an insurance policy is susceptible to more than one construction, the policy should be construed in favor of the insured to avoid exclusion of coverage. As was explained by the U. S. 5th Circuit in the 1997, opinion styled, Riner v. Allstate Life Insurance Co., “Short of inserting an unambiguous “good health” warranty demonstrating that the parties intended the contract to rise or fall on the literal truth of an insured’s general certification of good health, Texas has not allowed an insurer to change that result by contracting to make truthful application answers a condition precedent to coverage.” The same Riner court added that “a warranty is a statement made by the insured, which is susceptible to no construction other than that the parties mutually intended that the policy should not be binding unless such statement be literally true.”
Further, “Warranties in insurance applications are strongly disfavored in the law, and even fairly obvious attempts to create warranties in the application process have been rejected by Texas Courts.” This is illustrated in many Texas cases.