Texas Hill Country life insurance lawyers will tell you that a life insurance policy has to be read carefully. This even means that the initial application has to also be read very carefully. This is illustrated in a 1999, San Antonio Court of Appeals opinion. The opinion is styled, Carolyn Noseff v. Tower Life Insurance Company, et al.
Mr. Noseff applied through an agent for a life insurance policy with Tower Life Insurance Company. He died before the policy was delivered. It is undisputed that delivery of the policy and collection of the first premium was a valid condition precedent to the policy’s going into effect. His wife sued alleging that Tower Life failed to use ordinary care in delivery of the policy. Tower Life moved for summary judgment, which was granted. Mrs. Noseff, the wife of Mr. Noseff, filed this appeal.
This San Antonio Court of Appeals affirmed the summary judgment in favor of Tower Life. The policy stated that it would not take effect until “the policy is delivered to the owner and the first full premium is accepted by the Company while the proposed Insured is alive …”. There is no question that Noseff died without taking delivery of the policy, and signing off on the policy amendments. While Texas courts have long recognized that an insurance agent owes a duty to a client at the inception of coverage, Texas does not recognize a claim against an insurance company for failure to deliver an insurance policy. The cases relied upon to establish that an insurance agent can be liable to an insurance applicant if the agent fails to follow through on the promised performance does not pertain to the insurance company’s liability. An agent or broker undertakes to procure insurance for another is paid therefore.
In this case, it appears that Mr. Noseff wished to purchase insurance through his agent, from Tower Life. It also appears that the agent took the relevant information by way of the application but that the policy was evidently presented to Tower Life for review. However, no premium was ever paid. Also, that the application was no assurance Tower Life was going to accept the application. The lesson to be taken from this case is that if a person wants a life insurance policy to take effect immediately, then that person needs to check with the agent and read the policy and application to make sure the coverage takes effect immediately.
The more common reason a policy does not take effect immediately is that the insurance company requires a physical with the result being that the insured is in good health before coverage takes effect.