Misrepresentation In Insurance Policy Application

People in Weatherford, Aledo, Brock, Millsap, Mineral Wells, Springtown, Willow Park, Hudson Oaks, and other places in Parker County need to understand that the ways they fill out an insurance application can be important.
Here is a case where the insurance company lost the argument that the information in the policy application was incorrect. The style of the case is Fredonia State Bank v. General Life Insurance Company. The opinion in the case was issued in 1994 by the Texas Supreme Court. Here are the facts of the case.
The insured person died as the result of a gunshot wound to the head. Prior to his death, he had purchased two life insurance policies, each in the amount of $250,000 issued by General American Life Insurance Company. General American denied the beneficiary’s claims for benefits. Fredonia State Bank, an assignee of one of the two policies and executor of the insured’s estate, sued to collect the proceeds of the policy.
General American asserted as defenses that the insured committed suicide and that the insured had made misrepresentations regarding his medical history, which were material to the risk assumed by General American.
The Bank argued that the insured’s application did not contain misrepresentations and that even if it did, the misrepresentations would not constitute a defense since the application was not attached to the policies when they were issued.
The jury found that (1) the insured did not commit suicide, (2) the medical portion of his application was not attached to the insurance policies, and (3) the insured did not misrepresent his medical history in order to obtain insurance. The trial court granted summary judgment for the Bank. The Appellate Court reversed the trial court’s judgment finding that the great weight and preponderance of the evidence was contrary to the jury’s finding and that the insured had made misrepresentations in order to obtain insurance.
The Texas Supreme Court granted writ and ultimately reversed the appellate court’s decision. According to the Court, the Insurance Code precludes an insurance carrier from relying on misrepresentations contained in an application as a basis for denying claims, unless the application is attached to the insurance policy.
This requirement is intended to enable the insured to have the material terms of the contract at hand, so that he may correct any misrepresentations which may have been the basis of the insurance coverage. In so holding, the Texas Supreme Court disapproved of the Fifth Circuit’s holding in Wise v. Mutual Life Insurance Company of New York, which was decided in 1990, in which the Fifth Circuit concluded that the Insurance Code did not apply to life insurance policies prior to its amendment in 1989, when the work “life” was added to the statute. According to the Texas Supreme Court, even prior to the 1989 amendment, the Texas Insurance Code statute applied to life insurance policies and, therefore, representations in an application not attached to the policy could not be the basis of a misrepresentation defense against a policy.
The Insurance Code provisions discussed above are currently found at Section 1101.003 which reads, “A life insurance policy must provide that the policy or the policy and the application for the policy constitute the entire contract between the parties. And Section 1201.273 which reads, “An insured may not be bound by a statement made in an application for an individual accident and health insurance policy unless a copy of the application is attached to or endorsed on the policy as a part of the policy issued.
Any time a claim for benefits under a life insurance policy is denied by the insurance company, an experienced Insurance Law Attorney needs to be consulted.

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