Misrepresentations In Life Insurance Applications – Intent

Llano County life insurance lawyers need to know about this 1989, Corpus Christi Court of Appeals opinion.  The case is styled, Maria C. Soto v. Southern Life & Health Insurance Company.

Maria C. brought suit against the Southern Life to collect $4,000.00 in benefits as the beneficiary of a life insurance policy which was issued to her now deceased husband, Jesus G. Soto.  Southern Life denied liability based on misrepresentations made on the application for insurance regarding Mr. Soto’s condition of health and plead the affirmative defense of misrepresentation and fraud.  A jury subsequently found that Mr. Soto had represented in the application for life insurance that (1) he was in good health and free from all disease; (2) he had not been under observation or treatment in a clinic or hospital between May 23, 1980 and May 23, 1985; (3) he had not been attended by a physician between May 23, 1982 and May 23, 1985; and (4) he had no physical defect or infirmity in the form of lung disease.  The jury further found that both Jesus knew these representations were false and that they were intended to induce or deceive Southern Life into issuing Mr. Soto a life insurance policy.  The jury also found that these representations were material to the risk and that Southern Life would not have issued the life insurance policy had it known the true state of Jesus’s health.  Based on these findings, the trial court ordered that Soto take nothing by her suit.  This court affirmed the judgment of the trial court.

Soto states that she testified at trial that she provided Mr. Nava the information for the application, that she informed the agent, Enrique Nava, of Mr. Soto’s hospitalization, illness, and physician name, but that she did not read the application before she signed it.  Soto argues that Mr. Nava failed to write the correct information on the application.

In this case, the controlling issue was whether Jesus G. Soto, by way of  Soto intentionally misrepresented the condition of health answers in Mr. Soto’s application for life insurance.  An affirmative finding on this issue could support a basis for judgment and preclude any recovery under the life insurance contract.  Soto’s requested issue, on the other hand, merely seeks to negate or disprove Southern Life’s affirmative defense and would not, by itself, support a basis for judgment.  In fact, Soto’s requested issue was an inferential rebuttal issue because it presented a contrary or inconsistent theory from the affirmative defense being asserted by Southern Life.  Moreover, even if Soto could claim some form of waiver defense based on Southern Life’s soliciting agent’s acts, Soto failed to set out this defense in her pleadings.

In this case, Southern Life’s pleadings clearly alleged the affirmative defense of misrepresentation and fraud.  Fraud has been construed under the Insurance Code to mean a misrepresentation made willfully and with intent to deceive the insurer.

Likewise, there is some evidence to show that Soto, and not Jesus, actually gave Mr. Nava the information for the application, that Soto signed Jesus’s name to the application, and that she did not read the application before signing it.  Soto further admitted that the answers to the “good health” questions on the application and which were the subject to this special issue were incorrect.  Lastly, there is some evidence to show that she was aware of Jesus’s true health condition and the circumstances surrounding it and that she therefore willfully intended to deceive Southern Life into issuing Jesus a life insurance policy.

A statement may constitute a misrepresentation whether it is innocently or intentionally made.  Thus, a person who makes representations innocently believing them to be true when they are, in fact, false, is charged in law with misrepresentation regardless of his knowledge of the falsity or his intention to deceive.”  By her fifth point of error, Soto contends that the trial court erred by submitting special issue number eight.  This issue asked the jury whether Jesus was negligent in misrepresenting the answers to the good health questions in the application for life insurance.  Specifically, Soto complains that these submissions permitted a finding favorable to Southern Life without requiring knowledge of the falsity of the declarations or the willful intention to deceive or defraud Southern Life.

To avoid a policy of insurance because of misrepresentations, the burden is on the insurer to plead and prove: (1) the making of a representation by the insured; (2) the falsity of the representation; (3) reliance thereon by the insurer; (4) the intent to deceive on the part of the insured in making same; and (5) the materiality of the representation.  Therefore, it is incumbent upon the insurer to prove that the insured made some material misrepresentation “willfully and with design to deceive or defraud,” as an element of this defense.  In short, false statements which are made negligently, carelessly or by mistake are not sufficient to avoid a life insurance policy where the defense is based upon the insured’s misrepresentation of a material fact.

The jury  found that Soto and Jesus knew that the representations were false and that they were intended to induce or deceive Southern Life into issuing Jesus a life insurance policy.  Therefore, this court concluded that any error was harmless.