633 S.W.3d 228
Tex. App.2021Background
- Sergio Arce, Jr. applied for a life policy (Dec. 2016), answered “no” to a question about stomach/liver disease; medical records showed a 2013 hepatitis C diagnosis he had not treated.
- American National issued the policy effective Jan. 4, 2017 (beneficiary: Bertha Arce) after adjusting premium; Sergio died in a car accident 13 days later.
- American National denied the claim in July 2017, refunded the quoted premium with interest, and cited the undisclosed hepatitis C as a material misrepresentation that would have prevented issuance under underwriting guidelines.
- Bertha Arce sued for breach of contract, violations of the Texas Insurance Code (sections 541.060, 541.061, 542.060), attorney’s fees, and later sought class relief; American National moved for traditional summary judgment.
- Trial court granted summary judgment for American National; Arce appealed arguing (1) the trial court erred in overruling her evidentiary objections to the insurer’s summary-judgment proof and (2) the insurer failed to prove the elements (including intent to deceive) necessary to avoid coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of insurer's summary-judgment evidence (Marquis affidavit) | Arce: paragraph asserting premium was collected and policy effective lacks foundation/personal knowledge and is inadmissible. | American National: Marquis’s position and experience provide personal knowledge; even if one statement were conclusory, other unchallenged evidence and the issued policy make error harmless. | Court: Overruling objections was not reversible error; any error was harmless. |
| Whether insurer must prove intent to deceive to avoid life policy under recodified Insurance Code | Arce: longstanding Texas common-law rule (Mayes five-part test) requires proof of insured’s intent to deceive; recodification did not change substantive law. | American National: §705.051 (recodified) omits intent element; insurer need only prove material misrepresentation that affected risk. | Court: Followed Texas precedent requiring intent; intent-to-deceive remains an essential element and cannot be disposed of on summary judgment. |
| Timeliness of rescission / statutory 90-day limitation (§705.005) | Arce: insurer’s rescission asserted beyond the statutory 90-day window, which bars rescission as a defense. | American National: relied on misrepresentation defense tied to issuance and underwriting; did not successfully show timely rescission. | Court: Insurer asserted rescission beyond 90 days; that fact undermines its rescission defense and precludes summary judgment on contract claims. |
| Class claims dismissed without targeted summary-judgment motion | Arce: American National did not seek summary judgment on class claims and did not address them. | American National: where the class representative’s individual claims fail, the entire case (including class claims) may be dismissed. | Court: Because American National did not move on class claims, summary judgment on class claims was improper even if the representative’s claims failed. |
Key Cases Cited
- Mayes v. Mass. Mut. Life Ins. Co., 608 S.W.2d 612 (Tex. 1980) (establishes five-element test—including intent to deceive—for avoiding an insurance policy based on misrepresentation)
- Colonial Penn Life Ins. Co. v. Parker, 362 F. Supp. 3d 380 (S.D. Tex. 2019) (federal court held recodification removed intent requirement from §705.051)
- Fleming Foods of Tex. v. Rylander, 6 S.W.3d 278 (Tex. 1999) (rules on statutory interpretation when codified language differs)
- Medicus Ins. Co. v. Todd, 400 S.W.3d 670 (Tex. App.—Dallas 2013) (court reaffirmed insurer’s burden to prove intent to deceive under pre-recodification law)
- Texas Commerce Bank, N.A. v. Grizzle, 96 S.W.3d 240 (Tex. 2002) (if class representative’s claims are properly defeated, the entire class action may be dismissed)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standard for review of summary-judgment evidence)
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (summary-judgment de novo review)
Outcome: The court reversed the trial-court summary judgment and remanded, holding genuine fact issues (including intent and timeliness of rescission) precluded summary judgment on contract and Insurance Code claims, and that summary judgment on class claims was improper.