362 F. Supp. 3d 380
S.D. Tex.2019Background
- Decedent Robert Parker applied for life insurance on October 30, 2014 and signed a statement that his answers were true; Question 3b asked whether in the past three years he had "been treated for" drug or alcohol abuse, to which he answered "no."
- Colonial Life issued the policy in November 2014; Parker died within seven months of issuance and before the two-year incontestability period expired.
- VA treatment records from November 2011 through late 2014 document repeated diagnoses, treatment, counseling, AUDIT-C screening positives, prescriptions (e.g., acamprosate), and contemporaneous provider notes reflecting ongoing alcohol and historical cocaine problems within the three-year window before application.
- Colonial introduced uncontroverted evidence that, had Parker answered "yes," the application would have been declined (policy would not have been issued).
- The insurer also asserted the policy lapsed for unpaid premiums; the court assumed, for the rescission analysis, hypothetical payment of premiums and addressed misrepresentation under the Texas Insurance Code.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Parker misrepresented prior substance abuse/treatment on application | Parker answered "no" but VA records show he had substance-abuse diagnoses and treatment in the prior 3 years, so the representation was false and material | Parker allegedly did not believe he had a problem; therefore the answer was not knowingly false and mere inaccuracy should not void the policy | Court: The answer was false as a matter of law given VA records; misrepresentation was material and supports rescission |
| Whether insurer must prove intent to deceive for rescission (effect of 2005 Texas Insurance Code recodification) | Under Tex. Ins. Code §705.051 (life/accident/health), for policies <2 years insurer need not prove intent; intent requirement applies only on/after the 2nd anniversary per §705.104 | Defendants: Mayes (common-law) requires proof of intent to deceive; omission of intent in statute should not eliminate it | Court: Legislative recodification removed the general intent requirement for policies within first two years; insurer need not prove intent for this policy issued Nov. 2014 (death within 2 years) |
| Reliance and materiality of the misrepresentation | Colonial credibly shows it did not know the misrepresentation was false and would not have issued the policy if told the truth, so reliance and materiality are met | Defendants dispute that records show treatment/abuse sufficient to prove falsity/materiality | Court: Reliance and materiality satisfied by insurer's evidence that truthful answer would have prevented issuance |
| Effect of lapse for unpaid premiums on relief | Plaintiff prevailed on rescission independent of lapse; court assumed payment for statutory analysis | Defendants argued policy lapsed before death so benefits not owed | Court: Even assuming premiums paid, rescission proper due to misrepresentation; summary judgment for plaintiff granted (defendant's MSJ denied) |
Key Cases Cited
- Mayes v. Massachusetts Mut. Life Ins. Co., 608 S.W.2d 612 (Tex. 1980) (traditional five‑element test for rescission of an insurance policy for misrepresentation)
- Robinson v. Reliable Life Ins. Co., 569 S.W.2d 28 (Tex. 1978) (materiality defined as inducing insurer to assume the risk)
- Federated Life Ins. Co. v. Jafreh, [citation="392 F. App'x 280"] (5th Cir. 2010) (discussing effect of Texas Insurance Code recodification on rescission law)
- Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278 (Tex. 1999) (courts must enforce clear statutory language and not alter code provisions by prior law)
- Traxler v. Entergy Gulf States, Inc., 376 S.W.3d 742 (Tex. 2012) (presumption that legislature is aware of caselaw when enacting or recodifying statutes)
- Crosstex Energy Servs., L.P. v. Pro Plus, Inc., 430 S.W.3d 384 (Tex. 2014) (statutes should be interpreted to avoid rendering provisions meaningless)