Court Opinion

ID: 9662055
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:58:00.635514+00
Date Added: 2024-06-11T18:14:36.182452
License: Public Domain

PHILLIPS, Chief Justice,
concurring with the judgment of the Court.
The prior concurring opinion of June 22, 1994 is withdrawn and the following substituted.
Although I join in the judgment of the Court, I write separately to clarify and respond to Union Bankers’ arguments regarding the meaning and effect of article 3.70-3(A)(2)(a). I also discuss the possible application of our decision on remand:
I.
I agree with the Court that this statute does not, during the first two years from the issuance of an individual health insurance policy, alter the common law rule that the company must establish the insured’s intent to deceive to cancel a health insurance policy on the basis of a misrepresentation in the application for insurance.
Article 3.70-3(A)(2)(a) provides for a time limit on “certain defenses” made by an insurer based on “misstatements ... made by the applicant in the application ... to void the policy or to deny a claim” for loss incurred or disability commencing after the expiration of two years from the date of the policy’s issuance. A “misstatement” in an application for insurance may be either a misrepresentation or, in some circumstances, a breach of warranty. See Odom v. Insurance Co. of Penn., 455 S.W.2d 195, 196 (Tex.1970); Lane v. Travelers Indem. Co., 391 S.W.2d 399, 402 (Tex.1965); Reppond v. National Life Ins. Co. of Am., 101 S.W. 786, 788 (Tex.1907). The “certain defenses” which are the subject of article 3.70-3(A)(2)(a) may therefore include both breaches of warranty and misrepresentations.1
*285Article 3.T0 — 3(A)(2)(a) thus modifies the common law, which does not require proof of intent to deny a claim based on a breach of warranty. While that distinction is not dis-positive in the case before us, as these facts clearly present a misrepresentation,2 it does provide a sound explanation for the purpose of the statute. Thus Union Bankers’ argument that the Court’s construction would render 3.70-3(A)(2)(a) “meaningless” and “useless” is without merit.3
Second, Union Bankers urges the construction of similarly worded statutes from other states to support its claim that the policy may be cancelled during the first two years without proof of intent. As the Court notes, however, Texas has, both before and after the statute, adopted the minority position that intent to deceive is required for cancellation of an insurance policy on the ground of a misrepresentation: See Couoh On INSURANCE 2d § 35:119 and § 35:122 (recognizing split of authority and citing numerous Texas cases supporting view that Texas takes the minority position). Accord Appleman, Insurance Law and Practice § 7297; 43 Am.Jur.2d Insurance § 74 (1982). See also Jerry, Understanding Insurance Law § 102 (recognizing the split of authority). Given this history, the interpretations from states following the majority rule are of little value.
Finally, the application completed by Shelton in this case stated that “to the best of my knowledge and belief the statements above are true and complete and shall be the basis for issuance of a policy and will become a part thereof.” As a general rule, when an applicant for insurance makes a statement “to the best of my knowledge,” the insurer is required to prove intent to deceive to avoid the policy on the ground that the statement was false. See Couch on Insuranoe 2d (Rev.Ed) §§ 35:149-50, 36:35. This rule applies regardless of whether the statement is a warranty or a representation, and whether or not the common law of the jurisdiction requires proof of the insured’s intent to deceive for the defense of misrepresentation. See id.
*286Therefore, I conclude that the Court has reached the correct judgment both under article 3.70-3(A)(2)(a) and, regardless of the statute, under the particular facts of this case.
II.
Because I am persuaded that there is some evidence of bad faith on the part of Union Bankers on the record before us, I also agree with the Court that a remand to the trial court on that issue is appropriate. In the trial court, however, Union Bankers may argue that, as a matter of law, it did not act in bad faith by asserting what our opinions today reveal to be a tenable, although incorrect, legal position. Because Union Bankers does not raise the argument here, it is not our responsibility to determine whether the evidence below is, as a matter of law, “such as to permit the logical inference that the insurer had no reasonable basis to delay or deny payment of the claim, and that it knew or should have known it had no reasonable basis for its actions.” Lyons v. Millers Cas. Ins. Co. of Texas, 866 S.W.2d 597, 600 (Tex.1993).

. For many types of insurance, the Legislature has mandated a policy provision that all statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties. There is not a similar requirement for individual health insurance contracts, however. Compare TexIns.Code Ann. art. 3.70-3 (Vernon 1981) and 28 Tex.Admin.Code §§ 3.1-3.9002 (West 1994), with Act of March 22, 1909, 31st Leg., R.S., ch. 108, 1909 Tex.Gen.Laws 192, 200 (current version at Tex.Ins.Code Ann. art. 3.44(4) (Vernon Supp.1994)) (life insurance policies); Act of May 5, 1931, 42nd Leg., R.S., ch. 101, 1931 Tex.Gen.Laws 172, 173 (current version at Tex. Ins.CodeAnn. art. 3.50 § 2(3) (Vernon Supp. 1994)) (group life policies); Act of May 25, 1985, 69th Leg., R.S., ch. 673, § 1, 1985 Tex.Gen.Laws 2445, 2446 (current version at Tex.Ins.Code Ann. art. 3.51-6 § l(d)(2)(iii) (Vernon Supp.1994)) (group accident and health policies); Act of March 20, 1941, 47th Leg., R.S., ch. 89, § 2(b), *2851941 Tex.Gen.Laws 111, 112 (current version at TexIns.Code Ann. art. 3.52 § 2(b) (Vernon 1981)) (industrial life policies); Act of May 29, 1987, 70th Leg., R.S., ch. 559, § 2 1987 Tex.Gen.Laws 2234, 2235 (current version at Tex.Ins.Code Ann. art. 10.05-1 § (a)(3) (Vernon Supp.1994)) (fraternal benefit societies' life policies); Act of May 5, 1939, 46th Leg., R.S., ch. 6, § 9, 1939 Tex.Gen. Laws 401, 405 (current version at Tex.Ins.Code Ann. art. 14.18 (Vernon 1981)) (all mutual assessment companies' policies, including health); and Act of April 27, 1961, 57th Leg., R.S., ch. 180, § 1, 1961 Tex.Gen.Laws 341, 353 (current version at Tex Ins Code Ann. art. 22.13 § 1(a) (Vernon Supp.1994)) (stipulated premium companies' life policies). Additionally, the distinction has been collapsed in the Texas Administrative Code in various insurance contexts. See 28 Tex.Admin.Code § 3.105 (West 1994) (individual life policies); 28 Tex.Admin.Code § 3.5106(a)(2)(D)(i) (West 1994) (credit life-accident-health policies); 28 Tex.Admin.Code § 3.804(3)(G) (West 1994) (variable life policies); 28 TexAdmin.Code § 26.14(g)(8)(B) (West 1994) (small employer group health policies). But see id. § 26.14(g)(9) (small employer individual health policies).

. This case involves an alleged misrepresentation. Union Bankers did not at any time allege that Mr. Shelton's false statement was a breach of warranty, nor could it. The policy at issue here states, as discussed infra, that "[a]ny wrong or left out statements [in the application] could cause an otherwise valid claim to be denied.” (emphasis added). Such tentative language cannot be interpreted as incorporating the application statements as warranties. See, e.g., Lane, 391 S.W.2d at 402.

. See, e.g., Odom v. Insurance Co. of Penn., 455 S.W.2d 195 (Tex.1970) (holding statements made by insured in application for automobile liability insurance, attached to and made a part of the policy, created warranties and insured was bound by misstatements in application); Texas State Mut. Fire Ins. Co. v. Richbourg, 257 S.W. 1089, 1091-92 (Tex.Comm'n App.1924, judgm’t adopted) (holding certain statements made by insured in application for fire insurance were properly made warranties in the policy and insured’s ignorance of falsity of statements would not prevent avoidance of contract); see also Washington v. Reliable Life Ins. Co., 581 S.W.2d 153, 160 (Tex.1979) (distinguishing Odom); First Continental Life & Accident Co. v. Bolton, 524 S.W.2d 727, 730 (Tex.Civ.App.—Houston [14th Dist.] 1975, writ ref’d n.r.e.).
Indeed, many of the cases relied upon by Inter-Ocean Ins. Co. v. Ross, 315 S.W.2d 71 (Tex.Civ. App.—Fort Worth 1958, no writ), overruled by the Court’s opinion to the extent it may be read to allow avoidance of a policy of insurance based upon a misrepresentation defense without a finding of intent to deceive, are actually "condition cases” or "warranty cases,” which properly do not require proof of an intent to deceive.