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De La Torre v. National Western Life Insurance Company

This action arose from Defendant National Western Life Insurance Company’s (“NWL”) bad faith refusal to pay $400,000.00 in life insurance benefits to Plaintiffs Elia De La Torre and Maria Luisa Diaz.  Specifically,  NWL relied upon an inconspicuous clause contained in Carlos Alberto De La Torre’s application for life insurance which ostensibly limited NWL’s exposure to $50,000.00 during the 60 day period following the execution of the application.  However, NWL’s reliance on this provision was misplaced as Mr. De La Torre filled out his application on 11/10/99 and died 65 days later on 1/15/00.  NWL then issued the policy on 1/20/00.

As a matter of law, the temporary insurance agreement expired on 1/10/00 and thus, Plaintiffs were entitled to the face amount of the policy.  Further, the temporary insurance agreement language limiting NWL’s exposure was ambiguous as it failed to disclose to Mr. De La Torre what would occur if the sixty-day period had expired and his application had not been accepted or rejected.  Finally, the language limiting NWL’s exposure to $50,000.00 was not bolded or highlighted, nor was it set forth in a place that would attract Mr. De la Torre’s attention, thus NWL was unable to rely upon this language to limit its liability in this instance.

FACTUAL BACKGROUND

On November 10, 1999, in Tijuana, Baja California, Carlos Alberto De La Torre Hernandez (“Mr. De La Torre”) applied for a policy of life insurance with NWL in the face amount of $400,000.00.  The beneficiaries were identified as Elia De La Torre (his wife) and Maria Luisa Diaz (his mother). Each was a fifty percent beneficiary. At the time of his application, Mr. De La Torre tendered, and NWL accepted, a premium payment in the amount of $6,020.  This premium represented the entire annual premium based on the policy’s face amount of $400,00.00 and, in accordance with the terms of the temporary insurance agreement, gave rise to immediate coverage.  The temporary insurance receipt provides in pertinent part (translated from Spanish to English):

“Subject to all terms and conditions of the insurance policy applied for in this application, this Agreement & Receipt provides Temporary Insurance in the amount of the lesser of: (a) the amount of insurance applied for; (b) $50,000,
minus the total of all the coverage paid by the Company, at the death of the proposed insured(s), as a result of policies previously issued or applied for; or (c) $250,000 in the aggregate for all insureds listed on the application.  This
Temporary Insurance will take effect on the effective date and as defined on the reverse of this receipt.”

The language limiting the payout under the provisional insurance receipt was neither bolded nor highlighted.  This limiting language was also never discussed with Mr. De la Torre at the time he applied for the $400,000.00 policy.  The subject application also contained the following provisional insurance requirements relating to the effective date of the temporary insurance (translated from Spanish to English):

"Temporary Insurance will take effect on the date that the following four requirements are met: (1) the application is fully completed, including any amendments required by National Western; (2) the initial premium has been paid; (3) all medical exams or tests required by National Western are completed; and (4) as of the date of this
agreement, the proposed insured must be insurable at standard rates for the type and amount of insurance applied for."

Mr. De la Torre met all four of the above-described temporary insurance requirements.  According to its terms, the temporary insurance would be deemed to be terminated in the event that certain conditions were met.  The relevant provisions of the policy in this regard provide:

Temporary Insurance will end on the earliest of the following dates: (1) the date insurance begins under the policy applied for;
(2) the date this application is cancelled or declined; or (3) 60 days have passed since the date of this application.  (Emphasis added).

Since the application was executed on 11/10/99, the provisional insurance expired on January 10, 2000.  As of January 10, 2000, however, Mr. De la Torre’s application had not been cancelled or declined nor had his premium been returned to him.  On January 15, 2000, Mr. De la Torre was killed by unknown assailants.  On January 20, 2000, NWL actually issued Mr. De la Torre’s life insurance policy.  On June 14, 2000, Plaintiffs made a request for payment of full policy benefits i.e. $400,000.00.  On July 21, 2000, NWL responded acknowledging receipt of the request for payment of the face amount of the policy and indicated that the matter was being referred to outside counsel for further review but that it was NWL’s position that only the temporary insurance benefits were available to Plaintiffs. On July 27, 2000, NWL sent a follow-up correspondence indicating that they were investigating the matter and requesting the insured’s cooperation.   

In an interest in cooperating with NWL, Diaz and De La Torre made themselves available to an investigator of NWL and allowed their statements to be taken in August 2000.  The statements were taken under the pretense that NWL was seriously considering the claim and investigating whether there were any grounds for contestability as set forth in the policy.  Unbeknownst to Plaintiffs, NWL had no intention of investigating the claim but instead was simply buying time and seeking to take advantage of the Plaintiffs’ and of their economic circumstances by filing a lawsuit in Texas.  This lawsuit was stayed pending the outcome of the instant action. 

The case resolved for the policy limits of $400,000.00.  NWL was represented by the law firm of Luce Forward.