Texas House Bill HB3960

Texas 2025 - 89th Regular

• Filed: 3/6/25

Caption

Relating to the effect of certain misrepresentations on certain insurance policies.

Impact

The proposed legislation particularly impacts the rules surrounding life insurance policies, including a clarification regarding when an insurer can contest a policy due to misrepresentation. If enacted, it would require insurers to give proper notice if they intend to rescind a policy based on misrepresentation and to show materiality and intent on the part of the policyholder during a specified timeframe. This effectively alters the conditions under which insurers can deny a claim based on misrepresentation, thus affecting both policyholders and insurance companies.

Summary

House Bill 3960 addresses the impact of misrepresentations in life insurance applications and seeks to amend various sections of the Texas Insurance Code. The bill stipulates that a life insurance policy cannot be rescinded based on a misrepresentation in the application after the second anniversary of the policy's issuance, provided that the premiums have been paid during the two years prior. This aims to protect policyholders who have made premium payments, ensuring they retain their coverage unless certain conditions are met.

Contention

There are notable concerns surrounding this legislation, particularly from insurers who may feel that the bill could limit their ability to manage risk associated with life insurance policies. Insurers might argue that such changes could lead to increased exposure to fraudulent claims. Conversely, advocates for the bill emphasize the necessity of protecting consumers by ensuring that they are not unfairly penalized for minor misrepresentations that do not materially affect the insurer's decision-making process.

Texas Constitutional Statutes Affected

Insurance Code

• Chapter 705. Misrepresentations By Policyholders
  • Section: 002
  • Section: 004
  • Section: 051
  • Section: 101
  • Section: 102
  • Section: 104
  • Section: New Section