Texas 2025 - 89th Regular

Texas House Bill HB3960 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	89R4360 SCF-F
2	2	By: Paul H.B. No. 3960
3	3
4	4
5	5
6	6
7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to the effect of certain misrepresentations on certain
10	10	insurance policies.
11	11	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12	12	SECTION 1. The heading to Chapter 705, Insurance Code, is
13	13	amended to read as follows:
14	14	CHAPTER 705. MISREPRESENTATIONS BY POLICYHOLDERS OR APPLICANTS
15	15	SECTION 2. Section 705.002, Insurance Code, is amended to
16	16	read as follows:
17	17	Sec. 705.002. APPLICABILITY OF SUBCHAPTER. (a) Except as
18	18	provided by Sections [Section] 705.005 and 705.105, this subchapter
19	19	applies to each insurance policy issued or contracted for in this
20	20	state.
21	21	(b) To the extent of a conflict between this subchapter and
22	22	Subchapter C, Subchapter C controls.
23	23	SECTION 3. Subchapter A, Chapter 705, Insurance Code, is
24	24	amended by adding Section 705.0025 to read as follows:
25	25	Sec. 705.0025. EFFECT OF CHAPTER ON COMMON LAW. To the
26	26	extent of a conflict between this chapter and common law on the
27	27	impact of a misrepresentation in an application for insurance, this
28	28	chapter controls.
29	29	SECTION 4. Section 705.003(b), Insurance Code, is amended
30	30	to read as follows:
31	31	(b) Subsection (a) does not apply if [it is shown at trial
32	32	that] the misrepresentation:
33	33	(1) was fraudulently made;
34	34	(2) misrepresented a fact material to the question of
35	35	the insurer's liability under the policy; and
36	36	(3) misled the insurer and caused the insurer to waive
37	37	or lose a valid defense to the policy.
38	38	SECTION 5. Sections 705.004(a) and (b), Insurance Code, are
39	39	amended to read as follows:
40	40	(a) Except as provided by Section 705.1045 for a
41	41	contestability provision in a life insurance policy, an [An]
42	42	insurance policy provision that states that false statements made
43	43	in the application for the policy or in the policy make the policy
44	44	void or voidable:
45	45	(1) has no effect; and
46	46	(2) is not a defense in a suit brought on the policy.
47	47	(b) Subsection (a) does not apply if [it is shown at trial
48	48	that] the matter misrepresented:
49	49	(1) was material to the risk; or
50	50	(2) contributed to the contingency or event on which
51	51	the policy became due and payable.
52	52	SECTION 6. Section 705.051, Insurance Code, is amended to
53	53	read as follows:
54	54	Sec. 705.051. IMMATERIAL MISREPRESENTATION IN LIFE,
55	55	ACCIDENT, OR HEALTH INSURANCE APPLICATION. A misrepresentation in
56	56	an application for a life, accident, or health insurance policy
57	57	does not defeat recovery under the policy and is not a basis for
58	58	rescission unless the misrepresentation:
59	59	(1) is of a material fact; and
60	60	(2) affects the risks assumed.
61	61	SECTION 7. Sections 705.101, 705.102, and 705.104,
62	62	Insurance Code, are amended to read as follows:
63	63	Sec. 705.101. DEFINITION. In this subchapter, "insurance
64	64	policy" means a contract or policy of life insurance.
65	65	Sec. 705.102. APPLICABILITY OF SUBCHAPTER. This subchapter
66	66	applies to any life insurance policy issued or contracted for in
67	67	this state.
68	68	Sec. 705.104. MISREPRESENTATION IN APPLICATION FOR LIFE
69	69	INSURANCE. A defense based on a misrepresentation in the
70	70	application for, or in obtaining, a life insurance policy on the
71	71	life of a person in or residing in this state is not valid or
72	72	enforceable in a suit brought on the policy on or after the second
73	73	anniversary of the date of issuance of the policy if premiums due on
74	74	the policy during the preceding two years have been paid to and
75	75	received by the insurer, unless:
76	76	(1) the insurer has notified the insured or, if the
77	77	insured is deceased, each beneficiary of the insured of the
78	78	insurer's intention to rescind the policy because of the
79	79	misrepresentation; or
80	80	(2) [it is shown at the trial that] the
81	81	misrepresentation was:
82	82	(A) material to the risk; and
83	83	(B) intentionally made.
84	84	SECTION 8. Subchapter C, Chapter 705, Insurance Code, is
85	85	amended by adding Section 705.1045 to read as follows:
86	86	Sec. 705.1045. MISREPRESENTATIONS IN APPLICATIONS FOR LIFE
87	87	INSURANCE POLICIES IN EFFECT NOT MORE THAN TWO YEARS. (a) In this
88	88	section, "misrepresentation" includes a false statement, omission,
89	89	or other error in an application for a life insurance policy that
90	90	materially impacts the insurer's decision to issue the policy to
91	91	the applicant.
92	92	(b) An insurer may rescind or terminate a life insurance
93	93	policy before the second anniversary of the date of the issuance of
94	94	the policy based on a misrepresentation if:
95	95	(1) the misrepresentation:
96	96	(A) is material to the risk; and
97	97	(B) affects the risks assumed; and
98	98	(2) the premium paid by the insured is refunded.
99	99	(c) Proof of fraud or intent is not required to terminate a
100	100	life insurance policy if the policy contains a contestability
101	101	provision allowing the insurer to contest a misrepresentation in
102	102	the application before the second anniversary of the date of the
103	103	issuance of the policy.
104	104	(d) An insurer must provide notice of rescission or
105	105	termination not later than the 90th day after the date the insurer:
106	106	(1) discovered the misrepresentation; and
107	107	(2) provided notice of the misrepresentation to:
108	108	(A) the insured; or
109	109	(B) if the insured is deceased, the owners or
110	110	beneficiaries of the policy.
111	111	SECTION 9. Section 705.105, Insurance Code, is amended to
112	112	read as follows:
113	113	Sec. 705.105. APPLICABILITY OF OTHER LAW. Subchapter A
114	114	does not apply to a life insurance policy:
115	115	(1) that contains a provision making the policy
116	116	incontestable by the insurer for a material misrepresentation in
117	117	the application for insurance before the second anniversary of the
118	118	date of the issuance of the policy [after two years or less]; and
119	119	(2) on which premiums have been [duly] paid.
120	120	SECTION 10. Chapter 705, Insurance Code, as amended by this
121	121	Act, applies only to an insurance policy delivered, issued for
122	122	delivery, or renewed on or after January 1, 2026. An insurance
123	123	policy delivered, issued for delivery, or renewed before January 1,
124	124	2026, is governed by the law as it existed immediately before the
125	125	effective date of this Act, and that law is continued in effect for
126	126	that purpose.
127	127	SECTION 11. This Act takes effect September 1, 2025.