Texas Probate Litigation

Insurers getting more creative in denying coverage?

The Texas Medical Association is warning of a growing insurance industry practice of canceling an insurance policy after the insured seeks coverage for a catastrophic illness. The patient believes they have coverage in place, but the carrier scours the original application to find reasons to cancel or rescind  coverage.  This article from Medical News Today describes the process:

Someone buys a health insurance policy, fills out all the application paperwork, and pays the premium. Later the person needs medical care and submits the claims to his or her health insurer. Rather than pay the bills, the insurer pores through the patient's paperwork in hopes of finding an "out" - a mistake or omission the person made on his or her application. If it finds an error or omission, the insurance company rescinds the policy on the grounds of the mistake rather than continue to pay the person's medical bills. What's worse, the insurer then attempts to reclaim all previous payments it made under the policy. The company tells everyone who provided that patient's care while he or she was insured - hospitals, doctors, and others - that they are taking the money back.

Certainly, fraud does exist and an insurer needs accurate information to make underwriting evaluations. For example, there is no excuse for failing to list prior cancer treatment or a heart attack.  But should an insurer be able to rescind coverage for a woman's breast cancer because she failed to list prior treatment for acne on her application? 

Unfortunately, I believe this is a growing problem.  I represented a woman last year who was originally approved for long term disability payments.  Weeks later, she received a letter from the insurance company rescinding the disability policy because she failed to list her weight on the insurance application.  Of course, the company had no problem accepting her premiums for two years and never bothered to explain how weight would have caused the mental disability. We had to file suit in Federal Court in order to have the insurance company pay even a portion of the benefits owed.  This wasn't a fly by night small carrier.  Instead, it was one of the larger, publicly traded insurance companies.

The law often doesn't favor the insureds in this circumstance and new legislation is needed to protect the disabled and sick who paid for insurance and believed they were covered.  I urge anyone caught in  a rescission trap to contact a lawyer as soon as possible.

Citizens Bank v. Bryce: Trustee waived arbitration

Texas courts have eagerly enforced arbitration clauses, despite their typical unfairness to consumers and small businesses.  The Texas Supreme Court opened the door somewhat to challenging arbitration clauses when it overturned a large arbitration award against mega donor Bob Perry. 

In Citizens National Bank v. Bryce, the Tyler Court of Appeals relied on the Perry decision and found that the bank, sued as trustee for breach of fiduciary duty, waited too long to compel arbitration.  Specifically, the decision noted that the bank had participated in and sought discovery for twenty months prior to seeking to compel arbitration. It appeared that the bank wanted the benefits of full discovery allowed under the Texas procedure rules, while also enjoying the advantage of having arbitrators instead of Texas citizens deciding the case.

Daughter ripped off dad and landed in jail

This article from Virginia details an unfortunately common scenario of a child taking financial advantage of a parent.  As is typical in these cases, the daughter and her husband isolated the 84 year old man  and had him sign over his assets.  The steps they took to keep him away from from the rest of the family were extreme:

Living with Emma and her husband for nearly two years, Moncie was kept secluded in their home and cut off from contact with other family members and long-time friends. The couple had disabled his vehicles, prevented his use of the telephone and used scare tactics to keep him from leaving the house, according to the court’s findings. Suspecting his food was being laced with drugs, Moncie lost 45 pounds.

The ordeal ended when Moncie pried open a door and escaped into the cold night on Jan. 10, 2008. “He just got desperate enough to leave,” said Pulley. Moncie walked for miles before getting help at a convenience store.

The father sued the daughter to recover his assets.  The trial did not go well for her and the judge ordered her jailed for contempt of court:

The case turned on the credibility of the competing family members, and Alexander did not hesitate to rule for Moncie in Doss v. Doss (VLW 008-8-262.) He wrote, “Emma’s testimony is not credible. She has intentionally given false testimony during the course of the trial. … In contrast to Emma’s testimony, Moncie’s testimony is credible.”

Emma must have sealed her reputation with the judge when she was asked in open court in August what happened to $120,000 from the sale of one of her real estate purchases. “I used the money to pay them,” she said, pointing to the lawyers for herself and her husband. The lawyers later had to acknowledge their retainers were a good deal less than $120,000.

Later, Emma submitted an affidavit purporting to account for the funds, but the judge found it insufficient and ordered Emma locked up for contempt of court.

Describing the hearing, Pulley said the judge told Emma, in effect, “You’ve had two chances to tell the truth. I’m going to send you someplace where you have a chance to think about it.”

“And she’s still there,” Pulley said. Alexander ordered her release if she pays $25,000 of the award

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Estate tax likely to stay

The Wall Street Journal is reporting that Obama is against eliminating the estate tax.  The plan he has proposed provides an exemption of $3.5 million for an individual and $7 million for a couple.  The value of estates above those exemptions will be taxed at a rate of 45%.  Under such a proposal, it is estimated that less than 2% of estates would be subject to taxation.

    The WSJ article does a nice job summarizing the history of the effort to completely repeal the tax.  Repeal has long been billed as a "death tax" issue to protect family farms and small businesses.  The public largely supported the repeal efforts and it appeared repeal was a possibility.

     However, there was always an inherent tension in the repeal group.  Representatives of family farms and small businesses were willing to accept a compromise that would tax only the very largest of estates.  But such compromise was unacceptable to the very affluent, such as the Mars candy family, the Gallo wine family and the heirs of the Campbell's soup fortune.  Not surprisingly, those families provided much of the funding for the anti-tax movement and they opposed compromises such as a $10 million exemption that would have exempted nearly every every small business and family farm. In this economic environment, there is no longer much support for complete repeal and even the chances of a $10 million individual exemption are nil. 

   

  

Unsuitable executor

  Texas Probate Code Section 78(e) provides that a person whom the court finds unsuitable is disqualified from serving as an executor.  The term "unsuitable" is not defined.  The Texarkana Court of Appeals recently considered its application in In re Estate of Boren.

The decision first noted that the trial court has discretion to determine suitability.  That decision will only be overturned if the trial court judge "acts in an arbitrary or unreasonable manner without reference to any guiding rules or principles."  In upholding the trial court judge, the appellate court referenced the following facts from the record supporting the unsuitability of Richard Finley, the named executor:   

Some of this evidence is found in the testimony of Dee; he said that Richard had told him that it was Richard's intention while attorney-in-fact for Charles and Sarah to transfer all of their property into his (Richard's) name. When Dee protested this, Richard responded that there was nothing Dee could do to prevent it. Dee testified that on another occasion, Charles had been upset because he had signed papers at Richard's request, but did not know what the documents were; as it developed, the papers were a collateral pledge of Charles's $12,000.00 certificate of deposit to guarantee a loan for Richard's daughter to purchase a house. In another incident, Dee discovered that Richard was intending to sell a tract of 127 acres to Charles for $65,000.00. Dee protested that Charles neither needed the property nor possessed the ability to even know how to locate it. Richard responded that if Charles did not buy the land, he (Richard) would lose it through foreclosure. Richard continued the personal use of the tract of land after the sale and the Borens subsequently deeded him forty acres of it as a gift.

In addition, there was testimony from Randy Boren, Charles's nephew and one-time guardian. Randy testified that Richard had confiscated Charles's tools and equipment for his own use and that while Randy was Charles's guardian, Richard had refused to provide records and receipts of his activities as attorney-in-fact for Charles, a responsibility he held.

When Parks assumed the guardianship of Charles, she discovered that Richard had not paid the fees for Charles's nursing home care for some three months and that the account was some $9,000.00 in arrears. Parks also discovered that during the period commencing on January 3, 2002 through December 31, 2004, there had been automatic teller machine withdrawals from Charles's and Sarah's accounts totaling $5,271.75, despite the fact neither Charles nor Sarah knew how to use an automatic teller machine. She found further discrepancies in that Richard had written checks over that same period of time totaling $1,890.22 for fuel and "blank" checks for $38,015.21 in addition to cash withdrawals amounting to $19,115.94. Despite the fact that Charles and Sarah owned no livestock, there was $5,730.00 spent on cattle and $2,734.07 on tractor repairs, although Charles and Sarah had no tractor. The implication was that Richard had both cattle and a tractor and that he had converted these funds to his own use. Although Charles and Sarah had no outstanding notes upon which to make payments, Richard wrote checks aggregating $5,521.71 with the notation that they were for note payments.

Taking this testimony into account, there was evidence for the trial court to find Richard unsuitable to be named as executor and that Richard had breached his fiduciary duty in his use of power of attorney for Charles. The finding that Richard was unsuitable to serve as independent executor was no abuse of discretion.