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Click here for the full text of this decision FACTS:On April 4, 2002, J.C. Thomas Grogan submitted to Assurity an application for $1 million of whole life insurance on his own life, naming his wife Varsha as beneficiary. For reasons unimportant to this appeal, Thomas’ application did not progress in a timely manner; and in June 2002, Assurity notified Thomas that his application was closed. But on Aug. 8, 2002, Thomas sent to Assurity a letter reaffirming his desire to apply for the policy. On Aug. 26, 2002, Thomas faxed to Assurity a new application along with another request to reopen his application. The new application is identical to the first in all material respects. The last page of the application stated: “In the event the first full premium on the policy applied for is not paid upon the date of this application, the insurance under such policy shall not take effect unless the application is approved by the Company at its Home Office, such policy issued and delivered to the Proposed Insured/Owner, and such first full premium paid during the Proposed Insured’s lifetime and continued good health.” Assurity issued the policy on Aug. 27, 2002, and mailed it to Thomas, along with delivery instructions, on Aug. 30, 2002. Thomas completed the delivery instructions by returning to Assurity a Delivery Certificate he had signed and marked as “received September 3.” The Delivery Certificate provided: “As requested, this policy has been issued without the first premium having been collected with the application. . . It is hereby certified that there has been no change in the good health of the Insured since the date of the application and it is understood and agreed that the policy shall be effective as of the date of issue only upon payment of the first premium during the lifetime and continued good health of the Insured.” Thomas paid his first premium on Sept. 6, 2002, and Assurity received the signed Delivery Certificate on Sept. 20, 2002. On Oct. 7, 2002, Thomas found out that a lump on his neck, which he had known about for at least a year, most likely was cancerous. On Oct. 24, 2002, he began chemotherapy treatment for Hodgkin’s disease. Thomas died on Feb. 17, 2003, due to complications stemming from chemotherapy treatment for his cancer. In March 2003, Varsha applied for the proceeds from the life insurance policy. However, because Thomas died during the policy’s two-year contestability period, Assurity requested his medical records for the five years preceding his death. After reviewing the records, Assurity determined that Thomas was not in good health on the date relevant to the policy’s effectiveness. Therefore, Assurity refused to pay the proceeds to Varsha. Assurity sought a declaratory judgment that the life insurance policy never took effect due to the failure of a condition precedent. Varsha counterclaimed that Assurity, by refusing to pay the proceeds, breached the terms of the alleged insurance contract. The district court held that the insurance policy did take effect, entitling Varsha to the policy’s proceeds. The court also awarded Varsha attorneys’ fees and imposed a statutory penalty against Assurity. Assurity appealed. HOLDING:Reversed and rendered. The court reviewed de novo the interpretation of a Texas insurance policy by the U.S. District Court for the Western District of Texas. The court noted that Assurity’s policy in one part stated that “[the policy] shall not take effect unless . . . [the] first full premium [is] paid during the Proposed Insured’s lifetime and continued good health. . . .” The policy in another part, the court noted, stated that “[the policy] shall be effective as of the date of issue only upon payment of the first premium during the lifetime and continued good health of the Insured.” In short, the court found that the Assurity policy was clear and umambiguous. The policy, the court stated, unambiguously stated that in order for it to take effect, the insured or proposed insured must make the first premium payment while in good health. The 5th U.S. Circuit Court of Appeals noted its precedents and Texas Supreme Court precedents upholding similar policy language. Having determined that the policy contained a condition precedent, the court turned to whether Thomas satisfied the condition. Without a doubt, the court found that Thomas had cancer prior to Sept. 6, 2002, the date he paid his first premium. Thus, the court found that Thomas was not in good health when he made that payment and as a result did not satisfy the policy’s good health condition precedent. Therefore, the court stated, the policy never took effect. OPINION:DeMoss, J.; Barksdale, DeMoss and Prado, J.J.

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