Opinion
No. 21-0843
04-28-2023
AMERICAN NATIONAL INSURANCE COMPANY, Petitioner, v. Bertha ARCE, Individually and as Representative of All Others Similarly Situated, Respondent
Wade C. Crosnoe, Jay Thompson, Austin, for Amicus Curiae Texas Association of Life and Health Insurers (TALHI). Donald R. Littlefield, Dallas, Susan Alexander Logsdon, Houston, Louis F. Mendez, for Amicus Curiae American Council of Life Insurers (ACLI). John H. Barr II, John T. Smithee, Amarillo, Jennifer W. Johnson, Dallas, Juan Carlos Hernandez, Mark A. Ticer, Dallas, for Respondent Wade C. Crosnoe, J. Richard Harmon, Jo Allison Stasney, Dallas, for Amicus Curiae RSUI Group, Inc. Michael David Leblanc, Paul Green, Dallas, Angela Olalde, Galveston, Michael Adams, for Petitioner. Andrew C. Whitaker, Dallas, Pro Se.
Wade C. Crosnoe, Jay Thompson, Austin, for Amicus Curiae Texas Association of Life and Health Insurers (TALHI).
Donald R. Littlefield, Dallas, Susan Alexander Logsdon, Houston, Louis F. Mendez, for Amicus Curiae American Council of Life Insurers (ACLI).
John H. Barr II, John T. Smithee, Amarillo, Jennifer W. Johnson, Dallas, Juan Carlos Hernandez, Mark A. Ticer, Dallas, for Respondent
Wade C. Crosnoe, J. Richard Harmon, Jo Allison Stasney, Dallas, for Amicus Curiae RSUI Group, Inc.
Michael David Leblanc, Paul Green, Dallas, Angela Olalde, Galveston, Michael Adams, for Petitioner.
Andrew C. Whitaker, Dallas, Pro Se.
Justice Devine delivered the opinion of the Court.
For more than a century, Texas courts have applied the settled rule that insurers may not avoid liability under an insurance policy based on a misrepresentation in an insurance application unless, among other things, the insurer pleads and proves the insured intended to deceive or induce the insurer to issue the policy. The primary issue before us is whether the common-law scienter requirement is repugnant to the plain language of section 705.051 of the Texas Insurance Code, which provides that "[a] misrepresentation in an application for a life, accident, or health insurance policy does not defeat recovery under the policy unless the misrepresentation: (1) is of a material fact; and (2) affects the risks assumed." Section 705.051, which dates back to 1909, has long functioned side by side with the common law, having been reenacted and recodified without substantive change, most recently in 2003.
We hold that section 705.051 does not displace the common-law rule because the statute prescribes necessary, not exclusive or sufficient, conditions for denying recovery under a contestable policy. Finding no compelling reason to otherwise repudiate clear and longstanding precedent, we affirm the court of appeals’ judgment in part and remand the case to the trial court. We also reverse the court's judgment in part and render judgment that, as a matter of law, the insurer was exempt from complying with the ninety-day notice provision in section 705.005.
I
During a chance encounter with an insurance agent at a motorcycle shop, Sergio Arce, Jr. spontaneously applied for a $25,000 life insurance policy with American National Insurance Co. (ANIC). The application process consisted of ANIC's agent reading questions to Arce from an electronic application form and documenting his responses using a computer tablet. Arce disclosed some adverse medical history and provided the name and address of his medical provider, but the agent recorded his answers to all other medical-history questions as "no." At the conclusion of the application interview, Arce electronically signed the application form, affirming that his answers were "full, complete and true to the best of [his] knowledge and belief." By signing, Arce also authorized ANIC to secure his medical records.
One month later, ANIC issued a life insurance policy to Arce but, for undisclosed reasons, declined accidental-death coverage and required payment of an additional premium on delivery. As required by statute, the policy would become incontestable two years after issuance, but in a tragic turn of events, Arce died a mere thirteen days later from injuries sustained in an automobile accident.
The incontestability provision in Arce's insurance policy states: "This Policy will be incontestable after it has been in force during the Insured's lifetime for 2 years from the Issue Date except for nonpayment of premium." See Tex. Ins. Code § 1101.006 (mandating the inclusion of a policy provision with this exact language).
Arce's mother, Bertha, submitted a claim under the policy as his designated beneficiary, but ANIC denied the claim and refunded the premium. During the claims-investigation process, ANIC reviewed Arce's medical records and determined that he had incorrectly answered "no" to an application question inquiring about diagnoses, treatment, or medical advice for "any disease or abnormality of the stomach, intestines, rectum, pancreas, or liver, including cirrhosis, hepatitis and colitis." In refusing to pay the claim, ANIC informed Bertha that it would not have issued the policy if the application questions had been answered correctly.
Bertha sued ANIC for policy benefits, statutory penalties, and attorney's fees, alleging breach of contract and related violations of the Texas Insurance Code. ANIC answered and moved for summary judgment on the contract and statutory claims. The following week, Bertha amended her petition to add class claims and a new Insurance Code claim. ANIC never amended or supplemented its motion to address the amended petition.
In a traditional summary-judgment motion limited to the claims in Bertha's previous filing, ANIC argued that the breach-of-contract and statutory claims were fatally infirm because ANIC was entitled to rescind the policy. Relying principally on Insurance Code section 705.051, ANIC claimed that no benefits were due under the policy because, as a matter of law, (1) Arce's insurance application included material misstatements of fact that affected the risks ANIC assumed in issuing the policy and (2) the Insurance Code does not require insurers seeking rescission of a life insurance policy during the contestability period to prove misstatements were made with intent to deceive or induce the insurer to issue the policy.
Compare id. § 705.051 (precluding an insurer from denying recovery under the policy based on a misrepresentation that is not "a material fact" and does not "affect[ ] the risks assumed"), with id. § 705.104 (precluding a defense based on misrepresentation in an insurance application asserted in a suit on the policy more than two years after the policy's issuance unless notice of rescission has been given to the insured or the insurer proves the misrepresentation was "material to the risk" and "intentionally made").
ANIC acknowledged the common-law rule requiring proof of intent to deceive but argued that the scienter requirement was incompatible with section 705.051 ’s plain language following its recodification in 2003. Under ANIC's view of the statute, an insurer could avoid an obligation to pay on an insurance policy based on an innocent, unknowing, or careless misstatement in an insurance application, so long as the misstatement was of a material fact and either induced the policy's issuance or affected the premium charged.
ANIC did not take the alternative position that intent to deceive was conclusively established. However, it argued that even if proof of intent is required to avoid paying on the policy, Bertha's claims under Insurance Code sections 541.060 and 541.061 would still fail because ANIC denied Bertha's claim based on a "bona fide" and "good faith" dispute about the continued vitality of the common-law rule.
Bertha's summary-judgment response, filed months later, joined issue on the necessity of pleading and proving intent to deceive before an insurer may decline to pay benefits based on a misrepresentation in the insurance application. She argued that section 705.051 ’s language does not conflict with the common law and noted that the two have coexisted for more than a hundred years without any substantive modification to the statute.
Bertha further asserted that ANIC had forfeited any misrepresentation defense by failing to timely notify her about its intent to rescind the policy, as required by section 705.005 of the Insurance Code. That notice requirement is inapplicable to life insurance policies with a statutorily compliant incontestability clause, like the one in Arce's policy, but only if premiums have been "duly paid." Bertha argued that ANIC was not exempt from providing notice because the summary-judgment evidence did not establish that the additional premium due on delivery had, in fact, been paid. ANIC refuted the assertion, pointing to affidavit testimony confirming the insurer's receipt of all premiums due and payable. Although Bertha had lodged myriad objections to that affidavit, ANIC stated the obvious: if the additional premium had not actually been paid, Bertha's claims would fail due to nonpayment of the initial premium or lapse of the policy.
See id. § 705.005 (prohibiting an insurer from relying on an insured's misrepresentation in an insurance application as a defense to coverage absent proof at trial that, before the 91st day after discovering the misrepresentation, the insurer gave notice to an insured or a deceased insured's beneficiary that it refused to be bound).
See id. § 705.105 ("Subchapter A [which includes section 705.005 ] does not apply to a life insurance policy: (1) that contains a provision making the policy incontestable after two years or less; and (2) on which premiums have been duly paid.").
The trial court granted ANIC's motion and rendered a final take-nothing judgment rescinding Arce's life insurance policy. No grounds were stated. On motion for rehearing, which was denied, the trial court expressly overruled Bertha's objections to ANIC's summary-judgment evidence.
The court of appeals affirmed the trial court's ruling on Bertha's objections, but otherwise reversed and remanded. After rejecting ANIC's argument that the common-law scienter requirement did not survive section 705.051 ’s recodification, the court held that ANIC could not avoid its contractual obligation without pleading and proving that Arce intended to deceive ANIC. Measured against that standard, the court held that summary judgment was not proper on the breach-of-contract claim because: (1) intent often involves fact questions; (2) ANIC's evidence did not conclusively establish intent; (3) mere knowledge of a health condition does not conclusively establish intent to deceive; and (4) "[t]he undisputed summary judgment evidence shows [ANIC] asserted rescission well beyond the ninety-day period set in section 705.005 of the Code." The court also reversed summary judgment on the related Insurance Code violations, which alleged wrongful denial of policy benefits. Finally, the court reversed summary judgment on the class claims because ANIC did not move for summary judgment on those claims or address them in any way.
633 S.W.3d 228, 230 (Tex. App.—Amarillo 2021).
Id. at 234-36.
Id. at 234-37.
Id. at 237-38.
Id. at 238.
II
ANIC's petition for review presents three issues: (1) whether section 705.051 grants insurers a misrepresentation defense without proof of intent, as required under the common law; (2) whether the court of appeals erred in failing to hold section 705.005 ’s notice requirement inapplicable as a matter of law; and (3) whether the court of appeals erred in reversing summary judgment on Arce's Insurance Code and class claims because it had no contractual obligation to pay policy benefits.
Amicus briefs supporting ANIC's construction of the statute were submitted by Texas Association of Life & Health Insurers; The American Council of Life Insurers; RSUI Group, Inc.; and Andrew Whitaker, Esq.
We granted ANIC's petition to resolve an incipient conflict between Texas state cases, which consistently apply the common-law rule, and a handful of federal district court cases that have recently departed from it. But before beginning our analysis of that issue, we address, as a preliminary matter, the effect of the 2003 nonsubstantive recodification of the Insurance Code.
See generally Brown v. Bankers Life & Cas. Co. , No. H-20-136, 2021 WL 2325448 (S.D. Tex. Mar. 30, 2021) ; Guzman v. Allstate Assurance Co. , No. 2:19-CV-187-BR, 2020 WL 7868100 (N.D. Tex. Dec. 3, 2020), rev'd on other grounds , 18 F.4th 157 (5th Cir. 2021) ; Landeros v. Transamerica Life Ins. Co. , No. 7:17-CV-00475, 2020 WL 3107795 (S.D. Tex. May 8, 2020) ; Colonial Penn Life Ins. Co. v. Parker , 362 F. Supp. 3d 380 (S.D. Tex. 2019).
In the courts below, ANIC argued that the 2003 recodification rendered the common-law intent requirement inoperative because the Legislature substantively changed section 705.051. There, as here, ANIC leaned heavily on two cases: (1) Fleming Foods v. Rylander , in which we held that when the language adopted in a recodification substantively changes the meaning of a statute, courts must consider the prior law repealed and apply the current law according to its plain language even if the Legislature stated no substantive change was intended; and (2) Colonial Penn Life Insurance Co. v. Parker , in which a federal district court treated section 705.051 as having been "amended" and, on that basis, applied a presumption that the Legislature intended to make a substantive change to the statute. Neither is an accurate description of the 2003 recodification of section 705.051.
6 S.W.3d 278, 284 (Tex. 1999). ANIC has also extensively cited and discussed State Farm Life Insurance Co. v. Martinez , in which we held courts could no longer apply a common-law rule following substantial changes to a recodified law. 216 S.W.3d 799, 800, 803-04 (Tex. 2007).
362 F. Supp. 3d 380, 399-402 (S.D. Tex. 2019).
Having lost on that argument in the court of appeals, ANIC changed tack in this Court, asserting that section 705.051 ’s plain and unambiguous language—now and since its original enactment in 1909—provides insurers a misrepresentation defense on the terms stated therein and allows no other limitations. In clarifying its argument in this Court, ANIC now acknowledges—quite correctly—that the Legislature not only declared that the 2003 recodification was nonsubstantive, it also left section 705.051 ’s language materially unchanged. Accordingly, we do not consider the prior law repealed.
Compare Tex. Ins. Code § 705.051 ("A misrepresentation in an application for a life, accident, or health insurance policy does not defeat recovery under the policy unless the misrepresentation: (1) is of a material fact; and (2) affects the risks assumed."), with Act of May 22, 2003, 78th Leg., R.S., ch. 1274, §§ 1, 2, 2003 Tex. Gen. Laws 3611, 3611, 3752, 4138 (repealing former Article 21.18 and recodifying it as section 705.051 in a "nonsubstantive revision of statutes" made effective April 1, 2005), Act of June 7, 1951, 52d Leg., R.S., ch. 491, 1951 Tex. Gen. Laws 868, 1075, 1091-92 (repealing and codifying former Article 5045 as Article 21.18 using identical language and "preserving the substantive law as it existed immediately before the passage of this Act except as to laws affecting the business of insurance passed at the Regular Session of the 52nd Legislature"), Tex. Rev. Civ. Stat. art. 5045 (1925) (recompiling and renumbering former Article 4959 using its same language) [adopted at the 39th Leg., R.S.], Tex. Rev. Civ. Stat. art. 4959 (1911) (recompiling statutes but retaining numbering and the same language) [adopted at the 32d Leg., R.S.], and Act approved Mar. 22, 1909, 31st Leg., R.S., ch. 108, § 68, 1909 Tex. Gen. Laws 192, 215 (enacting former Tex. Rev. Civ. Stat. art. 4959, now section 705.051, which said: "No recovery upon any life, accident or health insurance policy shall ever be defeated because of any misrepresentation in the application which is of an immaterial fact and which does not affect the risks assumed."); see also Researching Texas Law: Constitution & Statutes , Tex. A&M School of L. , https://law.tamu.libguides.com/c.php?g=513877&p=4146200 (providing links to the 1911 and 1925 statutory recompilations with the text of former Article 4959 at page 1037 of the 1911 statute and the text of former Article 5045 at page 1410 of the 1925 statute) (last visited Apr. 25, 2023).
One amicus brief takes the position that the 2003 recodification substantively changed section 705.051 by not materially changing its language to expressly include an intent-to-deceive element. We cannot endorse this approach to construing the statute in light of authority making prior judicial interpretations applicable to statutes that have not substantively changed and other well-settled principles like the legislative-acceptance doctrine and the presumption that the Legislature acts with full knowledge of (and subject to) extant law. See In re Ford Motor Co. , 165 S.W.3d 315, 318 n.1 (Tex. 2005) (applying precedent to the current version of a statute); Grapevine Excavation, Inc. v. Md. Lloyds , 35 S.W.3d 1, 5 (Tex. 2000) (discussing the legislative-acceptance doctrine); Monsanto Co. v. Cornerstones Mun. Util. Dist. , 865 S.W.2d 937, 940 n.5 (Tex. 1993) (observing that the Legislature was presumed to be aware of this Court's precedent in enacting and amending a statute).
This brings us to the main issue on appeal: whether section 705.051 is an exclusive misrepresentation defense that effectively renders the common-law rule a dead letter.
III
"[A]n insurance policy is a contract that establishes the respective rights and obligations to which an insurer and its insured have mutually agreed." Insurance policies are construed as contracts and enforced as contracts. Under our precedent, an insurer cannot avoid contractual liability based on a misrepresentation in an application for any type of insurance without pleading and proving: (1) the making of the representation; (2) falsity of the representation; (3) reliance by the insurer; (4) the intent to deceive on the part of the insured in making the same; and (5) the materiality of the representation. The requirement of intent to deceive is well settled, longstanding, and clearly articulated. But even though our body of law has operated in harmony with section 705.051 since its original enactment, ANIC insists that—no matter how entrenched in our jurisprudence—the intent requirement cannot be squared with the statutory language and must therefore yield.
USAA Tex. Lloyds Co. v. Menchaca , 545 S.W.3d 479, 488 (Tex. 2018) (internal quotation marks omitted).
Id. ; see Anadarko Petroleum Corp. v. Hous. Cas. Co. , 573 S.W.3d 187, 192-93 (Tex. 2019) ; RSUI Indem. Co. v. Lynd Co. , 466 S.W.3d 113, 118-19 (Tex. 2015).
Mayes v. Mass. Mut. Life Ins. Co. , 608 S.W.2d 612, 616 (Tex. 1980) (collecting cases and articulating the elements of the common-law misrepresentation defense); see Union Bankers Ins. Co. v. Shelton , 889 S.W.2d 278, 282 (Tex. 1994) (plurality op.) (stating that the Mayes elements apply to all types of insurance contracts); id. at 284-85 (Phillips, C.J., concurring) (agreeing that intent to deceive is required); id. at 286 (Cornyn, J., concurring and dissenting) (joining the concurring opinion as to the requirement of intent).
E.g., Union Bankers , 889 S.W.2d at 282 (plurality op.), 284-85 (Phillips, C.J., concurring), 286 (Cornyn, J., concurring and dissenting) (collectively reflecting the Court's unanimous opinion that proving intent to deceive is necessary to avoid liability based on a misrepresentation in an application for any type of insurance); Mayes , 608 S.W.2d at 616 (life insurance); Washington v. Reliable Life Ins. Co. , 581 S.W.2d 153, 160 (Tex. 1979) (life insurance); Allen v. Am. Nat'l Ins. Co. , 380 S.W.2d 604, 607 (Tex. 1964) (life insurance); Clark v. Nat'l Life & Accident Ins. Co. , 145 Tex. 575, 200 S.W.2d 820, 822-23 (1947) (life insurance); Great S. Life Ins. Co. v. Doyle , 136 Tex. 377, 151 S.W.2d 197, 201 (Tex. [Comm'n Op.] 1941) (reinstatement application for life insurance); Colo. Life Co. v. Newell , 78 S.W.2d 1049, 1051 (Tex. Civ. App.—El Paso 1935, writ ref'd) (life insurance); Westchester Fire Ins. Co. v. Wagner , 24 Tex.Civ.App. 140, 57 S.W. 876, 878 (1900, writ ref'd) (fire insurance proof of loss).
ANIC contends two cases—one of ours and one from the Commission of Appeals—implicitly reject the common-law intent requirement in light of the 1909 Insurance Code enactments. However, no issue of intent was presented in either case. See generally Robinson v. Reliable Life Ins. Co. , 569 S.W.2d 28 (Tex. 1978) (considering whether statutory conditions listed disjunctively are actually conjunctive requirements for rescission and holding that former art. 21.16 [now section 705.004] requires proof of at least one, not both); Wright v. Fed. Life Ins. Co. , 248 S.W. 325 (Tex. Comm'n App. [Sec. A] 1923, judgm't adopted) (considering whether the "policy never took effect nor became a binding obligation" of the insurer, and holding that the predecessors to sections 705.051 and 1101.007 "in no way prohibit or invalidate the stipulation [in the insurance application] that the policy sued on should not take effect unless the insured was [actually] in good health at the time it was delivered"). Neither case holds that intent is not required to rescind an insurance policy based on a misrepresentation in an insurance application, but even if they could be so construed, the great weight of our precedent is to the contrary. In making this observation, we express no opinion as to whether these cases were otherwise correctly decided or whether their analytical viability endures.
See supra notes 14 & 18.
Whether ANIC is correct depends on the proper interpretation of the statute, which is a question of law we consider de novo according to established principles. As always, our primary objective is to give effect to the Legislature's intent as manifested in the enacted language, which we apply according to its plain and grammatical meaning unless doing so would produce absurd results or a different meaning is contextually apparent. While "we must never ‘rewrite [a] statute under the guise of interpreting it,’ " the issue here is not whether the common law alters the statutory language but whether the Legislature's enacted language expressly or effectively forecloses the common law. It goes without saying that statutes can modify or displace common-law rules, but to resolve the instant dispute, we must ascertain whether section 705.051 actually does so.
Colorado County v. Staff , 510 S.W.3d 435, 444 (Tex. 2017).
Id.
Id. (quoting In re Ford Motor Co. , 442 S.W.3d 265, 284 (Tex. 2014) ).
A
Section 705.051 is in Chapter 705 of the Insurance Code's "Consumer Protection" title, which governs misrepresentations by policyholders in applying for insurance or filing a proof of loss. The chapter is divided into three subchapters.
Tex. Ins. Code §§ 705.001 –.105.
Subchapter A is composed of sections 705.001 to 705.005, which apply to all types of insurance policies except (as stated in Subchapter C) life insurance policies with two-year incontestability provisions "on which premiums have been duly paid." Sections 705.003 and 705.004 govern enforcement of insurance policy provisions addressing, respectively, misrepresentations in proofs of loss and misrepresentations in insurance applications. As a precondition to invoking a misrepresentation defense at trial, section 705.005 requires the insurer to give an insured or a deceased insured's beneficiary notice of the insurer's intent to rescind within ninety days after discovering a misrepresentation in an insurance application.
Id. § 705.105 (exempting certain life insurance policies from Subchapter A).
Subchapter B contains a single "special" provision, section 705.051, that applies only to misrepresentations in applications for life, accident, and health insurance. Subchapter C provides additional special provisions—sections 705.101 to 705.105—that apply only to life insurance policies. If premiums have been "duly paid," Subchapter C effectively exempts all life insurance policies from Subchapter A, including the notice requirement, because all life insurance policies are required to include a two-year incontestability clause.
See id. §§ 705.105, 1101.006. Section 705.105 ’s phrasing is a curiosity because it suggests that a life insurer that has not been duly paid would be subject to section 705.005 ’s ninety-day notice requirement while one who has been duly paid would be excused from providing the required notice. Why that would be the case is not immediately apparent, but presumably, nonpayment of premiums would carry other consequences distinct from the effect of any misrepresentation in the insurance application.
The principal provision at issue here, section 705.051, provides:
§ 705.051. Immaterial Misrepresentation in Life, Accident, or Health Insurance Application
A misrepresentation in an application for a life, accident, or health insurance policy does not defeat recovery under the policy unless the misrepresentation:
(1) is of a material fact; and
(2) affects the risks assumed.
Id. § 705.051.
ANIC views this provision as effectively encompassing all the common-law rescission elements, except intent to deceive, and as establishing an insurer's right to rescind if both statutorily stated conditions are satisfied. We disagree with ANIC's preferred reading of the statute and hold that section 705.051 is not discordant with the common law, either expressly or by necessary implication.
Although reliance is not expressly stated, ANIC admits it is inherent in the materiality and risks-assumed conditions. The parties disagree about whether the term "misrepresentation" inherently connotes some knowledge of the true facts, and thus some intent to deceive, and whether the term can encompass even innocent falsehoods. Our construction of section 705.051 renders these disputes immaterial.
Both the statutory and the common-law elements govern an insurer's misrepresentation defense because, grammatically, section 705.051 states conditions that are necessary, not sufficient, to defeat recovery. Conditions that are sufficient guarantee a result, while conditions that are merely necessary do not. Take for example the statement: "My car does not function unless it has gas and motor oil." Gas and motor oil are necessary, but not sufficient, for my car to function. Though not expressly stated, the law of mechanics also precludes my car from functioning unless it has an engine, tires, and a key.
As written, section 705.051 does not guarantee that the insurer can "defeat recovery under the policy" if both of the stated conditions are satisfied; it only guarantees that recovery cannot be defeated if one or the other is not. Consistent with its status as a consumer-protection statute, section 705.051sets a floor that cannot be avoided by contract or under the common law, but it does not purport to grant insurers a rescission defense at all , let alone on exclusive terms.
ANIC's contrary construction works only if the statute is rewritten to change "does not defeat" to "does defeat" and "unless" to "if". We might consider ANIC's point well taken if that were what the statute actually said, but it does not. Even taking "unless" to mean "except if", as ANIC urged in post-submission briefing, does not alter the plain meaning of section 705.051 as establishing minimum conditions that do not guarantee denial of recovery. So construed, the statute does not inherently or necessarily conflict with settled law requiring pleading and proof of intent to deceive in addition to the statutorily mandated conditions.
ANIC argues we must conclude differently because the Legislature knows how to impose an intent requirement and conspicuously did so in section 705.104, which applies (1) only to applications for life insurance policies and (2) only to a misrepresentation defense raised once a life insurance policy is incontestable. Similar to section 705.051, section 705.104 constrains an insurer's ability to avoid an insurance obligation based on a misrepresentation in an insurance application, but the minimum conditions the statute imposes are different:
Two federal district courts employing different rationales recently held that the 2003 recodification effected a substantive change to section 705.104. See Pruco Life Ins. Co. v. Villarreal , No. H-17-2795, 2021 WL 4155250, at *12 (S.D. Tex. Sept. 13, 2021) ; Landeros v. Transamerica Life Ins. Co. , No. 77-CV-00475, 2020 WL 3107795, at *6-7 (S.D. Tex. May 8, 2020). Both courts concluded that the 2003 recodification effectively reanimated section 705.104 ’s plain language, which both courts said had been rendered essentially superfluous by a 1909 legislative enactment that produced a conflict with language in section 705.104 ’s predecessor. The conflicting enactment was said to be the requirement—in section 1101.006 and its predecessor—that an insurance-policy provision contain an incontestability clause stating the policy is incontestable after two years "except for nonpayment of premium."
Although section 1101.006 is still on the books, the district court in Landeros concluded that section 705.104 was revived because it was recodified in 2003—two years after the ostensibly conflicting statute had been recodified—and the sequence of recodification events worked to amend section 1101.006 to encompass the additional grounds for contract avoidance beyond a contestability period in section 705.104. 2020 WL 3107795, at *6-7. The district court in Pruco , on the other hand, concluded that the 2003 recodification substantively altered section 705.104 by reorganizing it and altering its language. 2021 WL 4155250, at *12. Both cases said that, despite section 705.104 ’s plain language, this Court had held that its predecessor had become inoperative as to policies issued after 1909, but in light of the 2003 recodification, section 705.104 may now be enforced according to its plain language. Pruco , 2021 WL 4155250, at *12 (citing Patton v. Am. Home Mut. Life Ins. Co. , 143 Tex. 373, 185 S.W.2d 420, 422 (1945), as approving the analysis in Am. Nat'l Ins. Co. v. Welsh , 22 S.W.2d 1063, 1064 (Tex. Comm'n App. 1930, judgm't adopted) ); Landeros , 2020 WL 3107795, at *6-7 (citing Am. Nat'l Ins. Co. v. Tabor , 111 Tex. 155, 230 S.W. 397, 399 (1921) ).
We express no opinion as to whether either Pruco or Landeros was correctly decided on that issue, which is not presented here. For purposes of our analysis, the Legislature either rendered section 705.104 superfluous in 1909, so it has no bearing on section 705.051 ’s meaning, or the Legislature intended it to be effective according to its plain language. We need not consider whether section 705.104 has been substantively altered in word or legal effect because that provision is relevant to the analysis here only to the extent its plain language informs section 705.051 ’s proper construction, and for purposes of addressing ANIC's arguments on appeal, we assume that it does.
§ 705.104. Misrepresentation in Application for Life Insurance
A defense based on a misrepresentation in the application for, or in obtaining, a life insurance policy on the life of a person in or residing in this state is not valid or enforceable in a suit brought on the policy on or after the second anniversary of the date of issuance of the policy if premiums due on the policy during the two years have been paid to and received by the insurer, unless:
(1) the insurer has notified the insured of the insurer's intention to rescind the policy because of the misrepresentation; or
(2) it is shown at the trial that the misrepresentation was:
(A) material to the risk; and
(B) intentionally made.
Emphasis added.
ANIC contends that the intent element in section 705.104 would serve no purpose unless section 705.051 is construed as excluding intent as a prerequisite to denying benefits. Federal district courts have been persuaded by this argument and, notwithstanding clear precedent from this Court, have held that intent cannot be required to avoid liability on a contestable insurance policy (or by necessary implication, health and accident policies, which are also governed by section 705.051 but not section 705.104 ). For at least two reasons, we do not regard section 705.104 ’s language as carrying the same interpretive import.
See Colonial Penn Life Ins. Co. v. Parker , 362 F. Supp. 3d 380, 402-03 (S.D. Tex. 2019) ; see also Brown v. Bankers Life & Cas. Co. , No. H-20-136, 2021 WL 2325448, at *3 (S.D. Tex. Mar. 30, 2021) (following Colonial Penn ); Guzman v. Allstate Assurance Co. , No. 2:19-CV-187-BR, 2020 WL 7868100, at *4-6 (N.D. Tex. Dec. 3, 2020) (same), rev'd on other grounds , 18 F.4th 157 (5th Cir. 2021) ; Landeros v. Transamerica Life Ins. Co. , No. 77-CV-00475, 2020 WL 3107795, *7-8 (S.D. Tex. May 8, 2020) (same).
First, making intent a statutory requisite to rescission when a life insurance policy is otherwise incontestable is not inconsistent with leaving it to the common law to impose an intent condition, or not, for other types of policies (like accident or health insurance) or before a life insurance policy is incontestable. Section 705.104 simply sets a different statutory floor for a materially different situation.
Second, a review of the common law when section 705.104 ’s predecessor, former Article 3096eee, was enacted in 1903 suggests that intent may have been expressly stated in that provision because, before the statutory enactment, a life insurance policy that became incontestable could only be canceled for a reason specifically stated in the policy, which was strictly construed to avoid a forfeiture. By changing the standard to permit cancellation if (among other things) the misrepresentation was intentionally made, the Legislature effectively made the standard after incontestability equivalent to the standard Texas followed under the common law during the contestability period.
Act of March 27, 1903, 28th Leg., R.S., ch. 69, 1903 Tex. Gen. Laws 94-95, recompiled and renumbered as Tex. Rev. Civ. Stat. art. 4951 (1911), recompiled and renumbered as Tex. Rev. Civ. Stat. art. 5049 (1925), repealed and replaced by Act of June 7, 1951, 52d Leg., R.S., ch. 491, 1951 Tex. Gen. Laws 868, 1084-85, 1092 (adopting former art. 21.35 without changes), repealed and replaced by Act of May 20, 2003, 78th Leg., R.S., ch. 1274, § 2, 2003 Tex. Gen. Laws 3611, 3753-54, 4138-39 (adopting current Tex. Ins. Code § 705.104 as part of a nonsubstantive recodification effective April 1, 2005); see Researching Texas Law: Constitution & Statutes , Tex. A&M School of L. , https://law.tamu.libguides.com/c.php?g=513877&p=4146200 (providing links to the 1911 and 1925 statutory recompilations with the text of former Article 4951 at page 1035-36 of the 1911 statute and the text of former Article 5049 at page 1411 of the 1925 statute) (last visited Apr. 25, 2023).
See Mut. Rsrv. Fund Life Ass'n v. Payne , 32 S.W. 1063, 1065 (Tex. Civ. App. 1895, no writ) (although the policy excluded coverage for suicide, the court ordered the insurer to pay on the policy because the insured's death "by his own hand" occurred in the incontestability period, so that was no longer a valid defense); see also Hibernia Ins. Co. v. Bills , 87 Tex. 547, 29 S.W. 1063, 1064 (1895) (language in an insurance policy effecting a forfeiture is strictly construed); Franklin Life Ins. Co. v. Villeneuve , 29 Tex.Civ.App. 128, 68 S.W. 203, 206 (1902, writ ref'd) (the insurance policy was incontestable despite a misrepresentation on the application); Franklin Ins. Co. v. Villeneuve , 25 Tex.Civ.App. 356, 60 S.W. 1014, 1015 (1901, no writ) (same).
For either reason, our construction of section 705.051 does not render section 705.104 ’s intent requirement meaningless. If sections 705.051 and 705.104 are enforced according to their plain language, the conditions stated in those provisions would prevent courts and insurance policies from avoiding those minimum requirements for rescission. We therefore hold that more than one hundred years of precedent is not repugnant to or displaced by the equally mature legislative enactment now codified without substantive change as section 705.051.
See supra note 28 (discussing cases analyzing whether section 705.104 is enforceable according to its plain language).
B
ANIC nonetheless urges us to abandon the scienter requirement, bemoaning the common-law rule as a product of "judicial drift" that has placed Texas in the minority. ANIC's proffered reasons are insufficiently compelling to warrant destabilizing a body of jurisprudence that is not in conflict with the statutory scheme.
See Mark C. Dillon, The Extent to Which "Yellowstone Injunctions" Apply in Favor of Residential Tenants: Who Will See Red, Who Can Earn Green, and Who May Feel Blue? , 9 Cardozo Pub. L. Pol'y & Ethics J. 287, 358 (2011) (defining "judicial drift" as "the unintended expansion of case law by applying one innocuous sentence of a decision to a broader set of circumstances in a later case that was never initially intended or foreseen").
It is true, as ANIC says, that some of the earliest authority declaring the law "settled" is more conclusory than explanatory, but brevity is not unusual for opinions of the era. Conciseness of the articulated rule makes the law clear and unmistakable, not infirm. ANIC further assumes from precedential pith that the rule was subsequently applied without a critical eye. Maybe so. But by 1941 we had pointedly acknowledged the existence of divergent viewpoints and reconfirmed our commitment to what was already considered to be settled law in Texas. Though Texas may be aligned with a minority of jurisdictions in requiring intent to deceive, we are neither newly nor unwittingly so.
See, e.g., Westchester Fire Ins. Co. v. Wagner , 24 Tex.Civ.App. 140, 57 S.W. 876, 877 (1900, writ ref'd) ("It is the settled rule that false statements, to avoid a policy, must have been willful, and with design to deceive or defraud."); Colo. Life Co. v. Newell , 78 S.W.2d 1049, 1051 (Tex. Civ. App.—El Paso 1935, writ ref'd) (life insurance) (" ‘The rule may indeed be regarded as well established that to avoid a policy on the ground of misrepresentation it must be made willfully and with intent to deceive, must have been material, and relied on by the insured.’ ") (quoting Nat'l Life & Accident Ins. Co. v. Kinney , 282 S.W. 633, 644 (Tex. Civ. App.—Fort Worth 1926, no writ) ).
See Great S. Life Ins. Co. v. Doyle , 136 Tex. 377, 151 S.W.2d 197, 201 (Tex. [Comm'n Op.] 1941) (observing that "[m]any decisions [from other jurisdictions] are to the effect that where untrue answers are given as to material matters[,] the policy may be avoided without regard to whether [the] insured knew or should have known that the answers were not true" while "[c]ourts of other jurisdictions have held that before the defense of misrepresentations of material facts may be maintained, it is necessary, not only to prove that the representations were false, but also that they were made with intent to deceive or defraud" and holding that this Court had already expressed its commitment to the rule reflected in the latter line of cases by refusing the writ in Colorado Life Insurance Co. v. Newell , 78 S.W.2d 1049, 1051 (Tex. Civ. App. 1935, writ ref'd), which described the rule as "well established").
Union Bankers Ins. Co. v. Shelton , 889 S.W.2d 278, 285 (Tex. 1994) (Phillips, C.J., concurring) (noting the Court's awareness that Texas had adopted the minority rule); see id. at 282 (plurality op.), 284-85 (Phillips, C.J., concurring), 286 (Cornyn, J., concurring and dissenting) (unanimously embracing the minority rule).
We conclude that principles of efficiency, fairness, and legitimacy counsel against unsettling that which has been settled so long and with such clarity. "Adherence to precedent remains the touchstone of a neutral legal system that provides stability and reliability," so "[d]epartures from precedent must be carefully considered and should be rare." But while stare decisis is "not an inexorable command," it has its "greatest force" in areas where the Legislature may rightfully flex its constitutional power, like enactment of the Insurance Code provisions at issue here. In over a hundred years, there has been no indication that the Legislature disagrees with the common-law approach to enforcement of insurance contracts.
Mitschke v. Borromeo , 645 S.W.3d 251, 263 (Tex. 2022).
Id. at 260, 265.
Adhering to our precedent, we therefore hold that insurers must plead and prove intent to deceive to avoid contractual liability based on a misrepresentation in an application for life insurance, whether the policy is contestable or not. Proof of a material inaccuracy is not enough. We express no opinion as to whether the record bears legally sufficient evidence of intent because ANIC's summary-judgment motion did not argue that intent was conclusively established.
C
We do not reach the third issue—whether ANIC's denial of benefits was proper as a matter of law—because, as presented in this Court, success on that issue is premised on the common-law rule's invalidity. But to the extent ANIC contends Arce's statutory bad-faith claims are not viable based on a bona fide dispute about that matter, we hold that summary judgment is not proper because the record bears some evidence to the contrary. When deposed, ANIC's claims adjuster testified that Bertha's claim was not denied based on a dispute about whether the law requires proof of intent to deceive but, rather, on the adjuster's conclusion that Arce's misrepresentation was, in fact, intentional. Because ANIC's summary-judgment motion only asserted a good-faith dispute about whether intent to deceive is required—not about whether it exists—summary judgment is not proper on Bertha's claims under sections 541.060 and 541.061 of the Insurance Code.
See Kachina Pipeline Co. v. Lillis , 471 S.W.3d 445, 449 (Tex. 2015).
However, the court of appeals erred in reversing summary judgment based on ANIC's alleged failure to give timely notice under section 705.005. The court held that, as a matter of law, ANIC did not give notice within ninety days after discovering the alleged misrepresentation, which is true but beside the point. The question is whether notice was required at all. It was not, because section 705.105 makes section 705.005 inapplicable to life insurance policies with a two-year incontestability period, like Arce's policy, when premiums have been duly paid. ANIC submitted affidavit evidence that the premiums were paid; the court of appeals upheld the trial court's decision overruling Bertha's objections to that evidence; and Bertha has not appealed the adverse appellate ruling. Accordingly, we reverse and render judgment that section 705.005 ’s notice requirement is inapplicable to Arce's life insurance policy as a matter of law.
633 S.W.3d 228, 236-37 (Tex. App.—Amarillo 2021).
See Kachina Pipeline , 471 S.W.3d at 449 (summary judgment is proper when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law).
IV
For the reasons stated, we reverse and render judgment that section 705.005 ’s notice requirement does not apply to Arce's life insurance policy, but we otherwise affirm the court of appeals’ judgment and remand to the trial court for further proceedings.
Justice Young filed a concurring opinion.
Justice Young, concurring.
To defeat an insured's recovery under a life-insurance policy on the grounds of misrepresentation, § 705.051 of the Insurance Code lists two elements that an insurer must establish: that the misrepresentation (1) was of a material fact and (2) affected the risks assumed. The Court holds today that the insurer must establish a third element: that the misrepresentation was made with the intent to deceive. This third element comes not from the statutory text but from the common law.
How can our text-centered approach to statutory interpretation generate such an outcome? I write separately to address this question, which implicates the interrelated roles of stare decisis , the common law, and statutes. I also write to discuss what today's decision does not mean—specifically, it does not mean that courts may freely draw from the common-law well to "supplement" statutory requirements.
I
A
Petitioner asks us to declare that the intent-to-deceive element is no longer good law. According to petitioner, the common-law rule is inconsistent with § 705.051 of the Insurance Code ; the two cannot coexist; and the statute must therefore take precedence. Yet the two have coexisted—for over a century. The statute was enacted in 1909. See ante at 349-50. If there is fatal inconsistency today, there was fatal inconsistency then and at every point in between. Neither the statute nor the common law (which, importantly, predated the statute) has changed in any material way. If we were writing on a blank slate—if, for example, § 705.051 were enacted for the first time today —we would have to resolve as a matter of first impression whether the statute's enumeration of two discrete requirements to defeat recovery would exclude an unenumerated intent-to-deceive element. But that ship sailed long ago. As the Court's scholarly examination reflects, this Court's cases have jointly applied the statutory and common-law requirements from the start. Whether those requirements can coexist is not an open question. As a matter of law, they can , because that legal question was settled long ago.
This conclusion does not require me to believe (or disbelieve) that it was correct to maintain the common-law intent-to-deceive element upon the enactment of the statute. Even conclusively establishing the wrongness of that choice would be, in and of itself, insufficient to overcome stare decisis. "After all, [that] doctrine exists to protect wrongly decided cases." Mitschke v. Borromeo , 645 S.W.3d 251, 260 (Tex. 2022). How could it be otherwise? Stare decisis would protect a null set if it protects only precedents with which we already agree. To overcome precedent, we need more than asserted (or even proven) error. See id. at 263–66. Our traditional guideposts that direct our path when considering overruling an erroneous precedent—efficiency, fairness, and legitimacy—do not point toward a change in this context.
As I describe in Part II, infra , I conclude that the courts were likely correct to have maintained the intent-to-deceive element. But my vote in this case would be the same even if I reached the opposite conclusion.
"Efficiency" does not support tearing down a longstanding precedent that is clear and easily administrable. See id. at 263–64. Insurers may find it challenging to prove intent, of course. But the question is whether the substantive requirement of proving intent to defeat recovery is clear, and it is.
Nor is there any "fairness" ground for changing course now. Instead, "[o]ur reluctance [to unsettle precedent] is particularly acute in property and contract cases," like this one, because citizens are especially entitled to rely on the stability of legal rules in such private-law areas. Id. at 264. To the extent that a precedent involves statutory construction (including interpreting a statute in a way that has allowed this coexistence), stare decisis is at its peak. Id. at 265. "Even there," however, "circumstances may require the correction of seriously mistaken and harmful precedents." Id. ; see id. at 265 n.24 (noting cases in which this Court and the U.S. Supreme Court overruled statutory-interpretation precedents). But I see no plausible argument that the coexistence of the statutory and common-law elements was especially wrong or harmful, much less both.
This last point dovetails with "legitimacy," the final stare decisis guidepost. Legitimacy requires adhering to precedents for the sake of stability and reliability, even if they were conceived in error, but "adhering to or entrenching a precedent that is egregiously wrong or that has lost its underpinnings does not foster legitimacy." Id. at 266. If subsequent law has shaken (or destroyed) a precedent's foundations, then the precedent may stand like a hollowed tree—ready to fall for lack of vitality. That was the reason stare decisis did not impede overruling the precedent at issue in Mitschke itself. Id. It is mistaken to think of stare decisis as interested only in preserving a precedent at all costs; the doctrine's role is to help us determine, in a principled and neutral way, what to preserve. But legitimacy interests do not support changing the status quo here. The fact that the common law and the statute have dwelled together in comparative quietude for so long supports the notion that it was not egregious (even if it was wrong) to allow such coexistence.
Taken together, these points confirm that there is nothing extraordinary about this corner of the law that warrants repudiating longstanding precedent and practice. Accordingly, as I see it, the most we could muster is a sense that, had we been the ones to make the decision in the first instance, we may have decided things differently. That cannot be enough. If retrospective doubts about statutory decisions justify overturning long-settled legal principles, there would be no long-settled legal principles. "Every day would be a new day in the life of the law; every case would present an opportunity to refashion settled principles and a temptation both for parties and courts to disregard disliked precedents." Id. at 258.
Petitioner's argument, however, largely depends on revisiting decisions already made. Petitioner invokes principles—like our plain-text approach to statutory interpretation—with which I agree and that would require careful consideration if we were confronting a truly open question. In my view, however, stare decisis applies and has not been overcome. That is enough to resolve the case even if the statute would otherwise not bear the reading that the Court gives it.
B
This conclusion would be true regardless of whether the intent-to-deceive element, which originated in the common law, remains part of the common law or if, like the inosculation of two trees, it has merged into the statute by judicial interpretation and legislative consent.
Suppose that the intent-to-deceive requirement is still nothing but a freestanding common-law doctrine. If so, we could abrogate it using our own authority. All common-law courts can do that. See, e.g., Price v. Price , 732 S.W.2d 316, 319 (Tex. 1987) (abolishing the common-law doctrine of interspousal tort immunity); Rogers v. Tennessee , 532 U.S. 451, 453–55, 121 S.Ct. 1693, 149 L.Ed.2d 697 (2001) (describing the consequences of the Tennessee Supreme Court's abolition of the old common-law "year and a day rule," under which a defendant could not be convicted of murder if the victim survived longer than that period of time).
The question is not of authority but of propriety. Stare decisis would counsel against doing so here, at least based on the arguments we have before us. For one thing, petitioner has not asked us to simply abrogate the common-law rule by exercising our common-law authority. Instead, petitioner argues that the statute itself requires this result. But this contention, too, implicates stare decisis. The relevant precedent has at least two components: (1) the substantive principle (the part that compels insurers to establish the insured's intent to deceive) and (2) a jurisprudential principle (under which the common law's scienter element permissibly stands alongside the statute's requirements).
As Mitschke illustrates, even when stare decisis applies, its default presumption of retaining a challenged precedent can be rebutted. That is true in contexts like this one, where the common law is challenged on the ground of its incompatibility with a statute. Indeed, that is a very powerful ground because of the primacy of statutory law. Under our constitutional system, in which the People govern themselves, statutes enacted by elected political representatives are the chief vehicle for the People to exert their authority. This Court can and should overrule a common-law precedent when developments external to the judicial system undermine the precedent's vitality, as we did, for example, in Texas Mutual Insurance Co. v. Ruttiger , 381 S.W.3d 430 (Tex. 2012).
In Ruttiger , we recognized that intervening statutory law provided a basis to doubt the viability of the cause of action that this Court had created in Aranda v. Insurance Co. of North America , 748 S.W.2d 210 (Tex. 1988). See Ruttiger , 381 S.W.3d at 447. Significantly, Aranda was followed by massive statutory revisions indicating legislative intent to achieve a comprehensive and exclusive method to resolve the kind of claims that Aranda addressed. Id. at 441–44, 449–50. The new statutory regime and the Court-created tort coexisted uneasily for a time. In Ruttiger , we did not hold that the legislature had directly eliminated the common-law action; rather, we concluded that the legislation so thoroughly demolished the basis for our precedent that we should take the step of overruling Aranda . Id. at 451,. The decision was ours and not compelled by the legislature. Id. at 450. But as Ruttiger illustrates, the proper way for us to make such a decision is to account for the separation of powers and the preeminence of statutory over common law.
This case is markedly different. Unlike in Ruttiger , no legislative action has either expressly or functionally changed the status quo once the courts made clear that the statutory and common-law requirements would coexist. Unlike the highly reticulated statutory program that (at best) fit awkwardly with the existence of the Aranda cause of action, the intent-to-deceive requirement became no less compatible with the Insurance Code. And whereas the short-term coexistence of Aranda and the new statute was always fraught, the coexistence of the statutory and common-law requirements at issue here has been lengthy and peaceful.
I agree with the Court that the intent-to-deceive element is not fatally inconsistent with the statute. But, again, I believe that we could reach this result without accepting petitioner's invitation to relitigate it "de novo." Cf. ante at 354. Our standard application of stare decisis presents a barrier that could be overcome upon showing something new and material in statutory or other law or, even without that, on identifying some exceptional irregularity in our precedent. But unlike in Ruttiger , no new developments have been added to the equation, and there is nothing extraordinary about the precedent itself. There is no real work for us to do here.
C
But there is more. Not only has nothing new happened that would make this case like Ruttiger (or otherwise demonstrate the need for the common-law rule to recede), but the contrary is true. The legislature has not merely failed to do anything that would change the status quo, but has taken no such action despite repeatedly revisiting, revising, and recodifying the Insurance Code.
As the Court rightly notes, we presume that the legislature "acts with full knowledge of ... extant law." Ante at 353 n.14. Thus, in the legislature's recurring visits to the Insurance Code, it has brought along the knowledge that leaving § 705.051 intact amounted to leaving the common-law requirement intact, too. Hence the significance of the Court's observation that, "[i]n over a hundred years, there has been no indication that the Legislature disagrees with the common-law approach to enforcement of insurance contracts." Ante at 359.
This statutory history suggests that the common-law requirement has never been foreign to the statute's operation. Indeed, because of the presumption of the retention of the common law, it would not have been unreasonable (as I describe below, see infra Part II) for early twentieth-century courts to have regarded the legislature's enactment as embracing the intent-to-deceive requirement from the start. One way or another, one could conclude that the common-law requirement began as, or for all practical purposes became, part of the larger statutory scheme.
If so, the stare decisis analysis would be even stronger, because adherence to a stable understanding of statutory precedents is especially important. Mitschke , 645 S.W.3d at 265. The more tightly linked a common-law principle is to the statute itself, the more cautious we should be about disturbing it. One important reason even to have a concept of legislative ratification or acceptance (whether formally applicable here or not) is that uprooting law that is intertwined with statutory enactments risks undermining the statutes. At the very least, destabilizing preexisting common law of which the legislature was aware should be done, if at all, with great care and for only compelling reasons.
Said differently: If preexisting common law has become closely linked with the administration of a statutory program, and if the legislature has revisited the general statutory terrain but done nothing to change the specific part of the law at issue, further changes should normally come from the legislature and not from the courts. The legislature at any time could have, and at any time still may, abrogate the intent-to-deceive element, either expressly or by necessary implication. The affected public, relevant industries, bar organizations, and other interested parties are always free to present their arguments to the legislature whenever that body meets. If the legislature becomes persuaded to change course, it need only say so, and the courts will apply the new law as cheerfully as they applied the old.
II
The foregoing analysis can assume, at least for argument's sake, that Texas courts have been wrong all these years to retain the intent-to-deceive requirement despite § 705.051 ’s silence regarding scienter. At the very least, petitioner's textual arguments are far from trivial.
I conclude, however, that the Court's reading is correct—not just, or even primarily, because the statute uses the word "unless." It would be too much, and too judicially self-aggrandizing, to assert that any time the legislature uses that conjunction, it leaves a gaping hole for the courts to fill at will. Even if the statutory requirements are linguistically a "floor" rather than a "ceiling," that hardly means that the courts are empowered to drag furniture onto the floor whenever the spirit moves them. I do not understand the Court to say any such thing, of course; instead, I join the opinion for its correct and properly modest holding that the statute's choice of language fails to expressly foreclose the preexisting common-law requirements.
This holding is correct because new legislation, merely by its passage, neither supplants existing common-law doctrines nor repeals existing statutory provisions. To the contrary, either sort of law that antedates a new enactment can serve as a useful reference point for determining what that later law means. Historically, the common law is especially valuable. "[W]e construe statutory language against the backdrop of common law, assuming the Legislature is familiar with common-law traditions and principles." Marino v. Lenoir , 526 S.W.3d 403, 409 (Tex. 2017). "Congress is understood to legislate against a background of common-law ... principles, and when a statute covers an issue previously governed by the common law, we interpret the statute with the presumption that Congress intended to retain the substance of the common law." Samantar v. Yousuf , 560 U.S. 305, 320 n.13, 130 S.Ct. 2278, 176 L.Ed.2d 1047 (2010) (internal quotations omitted). This principle applies to all positive law—not just statutes, but constitutional texts, too. And given this State's rich common-law history, see, e.g., JDH Pac., Inc. v. Precision-Hayes Int'l, Inc. , 659 S.W.3d 449, 450–51 (Tex. 2022) (Young, J., concurring), law is seldom written on a blank slate.
See, e.g., Brown v. City of Houston , 660 S.W.3d 749, 755 (Tex. 2023) ("Statutory history concerns how the law changed , which can help clarify what the law means. "); Gilbert v. United States , 370 U.S. 650, 655, 82 S.Ct. 1399, 8 L.Ed.2d 750 (1962) ("For in the absence of anything to the contrary it is fair to assume that Congress used that word [forgery] in the statute in its common-law sense."); In re Soza , 542 F.3d 1060, 1071 (5th Cir. 2008) (Wiener, J., concurring) ("I can only justify providing content to the Insurance Code's fraud provision by giving ‘fraud’ its common law meaning, not by torturing other incompatible statutes."); Felix Frankfurter, Some Reflections on the Reading of Statutes , 47 Colum. L. Rev. 527, 537 (1947) ("[I]f a word is obviously transplanted from another legal source, whether the common law or other legislation, it brings the old soil with it.").
See, e.g., D'Oench, Duhme & Co. v. FDIC , 315 U.S. 447, 471 n.9, 62 S.Ct. 676, 86 L.Ed. 956 (1942) (Jackson, J., concurring) ("Particularly in the clauses dealing with the rights of the individual, the Constitution uses words and phrases borrowed from the common law, meaningless without that background, and obviously meant to carry their common-law implications."); Stephen Sachs, Constitutional Backdrops , 80 Geo. Wash. L. Rev. 1813, 1822 (2012) ("Our founding document is firmly rooted in the common-law tradition, in which each new enactment is layered on top of an existing and enormously complex body of written and unwritten law."); William Baude, Sovereign Immunity and the Constitutional Text , 103 Va. L. Rev. 1, 9–22 (2017) (arguing that state sovereign immunity is a "constitutional backdrop"—that is, a background rule of common law that the Constitution insulates from change).
The statute and the common law that existed at the time of the statute's enactment thus cannot be read as separate, independent rules of decision. As we observed last year in Taylor v. Tolbert , "we follow an ‘opt-out’ approach that incorporates common-law principles absent the Legislature's clear repudiation." 644 S.W.3d 637, 650 (Tex. 2022). We must, therefore, essentially read the statute with a common-law gloss. It is only based on this understanding that I can make the assertions that I made about stare decisis in Part I, supra , and that the Court can rightly say that stare decisis "has its ‘greatest force’ in areas where the Legislature may rightfully flex its constitutional power, like enactment of the Insurance Code provisions at issue here." Ante at 359 (quoting Mitschke , 645 S.W.3d at 265 ).
This concept is abstract but important, full of real-world implications. One particularly prominent (and controversial) one is the defense of qualified immunity in suits brought under 42 U.S.C. § 1983. I take no position on the recent scholarly debates about that defense, but the conventional belief is that in passing the Civil Rights Act of 1871 and providing individuals a cause of action for violations of their constitutional rights, the Reconstruction Congress did not abrogate—and thus incorporated into the law—the applicable and preexisting common-law immunities that state officials could originally claim in analogous tort suits. See, e.g., Pierson v. Ray , 386 U.S. 547, 555, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967).
The law of defenses to statutory actions—especially but not exclusively in criminal prosecutions—is comfortable with statutory silence. In Staples v. United States , the Supreme Court observed that a federal statute
is silent concerning the mens rea required for a violation.... Nevertheless, silence on this point by itself does not necessarily suggest that Congress intended to dispense with a conventional mens rea element.... On the contrary, we must construe the statute in light of the background rules of the common law, in which the requirement of some mens rea for a crime is firmly embedded.
511 U.S. 600, 605, 114 S.Ct. 1793, 128 L.Ed.2d 608 (1994) (internal citation omitted). And as Taylor put it in a civil context, "[w]hen the Legislature makes [new] law, it does so against a backdrop in which common-law defenses abound, and those defenses are generally available unless the Legislature clearly indicates otherwise." Taylor , 644 S.W.3d at 650. The observation that lawmaking bodies act in light of the common law's well-established background norms, often regarding defenses, is not novel. As Judge Easterbrook put it, defenses like "justification," which have been around for "thousands of years," operate as background assumptions baked into the law, much like "grammar and diction." Frank H. Easterbrook, The Case of the Speluncean Explorers: Revisited , 112 Harv. L. Rev. 1913, 1913–14 (1999).
Here, the common law's scienter requirement—which amounts to a defense by the insured if an insurer seeks to invalidate the policy—was clear when the legislature acted. The legislature easily could have but did not exclude that requirement. We must assume that legislative choice to have been purposeful; it was at least consequential. Much as in the cases cited above, its result was to retain the common law. I thus agree with the Court that petitioner's plain-text arguments are unavailing, because petitioner would need text that excludes the intent-to-deceive element; silence is petitioner's enemy, not its friend. This result remains true even though the legislature expressly codified some parts of the common law while leaving the intent element unwritten. That pattern is not particularly rare; the statutes that draw from criminal and civil common-law actions, yet are silent about intent, all mimic it. Nor does the retention of the intent-to-deceive requirement render the codified portions of the law superfluous. The very act of codification ensures that no matter what this Court were to do with the common law, the requirements’ presence in a statute book would prevent further judicial modification; they would endure in the form that the legislature adopted. Thus, the legislature either left it to the courts to determine the compatibility of the intent-to-deceive element or it assumed the continuation of the existing standard without need of codification. That is just an academic question now, since the courts reaffirmed that the intent-to-deceive requirement would remain and the legislature has never said otherwise. Stare decisis takes over at this point.
For similar reasons, I agree with the Court's detailed explanation for why § 705.104 ’s intent requirement does not become superfluous unless we adopt petitioner's construction of § 705.051. See ante 357-58.
In saying all this, however, I distinguish between, on the one hand, the intent-to-deceive requirement that the legislature knew was already part of the common law (much as a car owner's knowledge that a key is also required to operate a car, see ante at 355-56) and, on the other, some hypothetical wholly different and unexpected requirement. The courts may not simply add whatever additional requirements they desire based either on statutory silence about such a requirement or on the use of "unless" in the statute's text. Notably, this Court has not purported to add new requirements—we have simply adhered to the common-law principles that the legislature knew to already exist.
Equally important—and far more so today than in 1909—we should be wary of new common-law innovations altogether, whether framed as a "gloss" on a statute or a new cause of action. As I have previously observed, "it is increasingly less likely than ever before that there are [statutory or regulatory] gaps that judges alone can (much less should) fill." Elephant Ins. Co. v. Kenyon , 644 S.W.3d 137, 157 (Tex. 2022) (Young, J., concurring). By the same token, we must also be mindful of the truism that we may not "rewrite the statute under the guise of interpreting it." In re Ford Motor Co. , 442 S.W.3d 265, 284 (Tex. 2014). But today's decision involves no innovation of any sort, much less any improper judicial adventurism. The Court merely leaves intact principles that have been part of Texas law for the bulk of Texas history.
Indeed, for all the reasons I have described, I am persuaded that any judicial impropriety would come not in retaining but in abandoning the intent-to-deceive requirement. I say that not because of any policy preference (I have none), but because dispensing with the scienter element would unjustifiably destabilize settled law. Doing so would not reflect judicial humility or deference to a statute, as it might seem at first glance; it instead would be an aggressive flexing of judicial muscle.
* * *
At this point, the scienter element must be regarded as within the legislature's exclusive authority. That body, not this one, should hear any arguments concerning the wisdom of requiring proof of intent to deceive or complaints about Texas law not being in accord with the law of other states. If and when the legislature determines that the intent-to-deceive requirement has outlasted its usefulness, it can say so. Or it could take other steps that, by necessary implication, may justify this Court's reconsideration of that requirement, comparable to the Court's analysis in Ruttiger . Either way, to avoid the common-law intent-to-deceive element that has become part and parcel of the statutory scheme, petitioner must have something from the legislature (and something material—not a mere stylistic change in the statutory language). Nothing less can surmount the formidable stare decisis obstacle of "unsettling that which has been settled so long and with such clarity." Ante at 359.
I therefore gladly join the Court's opinion affirming the judgment below.