When Insurance Companies Wrongfully Rescind Long-Term Disability Policies in Texas
When Texans purchase long-term disability (LTD) insurance, they do so for peace of mind — knowing that if a serious illness or injury prevents them from working, they’ll still have financial support. Unfortunately, some insurance companies don’t honor their promises. They may try to rescind a policy after a claim is filed, claiming that the insured made misrepresentations on their application.
In many cases, these rescissions are not legitimate, and may instead be bad-faith tactics used to deny valid claims. At Raval Trial Law, we help individuals in Houston and across Texas fight back when insurers wrongfully rescind LTD coverage.
What Is Policy Rescission?
Rescission is when an insurance company cancels your policy as though it never existed. The insurer claims that it discovered something during its investigation that would have made it decline coverage in the first place, typically, a supposed misstatement or omission on your application.
Insurers justify rescission under the argument that the policyholder’s statements were material misrepresentations, meaning they affected the insurer’s decision to issue coverage. However, insurers often stretch this reasoning to avoid paying legitimate benefits.
Common Examples of Improper or Fraudulent Rescissions
Insurance companies sometimes weaponize the rescission process to sidestep financial obligations. Typical bad-faith tactics include:
- Reinterpreting minor application errors as intentional misrepresentations.
- Claiming omissions about health history that were never asked in the application.
- Using vague or confusing questions to trap applicants into technical inaccuracies.
- Performing a retroactive “investigation” only after a high-value claim is filed.
- Failing to refund premiums after voiding coverage, another red flag for bad faith.
These tactics leave disabled policyholders without benefits, at the exact moment they are least able to work or support their families.
How Bad-Faith Insurance Law Applies in Texas
Under Texas law, every insurer owes its policyholders a duty of good faith and fair dealing. This means insurers must act honestly, fairly, and in accordance with reasonable standards when handling claims. Suppose an insurer rescinds a policy or denies benefits without a reasonable basis. In that case, the policyholder may have a claim for insurance bad faith under both common law and the Texas Insurance Code (Chapters 541 and 542).
In some cases, wrongful rescission can entitle a policyholder to:
- Reinstatement of the original policy,
- Back payment of all withheld LTD benefits,
- Additional damages for emotional distress or financial hardship, and
- Punitive damages are designed to punish intentional misconduct
Real-World Example
Consider a Houston professional who disclosed a prior knee surgery on her LTD application but omitted a minor follow-up visit months later that didn’t change her prognosis. Years later, after filing a disability claim for an unrelated back injury, the insurer rescinded her policy, alleging she “failed to disclose material medical information.”
This kind of rescission can be legally indefensible, particularly if the insurer had access to her medical records or never asked follow-up questions during underwriting.
Why Insurers Engage in Rescission Abuse
Simply put, it’s about profits over people. Long-term disability policies involve large payouts that can last years or decades. When an insurer finds any justification, however weak, to rescind a policy, it avoids those financial obligations.
Rescission abuse also sends a chilling message to other policyholders: don’t challenge us. That’s why taking legal action is critical, not only to recover your benefits but to hold insurers accountable.
How an Experienced Houston Long-Term Disability Lawyer Can Help
At Raval Trial Law, we take a strategic, evidence-based approach to these disputes. We:
- Conduct a full review of your application and underwriting file;
- Demand copies of internal claim notes and investigation reports;
- Evaluate whether alleged omissions were truly “material”;
- Identify violations of the Texas Insurance Code or unfair settlement practices; and
- Litigate aggressively to restore coverage and recover unpaid benefits.
We’ve seen how devastating wrongful rescission can be, financially, emotionally, and professionally. Our mission is to make sure insurance companies are held to the same level of accountability they demand from policyholders.
Taking Action
If your LTD policy was rescinded, don’t accept the insurer’s explanation at face value. You have rights under Texas law, and experienced representation can make the difference between financial ruin and recovery.
Raval Trial Law helps clients across Houston and throughout Texas stand up to insurance companies that put profits ahead of people.
📞 Contact us today to speak with a dedicated long-term disability lawyer in Houston about your case and protect the coverage you’ve earned.