Producer Davis submits an individual disability income application for a client. The client inadvertently leaves the section regarding current prescription medications completely blank. Davis fails to notice the omission and forwards the paperwork to the underwriting department. The insurer also overlooks the blank section, issues the policy as applied for, and delivers it to the client. Eight months later, the client files a disability claim related to a condition treated by a medication they were taking at the time of application. Based on established application completion protocols, how will the insurer most likely handle this claim?
- The insurer must honor the claim because issuing the policy with an unanswered question constitutes a waiver of their right to that information.Answer
- BThe insurer will deny the claim because the client's failure to list the medication constitutes a material concealment that voids the contract.
- CThe insurer will deny the claim on the grounds that the producer breached their field underwriting duties by submitting an incomplete document.
- DThe insurer will suspend claim processing and require the producer to obtain the client's initialed addendum to the original application.
Answer
The insurer must honor the claim because issuing the policy with an unanswered question constitutes a waiver of their right to that information.
The correct answer accurately reflects the standard protocol for incomplete applications. If an application is submitted with unanswered questions, the insurer should return it to the agent for completion. However, if the insurer issues the policy without obtaining the missing information, they have legally waived their right to that information. They cannot later use the omission as a basis to deny a claim or rescind the policy.
Step-by-Step Solution
Key Concept
Handling Incomplete Applications and Waiver