An applicant completes a life insurance application but inadvertently leaves the section regarding past cardiovascular treatments entirely blank. The producer forwards the paperwork to the home office without noticing the omission. The underwriting department subsequently issues the policy as a standard risk without requesting the missing information. Fourteen months later, the insured dies from a myocardial infarction, and the insurer discovers a documented history of severe heart disease that existed prior to the application. Under the legal principles governing application completion, how must the insurer respond to the death claim?
- The insurer must pay the full death benefit because issuing the policy with an unanswered question constitutes a waiver of the right to that information.Answer
- BThe insurer may deny the claim on the grounds of material concealment, as the insured withheld critical health history.
- CThe insurer is permitted to void the contract because the incomplete health section violated the absolute warranty of truthfulness required at application.
- DThe insurer may deny the claim because the producer exceeded their express authority by submitting an incomplete document to underwriting.
Answer
The insurer must pay the full death benefit because issuing the policy with an unanswered question constitutes a waiver of the right to that information.
The correct answer accurately applies the doctrine of waiver to the application process. If an insurer receives an application with missing information (unanswered questions) and issues the policy anyway, the insurer has waived its right to that information. The insurer cannot later deny a claim based on facts that would have been revealed had they required the question to be answered.
Step-by-Step Solution
Key Concept
Handling Incomplete Applications and Legal Waiver
Estimated Time:1m 30s