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Question

Difficulty: MediumRepresentations, Warranties, and Concealment

Marcus is finalizing an application for a 20-year term life insurance policy. One of the underwriting questions asks whether he has any plans to travel outside the country for more than 30 days within the next year. Marcus answers 'No,' as he has absolutely no such plans and intends to remain at his local office job. Eight months after the policy is issued, Marcus is unexpectedly recruited by an international humanitarian organization and deployed overseas, where he contracts a fatal illness.

Which of the following best describes how insurance contract law evaluates Marcus's original application statement?

  1. A
    It is a warranty; because his subsequent travel physically contradicted his written statement, the policy is automatically voided regardless of his original intent.
  2. B
    It is an application discrepancy; the producing agent must unilaterally correct the original application to reflect the foreign travel before the insurer will process the death benefit.
  3. It is a representation; because the statement was entirely truthful to the best of his knowledge at the time of application, the insurer cannot void the policy for misrepresentation.Answer
  4. D
    It created an estoppel; by issuing the policy, the insurer voluntarily waived its legal right to review the claim, meaning the death benefit must be paid without investigation.

Answer

It is a representation; because the statement was entirely truthful to the best of his knowledge at the time of application, the insurer cannot void the policy for misrepresentation.
In insurance contract law, statements made by an applicant are classified as representations, meaning they are statements believed to be true to the best of the applicant's knowledge and belief. Since the applicant genuinely had no plans to travel when the application was signed, his answer was completely truthful. A subsequent, unforeseeable change in lifestyle or employment does not transform a truthful representation into a fraudulent misrepresentation or concealment. Therefore, the insurer has no legal grounds to void the policy.

Step-by-Step Solution

1
Identify the legal nature of statements made by applicants on life insurance applications.
By law, statements on an insurance application are considered representations, not warranties.
This establishes the standard of truth required (true to the best of knowledge versus an absolute guarantee).
2
Evaluate the truthfulness of the applicant's statement at the exact moment the application was completed.
The applicant answered truthfully based on his knowledge and intentions at that specific time.
The validity of a representation is judged based on the facts known and the intent present at the time of application.
3
Determine if a subsequent, unexpected change in circumstances invalidates the original representation.
It does not. Because the applicant did not intentionally conceal information or lie during underwriting, the policy remains valid.
A life insurance policy cannot be voided for a misrepresentation if the statement was honestly believed to be true when it was made.

Key Concept

Representations vs. Warranties
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Topics

Representations, Warranties, and Concealment

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