An insurance producer delivers a newly issued whole life insurance policy to a client. The policy contains a standard provision requiring a signed 'Statement of Good Health' certifying that the insured's health has not changed since the initial application was submitted. During the delivery meeting, the client informs the producer that they were diagnosed with severe high blood pressure three days earlier. The producer tells the client, 'Don't worry about that, the company is only concerned with terminal illnesses. You are fully covered.' The producer collects the initial premium and hands over the policy. Eight months later, the insured dies from a stroke caused by the high blood pressure, and the insurer attempts to deny the death benefit claim based on the change in health.
Under the principles of contract law, which of the following best describes the most likely legal outcome and the applicable doctrines?
- By instructing the client to ignore the health change and collecting the premium, the producer waived the insurer's right to enforce the health condition, legally estopping the insurer from denying the claim.Answer
- BThe client's verbal disclosure to the producer constituted a waiver of the written contract terms, which creates an estoppel that protects the insurer from paying the claim.
- CThe insurer can deny the claim because the new medical diagnosis represents a breach of warranty that automatically voids the life insurance contract.
- DThe insurer can deny the claim because the producer lacked the express authority to alter the policy provisions, making the doctrine of estoppel inapplicable.