Examkin

Question

Difficulty: HardWarranties, Representations, and Concealment

An independent contractor applies for an individual medical expense insurance policy. The application explicitly asks: 'Have you ever had any form of cardiovascular disease?' The applicant answers 'No.' The applicant genuinely feels healthy, has no known symptoms, and has not visited a physician in eight years. Five months after the policy is issued, the insured suffers a major heart attack. Subsequent emergency medical evaluations reveal severe, asymptomatic coronary artery disease that had been silently progressing for at least a decade. The insurer seeks to deny the claim, arguing the application contained a false statement regarding a highly material risk. Under the legal principles governing insurance contracts, what is the legally correct outcome?

  1. The insurer must pay the claim because statements on such applications are deemed representations, requiring truthfulness only to the best of the applicant's knowledge and belief.Answer
  2. B
    The insurer may deny the claim because the applicant's response serves as a strict warranty of their health, which was factually breached regardless of intent.
  3. C
    The insurer may deny the claim because failing to disclose the progressing disease constitutes the legal concealment of a material underwriting fact.
  4. D
    The insurer must pay the claim because issuing the policy without requiring a medical examination acts as an estoppel against any future misrepresentation defenses.

Answer

The insurer must pay the claim because statements on such applications are deemed representations, requiring truthfulness only to the best of the applicant's knowledge and belief.
The correct answer identifies that statements on life and health applications are legally classified as representations. A representation only needs to be true to the best of the applicant's knowledge and belief. Since the applicant was completely asymptomatic and unaware of the disease, their 'No' answer was an honest representation, not a fraudulent misstatement. Therefore, the policy remains valid and the claim must be paid.

Step-by-Step Solution

1
Identify the nature of the statement made on the application.
The applicant answered 'No' to a health question based on their honest belief, being entirely asymptomatic at the time of application.
Determining the applicant's intent and level of knowledge is critical for evaluating statements on an insurance application.
2
Apply the legal classification to the applicant's statement.
By law, statements on life and health insurance applications are considered representations, not warranties.
This establishes the legal standard of truth required (best knowledge and belief versus absolute factual truth).
3
Evaluate the insurer's defense against the standard for representations.
Because the applicant answered truthfully to the best of their knowledge, there was no material misrepresentation or intentional concealment. The insurer must pay the claim.
An innocent, unknowing misstatement about an asymptomatic condition does not breach a representation and cannot void the policy.

Key Concept

Representations vs. Warranties in Insurance Applications
Rate this question

Topics

Warranties, Representations, and Concealment

More questions from this topic