An insurance producer, Elena, delivers a life insurance policy to a client. At the time of delivery, she learns that the client has recently taken up skydiving, a hazardous activity that normally requires a premium surcharge according to the insurer's underwriting guidelines. Instead of notifying the home office, Elena tells the client not to worry and accepts the standard premium payment. If the client later dies in a skydiving accident, which legal doctrine would most likely require the insurer to pay the death benefit?
- Estoppel, because the producer's knowledge of the risk is imputed to the insurer, legally preventing the company from denying the claim.Answer
- BWaiver, because the legal consequence that prevents the insurer from asserting a defense after a right has been relinquished is defined as a waiver.
- CExpress authority, because the producer possesses the written power in their agency contract to independently alter policy conditions.
- DImplied authority, because a reasonable member of the public would perceive that the producer has the power to waive underwriting rules.
Answer
Estoppel, because the producer's knowledge of the risk is imputed to the insurer, legally preventing the company from denying the claim.
The correct answer accurately applies the doctrine of estoppel and the principle of imputed knowledge. In agency law, an agent's knowledge is legally deemed to be the knowledge of the principal. When the producer accepted the premium knowing about the new hazard, the insurer voluntarily waived its right to deny coverage. Estoppel is the resulting legal doctrine that prevents the insurer from later reasserting that waived right to deny the claim.
Step-by-Step Solution
Key Concept
Estoppel and Imputed Knowledge in Agency Law