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Question

Difficulty: MediumWaiver and Estoppel

An applicant for a major medical insurance policy explicitly discloses a prior shoulder surgery on the application's medical history questionnaire. The insurance company's underwriting department processes the application and issues a standard policy without attaching any exclusionary riders regarding the shoulder. Eight months later, the insured requires additional treatment for the shoulder and files a claim. The insurer attempts to deny the claim, arguing that their internal underwriting guidelines strictly prohibit covering this specific type of pre-existing joint injury. Which legal doctrine prevents the insurance company from retroactively enforcing this internal guideline to deny the claim?

  1. EstoppelAnswer
  2. B
    Waiver
  3. C
    Breach of warranty
  4. D
    Apparent authority

Answer

The correct answer is Estoppel, which is the legal consequence that stops the insurer from enforcing the underwriting rule after already issuing the policy.
The correct answer is the doctrine that legally blocks a party from acting contrary to their previous actions or statements. When the insurance company issued the policy knowing about the shoulder surgery, they voluntarily gave up (waived) their right to exclude it. As a result, the doctrine of estoppel legally prevents them from trying to regain and enforce that right at the time of a claim.

Step-by-Step Solution

1
Analyze the insurer's initial action when the application was received.
The insurer issued the policy without exclusions despite having full knowledge of the prior shoulder surgery.
Issuing the policy with known facts constitutes an implied waiver of the right to deny coverage for that specific condition.
2
Identify the legal consequence of the insurer's initial action.
Because the insurer waived their right to exclude the shoulder injury, they lost the ability to enforce that exclusion later.
The legal doctrine that permanently prevents a party from reclaiming a waived right is required to answer the question.
3
Match the consequence to the correct legal terminology.
The doctrine is Estoppel.
Estoppel applies when one party's actions (waiver) cause another party to rely on those actions to their detriment, legally binding the first party to their initial decision.

Key Concept

Waiver and Estoppel
Estimated Time:1m 30s
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Topics

Waiver and Estoppel

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