An irrevocable family trust is applying for a life insurance policy on the life of its grantor, Victoria. The trustee, Samuel, acts as the applicant and policyowner, while Victoria signs as the proposed insured. During the paperwork process, a question regarding Victoria's participation in hazardous avocations is inadvertently left blank. The producer overlooks the omission, and the insurance company subsequently underwrites and issues the policy without noticing the empty field. Six months later, Victoria dies in a scuba diving accident—a hazardous avocation that would have required a substantial premium surcharge if disclosed.
Under the legal doctrines governing insurance contracts, how is the insurance company obligated to handle the trust's claim?
- The death benefit is fully payable to the trust, as the insurance company relinquished its right to evaluate the hazardous avocation by executing the contract despite the visible omission.Cevap
- BThe claim is subject to immediate rejection because leaving a lifestyle inquiry blank automatically qualifies as fraudulent material concealment by the proposed insured.
- CThe settlement process is suspended until the producer unilaterally amends the original application on behalf of the deceased to reflect the scuba diving activity.
- DThe payable proceeds are mathematically reduced to the exact amount the paid premium would have purchased had the scuba diving risk been properly classified.