Texas General Lines — Life, Accident, Health and HMOGeneral InsuranceMedium
A life insurance applicant intentionally withholds information about a pre-existing heart condition on their application. Two years later, the insured dies from complications related to this heart condition. Which legal principle allows the insurer to deny the claim in this scenario?
- AEstoppel
- BWaiver
- CSubrogation
- DMisrepresentation
Show answer & explanationAnswer & explanation
Correct answer: D. Misrepresentation
Misrepresentation occurs when an applicant makes a false statement of a material fact on an insurance application. If the misrepresentation is material and intentional, the insurer can deny the claim, especially if it leads to an adverse outcome like death from the undisclosed condition within the contestability period.
Why the other options are wrong
- A. Estoppel prevents a party from asserting a fact inconsistent with a previous position, which is not applicable here.
- B. Waiver is the voluntary relinquishment of a known right, which is not what the applicant did.
- C. Subrogation allows the insurer to recover payments from a third party responsible for the loss, which is unrelated to this scenario.
Misrepresentation
A false statement of a material fact made by an applicant for insurance. If intentional and material, it can void the policy.
- Must be a false statement.
- Must be material (important to the insurer's decision).
- Can be innocent or fraudulent (intentional).
Memory trick: Truth on the form, or face the storm.