California Life-Only & Accident and Health AgentGeneral InsuranceHard
An insurance agent mistakenly tells a client that their new health policy covers acupuncture, even though the policy explicitly excludes it. The client relies on this statement and incurs acupuncture expenses. If the insurer is forced to pay for the acupuncture, despite the exclusion, this is an example of:
- AMisrepresentation
- BWaiver
- CEstoppel
- DConcealment
Show answer & explanationAnswer & explanation
Correct answer: C. Estoppel
Estoppel is a legal principle that prevents a party from asserting a fact or right inconsistent with a previous position or representation, especially if another party has relied on that position to their detriment. Here, the insurer (through its agent) made a representation, the client relied on it, and the insurer is 'estopped' from denying coverage based on the exclusion.
Why the other options are wrong
- A. Misrepresentation is a false statement of a material fact.
- B. Waiver is the voluntary relinquishment of a known right.
- D. Concealment is the intentional withholding of a material fact.
Estoppel
Estoppel is a legal doctrine that prevents a party from asserting a fact or right when their previous words or actions led another party to reasonably believe otherwise and act to their detriment.
- Prevents a party from changing their position.
- Requires reliance by another party to their detriment.
- Often arises from an agent's statements or actions.
- Often follows a waiver, making it legally binding.
Memory trick: Waiver gives up a right, Estoppel stops you from going back on your word.