Question

Fact Pattern #1:

Pat contracts with an Ajax Insurance Company agent for a $50,000 ordinary life insurance policy. The application form is filled in to show Pat's age as 32. In addition, the application form asks whether Pat has ever had any heart ailments or problems. Pat answers no, forgetting that as a young child he was diagnosed as having a slight heart murmur. A policy is issued. Three years later, Pat becomes seriously ill and dies. A review of the policy discloses that Pat was actually 33 at the time of the application and the issuance of the policy and that he incorrectly answered the question about the history of heart ailments.

1. In Fact Pattern #1, can Ajax void the policy and escape liability on Pat's death? Why or why not? Explain.
2. In Fact Pattern #1, if there was any ambiguity on the application, should it be resolved in favor of the insured or the insurer? Explain.

Answer 1

Ans 1: Yes, Ajex can void the policy and escape liability on Pat’s death because Pat was not honest when he filled out the application for his ordinary life insurance policy. Even though Pat forgot about his heart ailment, that does not grant him a payout from the policy if the policy prevents those with that issue from receiving the policy. The previous condition that he did not mention is why Ajex can void the policy.

Ans 2: I believe it should be in favor of the insured. It should favor the insured because if a case like this went to the courts, they wouldn’t want the insured to be at fault because of complicated wording or any sort of unclear language. This forces the insurer to write their policies in clear language so the insured is able to understand and comprehend the terms of the policy.