Insurer's Defenses. Jeffrey Duke purchased a life insurance ...

[lunatika]

Insurer's Defenses. Jeffrey Duke purchased a life insurance policy on his own life from New England Mutual Life Insurance Co Duke listed as his beneficiary his lover and business adviser, William Remmelink. On his insurance application, however, Duke described his beneficiary as merely his business partner. After Duke died of acquired immune deficiency syndrome (AIDS), New England Mutual brought an action against William Johnson, the executor of Duke's estate, to rescind (cancel) the insurance contract on the ground that Duke had materially misrepresented his relationship with his beneficiary. Johnson claimed that New England Mutual's attempt to rescind the contract was in bad faith and asked for both punitive damages and attorneys' fees. During the trial, an underwriter with twenty-four years of experience testified that New England Mutual had never before rescinded a policy because of a misrepresentation regarding the relationship between the beneficiary and the insured. Did Duke mischaracterize his relationship with his beneficiary? If so, was such a misrepresentation material? How should the court decide?

Question 2

A company that has more than 25,000 worth of business with the federal government and does not notify employees that as a condition of employment, the employer must be notified of any drug-related convictions that occur, and the employer must notify the federal government would be in violation of:
 a. the Drug Prohibition Act
  b. the Drug Control in the Workplace Act
  c. the Drug Prevention in the Workplace Act d. the Zero Tolerance Act
  e. none of the other choices are correct

[lorealeza]

Answer to Question 1

Insurer's defenses
The court found that there was no misrepresentation. Even if there was misrepresentation, stated the court, it was not material. Plaintiff New England Mutual mistakenly likens the de-scription of a beneficiary to a warranty and argues that a mischaracterization of a beneficiary is grounds for rescission, similar to the misrepresentation of a pre-existing health condition. The court viewed the matter otherwise, reasoning that the relationship between the insured person and his or her beneficiary is considered to be a description and not a warranty. The instant case involves a description of a non-traditional, non-familiar relationship, not a warranty, which, even if misrepresented, would not invalidate the policy. The court did not stop there. It went on to say that the insurance company should have to pay attorneys' fees as well. The court noted that while attorneys' fees are rarely awarded in actions involving breach of contract, two exceptions exist which are applicable here. First, attorneys' fees can be awarded to insureds forced to defend against an insurer's action to escape coverage. Second, attorneys' fees may be awarded where there has been an unreasonable, bad faith denial of coverage. The court found that New England Mutual's actions evidenced a gross disregard for its policy obligation. Said the court, Upon learning that Duke had contracted AIDS and that there would, most likely be a claim asserted under the life insurance policy within a short period of time, plaintiff searched through its files in an effort to determine a way to escape its obligation.    Such an investigation to find a bogus basis for disclaiming because the insured was a male homosexual (at higher risk for contracting AIDS than the general public) constitutes discrimination, both on the basis of disability and marital status.

Answer to Question 2

e