Author Question: Insurer's Defenses. Kirk Johnson applied for life insurance with New York Life Insur-ance Co on ... (Read 205 times)

saliriagwu · **on:** Jun 24, 2018

Insurer's Defenses. Kirk Johnson applied for life insurance with New York Life Insur-ance Co on October 7, 1986. In answer to a question about smoking habits, Johnson stated that he had not smoked in the past twelve months and that he had never smoked cigarettes. In fact, Johnson had smoked for thirteen years, and during the month prior to the insurance appli-cation, he was smoking approximately ten cigarettes per day. Johnson died on July 17, 1988, for reasons unrelated to smoking. Johnson's father, Lawrence Johnson, who was the benefi-ciary of the policy, filed a claim for the insurance proceeds. While investigating the claim, New York Life discovered Kirk Johnson's misrepresentation and denied the claim. The company canceled the policy and sent Lawrence Johnson a check for the premiums that had been paid. Lawrence Johnson refused to accept the check, and New York Life brought an action for a declaratory judgment (a court determination of a plaintiff's rights). What should the court decide? Discuss fully.

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-Free Workplace Act
d. the Zero Tolerance Act
e. the Drug Prevention in the Workplace Act

mochi09 · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

Insurer's defenses
The court ordered the entry of a judgment declaring that the policy in question was void from the beginning. Generally, an insurance policy is void for misrepresentation if the insurer establishes that (1) the representation was false; (2) the insured knew that it was false when made or made it in bad faith; and (3) the representation was material to the risk being insured. The smoking habits of the decedent were clearly material to the risk assumed by the insurer. A misrepresented fact is material if its disclosure would have caused the insurer to refuse the risk or to demand a higher premium. Disclosure of the decedent's smoking would have caused New York Life to demand higher premiums. Thus, the misrepresentation was material.

Answer to Question 2

c