Business College Case of A Customer Who Died Too Soon Discussion

The Case of the Customer Who Died to Soon

Facts:

On  October 26, a Wednesday Country Life Insurance agent went to the house  of Martha and Gary Andersen. He persuaded the Andersens to buy a life  insurance policy and accepted a check for $1,600. On his way out the  door, he gave the Andersens a “conditional receipt for medical  policy,” dated that day. The form stated that the Andersens would have a  valid life insurance policy with Wednesday Country Life, effective  October 26, but only when all conditions were met. The most important of  these conditions was that the Wednesday Country Life home office accept  the Andersens as medical risks after the company scheduled a medical  examination. The Andersens were pleased with the new policy and glad  that it was effective that same day.

Gary died in a car  accident three weeks later. Wednesday Country Life declined the  Andersens as medical risks and refused to issue a policy. Martha  Andersen sued. Wednesday Country Life pointed out that medical approval  was a condition to being covered. In other words, the company argued  that the policy would be effective as of October 26, but only if it  later decided to make the policy effective.   It had not made that  decision as of the date of Gary’s death.

At Trial

Plaintiff  argued that the policy was a scam. The so called “conditional receipt  for medical policy” is designed to trick customers and then steal their  money. The company leads people to believe they are covered as of the  day they write the check. But they aren’t covered until much later, when the insurer gets around to deciding the applicant’s medical status.

The company gets the customer’s money right away and gives nothing in  exchange. If the company, after taking its time, decides the applicant  is not medically fit, it returns the money, having used it for weeks or  even months to earn interest. If, on the other hand, the insurance  company decides the applicant is a good bet, it then issues the policy  effective for weeks or months in the past, when coverage is of no use. No one can die retroactively. The company is being paid for a period during which it had no risk.

Defendant,  Wednesday Country Life, argued that it would be impracticable for  Wednesday Country Life to issue life insurance policies without doing a  medical check. That is the road to bankruptcy and would mean that no one  could obtain this valuable coverage. They further argued that they do a  medical inquiry as quickly as possible as it is in their interest to  get the policy decided one way or the other.

The policy clearly stated that coverage was effective only when approved by the home office,  after all inquiries were made. The Andersens knew that as well as the  agent. If they were covered immediately, why would the company do a  medical check?

Questions:

Does the clause making the policy effective only after a medical examination violate public policy? Explain

What other basis for a lawsuit might Martha have against the insurance company? Explain

Based on your answers to Nos. 1 and 2 who will win this case and why?