Temporary Insurance Applications and Agreements: The Impact of Material Misrepresentations in Life Insurance Applications on Coverage

by Wilson Elser

Earlier this year, the Fourth Circuit upheld a decision of the U.S. District Court for the Eastern District of Virginia, Banner Life Ins. Co. v. Noel, No. 12-1329, 2013 WL 221650 (4th Cir. Jan. 22, 2013), holding that a material misrepresentation made in a life insurance application was a sufficient basis for rescission of a temporary insurance application and agreement (TIAA).

The Banner decision is significant because it highlights the importance of a carefully drafted life insurance application and TIAA, defined in Black’s Law Dictionary as an “independent binder of insurance” that provides temporary coverage while the insurer processes the policy.

In Banner, the insured decedent, Gary Noel (Noel), completed a life insurance application for $1million in coverage pursuant to a 30-year level term life insurance policy (the Policy) with Banner Life Insurance Company (BLI). As part of the application paperwork, Noel completed three individual forms: Part 1, Part 2 and the TIAA. Part 2 of the application requested Noel’s medical history. In contravention of Part 2 of the application, Noel failed to accurately reflect a prior history of elevated liver function, an abnormal abdominal liver ultrasound and a referral by his primary-care physician to see a gastroenterologist.

While Noel misstated his medical history in Part 2 of the application, he responded truthfully to the questions presented on the TIAA – an optional application and agreement for temporary coverage. During the underwriting process, BLI’s consultant learned of Noel’s misstatements in Part 2 of the application and declined to recommend approval pending Noel’s follow-up with a gastroenterologist. Three days after deciding to postpone the application but prior to notifying Noel of its decision to postpone approval, Noel died. After denying a claim by Noel’s widow for benefits under the TIAA, BLI filed a declaratory judgment action seeking rescission of the TIAA or, alternatively, declaring it was only obligated to return the premium.

The Decision
The question before the court was whether the TIAA, which offered temporary coverage apart from the Policy, was subject to rescission based on material misrepresentations made in Part 2 of Noel’s application for coverage. The court focused on the carefully constructed language of the TIAA, and relied on contract interpretation to arrive at the conclusion that a material misrepresentation made in Part 2 of the application affected BLI’s decision to issue the Policy, allowing for rescission of the TIAA. Noel’s wife argued that the TIAA was a separate policy and misrepresentations in Part 2 of the application did not affect the TIAA.

The court rejected this argument based on the language contained in the TIAA, which stated that BLI was “limited to a return of the Amount Remitted if … any part of the life insurance application or this TIAA contains a misrepresentation (emphasis added). The court held that the phrase “’life insurance application’ … refer[red] to the application as a whole …” and not the application portion of the TIAA. In effect, the court held that a misrepresentation made in the TIAA was unnecessary “given the presence of the disjunctive ‘or’ in the phrase [life insurance application or this TIAA]. …” Therefore, according to the court, BLI “ha[d] the better part of [the] argument” and could “rely on Noel’s responses in Part 2 in order to prove Noel made knowing misrepresentations material to [BLI’s] risk.”

After resolving the issue of whether or not the misrepresentations in Part 2 of the Policy application affected the TIAA, the court moved on to address whether the misrepresentations made were in fact material. Holding that the misrepresentations were material to BLI’s risk, the court stated that the falsities in Part 2 “warranted postponement of issuance of the policy, and that any policy issued would have been on different terms.”

In conclusion, according to the court, the enforceability of a TIAA as part of an application for a life insurance policy may be subject to and conditioned on the information provided in other aspects of the application so long as the material misrepresentation provision unambiguously allows for rescission. Thus, insurers would benefit from including language in the conditional receipt or TIAA that incorporates reference information that the applicant provides in the separate application for life insurance.

Steven Frangoulis provided research assistance for this alert.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wilson Elser | Attorney Advertising

Written by:

Wilson Elser

Wilson Elser on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.