Effective Date of Coverage. Robert Gladney applied for disability insurance from Paul Revere Life Insurance Co, enclosing with the application a check for $3,100, which represented the first semiannual premium. The issuance of the policy was conditional

Question

on the insurance company's receipt of a medical form that was to be completed by Gladney's doctor following a physical examination. Gladney was a busy man and kept putting off the physical examination. Over a month later, Gladney submitted a second application, because the first one was too old. The insurance agent advised Gladney to leave the application undated so that if Gladney failed to have the physical examination within a month, he would not have to submit yet a third application. Gladney told the agent that he would notify him when the examination was completed. Soon thereafter, Gladney fell ill. His doctor examined him but did not conduct all the tests normally required by Paul Revere for disability insurance. A month later, Gladney was hospitalized and underwent heart surgery. Gladney never told the insurance agent about his visit to the doctor and the fact that the doctor had examined him. Gladney now claims that he is entitled to disability benefits under the policy because he paid the premium and would have been approved for insurance had he notified the insurance company of his examination. Will the court agree? Discuss fully.

Answer 1

Effective date of coverage
No. The court held that the interim policy never became operative because Gladney had failed to satisfy the conditions precedent for coverage. In short, no insurance contract had come into existence, only a conditional agreement. That agreement did not operate to provide coverage "unless and until" Paul Revere's application requirements were fulfilled, including the required medical examination and tests. In the conditional agreement, Paul Revere had reserved the right, as a condition precedent to its acceptance of the contract, to receive a medical report, to review the report, and to seek further clarification or tests. Because Paul Revere was informed of Gladney's medical examination only after Gladney became disabled, the insurance company was never afforded an opportunity to exercise this right. Because this condition precedent was not met, the contract failed.