§ 1.4 Insurance Applications

• Library: Guide to South Carolina Liability and Property Insurance Law (SCBar) (2019 Ed.)

§ 1.4 Insurance Applications

"An application for insurance is an offer and until accepted by the insurer, no contractual relationship exists."²³ "Circumstances such as the negligent delay in either acting upon an application for insurance or in notifying the applicant of the rejection of an application will sustain liability on the theory of an implied acceptance of the applicant's offer.²⁴ Applications for insurance are mere offers or proposals and no contractual relationship exists between the applicant and the insurance company until the application is accepted.²⁵ "[T]o constitute a contract, there must be 'either an actual acceptance, or such circumstances as may imply acceptance, or estoppel from denying acceptance.'"²⁶ South Carolina courts have recognized that when an application is made, the insurer must act upon it with "reasonable promptness" and until it does act upon the application, the insurer must "refrain from doing anything reasonably calculated to mislead the applicant."²⁷

The South Carolina Supreme Court rejected the insurer's argument that the agent did not have authority to accept an insurance application and bind coverage. In Rickborn v. Liberty Life Insurance Co.,²⁸ the stepson asked his stepfather, who was an insurance agent for the life insurer, for advice on insurance and savings, and the stepfather recommended the stepson apply for a universal life insurance policy that would provide both insurance and savings. The stepfather agent presented the stepson with the application and conditions and told him to sign the documents. And, without reading the documents, the decedent signed them and did not receive a copy of the application and conditions. The decedent did not have his checkbook to pay the premium, and his stepfather informed him that he would "take care of it" and he wrote a personal check for the initial premium.²⁹

The stepfather agent...