Insurer must pay even though applicant died.

Byline: David Ziemer

Under Section 631.11(3), a life insurance policy is in effect, even if a blood test was a condition precedent to activation of the policy, and the insured died before having that test, the Wisconsin Court of Appeals held on Apr. 9.

Bad Timing

On May 21, 1997, Patrick Fox completed a Catholic Knights Insurance Society (CKIS) application for a $150,000 term life insurance policy. The application named Austin J. Fox as primary beneficiary. On the same day, Patrick paid CKIS $31.94 for the first premium.

The policy provided, "Coverage under this Agreement begins on the latest of the following dates: The date of this application; The date of this Agreement; The effective date specifically requested in the application; The date of completion of all examinations and medical studies required by the rules and practices of CKIS."

In the "medical requirements ordered" section, the insurance agent checked, "blood."

Patrick was scheduled to have his blood draw on May 30, but canceled and rescheduled for the afternoon of June 6. In the early morning hours of June 6, however, Patrick died from injuries suffered in a car accident in Washburn County.

CKIS refused to pay any death benefit, and refunded the initial premium. The Foxes' attorney informed CKIS that they could obtain a blood sample that was taken from Patrick by the coroner, but CKIS declined to do so.

Action was then brought on behalf of Austin Fox for breach of the insurance contract. Milwaukee County Circuit Court Judge Timothy G. Dugan granted summary judgment to CKIS, however, concluding that Patrick died before the policy began.

Fox appealed, and a divided Court of Appeals reversed in a decision written by Judge Charles Schudson and joined by Judge Ralph Adam Fine. Judge Ted Wedemeyer dissented.

Statute Trumps Policy

The majority acknowledged that, at first blush, the insurance agreement would seem to preclude coverage, because Patrick, at the time of his death, had not yet completed all examinations required by the insurer, and thus the policy had not yet gone into effect.

The court concluded, however, that sec. 631.11(3) trumps the policy language. The statute provides: "No failure of a condition prior to a loss and no breach of a promissory warranty constitutes grounds for rescission of, or affects an insurer's obligations under, an insurance policy unless it exists at the time of the loss and either increases the risk at the time of the loss or contributes to the...