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We as appointed agents to our carriers have a fiduciary responsibility to the Carrier and not the client. As this is a disclosure to you by the client, it is in essence a disclosure to the insurance company.
If not disclosed, the 2 year incontestable clause may not apply as it would be a willful act of fraud by the agent to the company and would be subject to the Fraud Statutes in the State of the insured (if a claim is presented) and it could be 5-7 years for the Statute of limitations to expire if such an act is done.
Since the policy should never have been issued, the insurance company is in its rights to rescind the policy and the insured's estate would have an E&O claim against the Agent. Unfortunately for the agent E&O insurance usually won't cover a felonious act perpetrated by the Agent.
The Big Lesson is....ALWAYS get a binder Check on Application. If the APS is in and all Medicals were completed before the heart attack and the insured dies, The company could be on the hook if they would have issued the policy prior to the heart attack, and issued it on the date of the application.
Wow....Did I pass the BAR EXAM YET.......
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Just for clairity I said ""However, he answered the questions on the application and exam truthfully on the dates signed (assuming) so I am not so sure if the proposed insured had an obligation to disclose the MI .""
Lee