Signatures in a life application

by MaxHerr » Tue Dec 08, 2009 02:50 am
Posts: 7886
Joined: 29 Nov 2009

There's a little disagreement over the subject of who must sign a life insurance application and related forms necessary to complete an application for insurance (such as HIPAA consents, HIV testing, etc.).

An otherwise anonymous poster on another thread would like to insist that he can obtain $1,000,000 of life insurance on a proposed insured without the knowledge and consent of the proposed insured.

My contention is that whether it appears explicitly in the insurance code of a particular state or not, in the law of contracts requires the parties to the contract to sign the contract in order for it to be legally in force. Since the insured is a party to the contract, whether he likes it or not, he must answer the various questions in the application (or supply the requested personal information) and attest to their accuracy being "true and complete to the best of my knowledge" (a representation). A third-party owner signs the application to acknowledge his insurable interest, which is a requirement of most if not all Insurance Codes.

Most insurance codes, if not explicitly referring to the insured, infer equivalency between the term "applicant" and "insured". For example, the California Insurance Code (799.03) requires that [for life and disability income insurance] "(a) An insurer that requests an applicant to take an HIV-related test shall obtain the applicant's written informed consent for the test. Written informed consent shall include a description of the test to be performed, including its purpose, potential uses, and limitations, the meaning of its results, procedures for notifying the applicant of the results, and the right to confidential treatment of the results. Prior to the applicant's execution of the consent, the insurer shall:
(1) Provide the applicant printed material describing HIV, its
causes and symptoms, the manner in which it is spread, the test or
tests used to detect HIV or the HIV antibody, and what a person can
do whose test results are positive or negative.
(2) Provide the applicant a list of counseling resources
available, where the applicant can obtain assistance in understanding
the meaning of the test and its results. The list may be provided
from publicly available information.

It is clear from the context, that the Code is referring to the insured, not a third-party applicant/owner whose insurability is not in question. We know that insurers have, for the most part, incorporated such consents within the application, or in additional forms that are made a part of the application. No signed consent, no insurance. Unless the insurance amount is small, say $50,000 or less, the majority of insurers utilize saliva, blood, or urine testing for HIV/AIDS.

Various state and/or federal laws also require informed consent of the insured under a COLI/BOLI policy applied for by their employer, particularly when the beneficiary will be the employer and not a person of the insured's choice, such as when the policy is being used to informally fund a nonqualified employee benefit plan.

Please share your thoughts.

Total Comments: 62

Posted: Tue Dec 08, 2009 03:22 am Post Subject:

Well, I don't know what the written law is, but I can tell you that I've never seen an application insurance that would allow me to not have the insured's signature (exlcuding juvaniles) and as a result have their consent. In fact, even in a tiny 25k face amount case, the insured's signature (the wife who wasn't at the meeting) held up the case.

Posted: Tue Dec 08, 2009 12:25 pm Post Subject:


Think back to your example in the other thread of the Wal-Mart case. What did Wal-Mart do? The company purchased policies on their employees without the employees consent. How did they do this? Did they break any laws? If I'm not mistaken, the insurance company did it all on a guaranteed issue basis and thus no medical testing was needed and no signatures were needed by the insureds.

California then changed their law. What did they change? They made it illegal to do this with non-exempt workers. In other words, corporations are no longer allowed to buy coverage on an hourly employee without the hourly employee's consent. What wasn't changed? Corporations still don't need consent from salaried workers to buy policies covering their lives.

Posted: Tue Dec 08, 2009 12:37 pm Post Subject:


Let me explain why you are making this mistake. You are combining one factual mistake with a bunch of irrelevant facts and combining that with years of experience that have you to think that if you don't know something, it must be wrong.

Factual Mistake: The insured has to be a party to the contract. You won't find any law that makes this a necessity.

Irrelevant Facts: Medical testing, HIV etc. Sure the insured would need to sign for these things. However, there is not a legal requirement that forces an insurance company to do medical underwriting.

Years of Experience: Keep in mind these are the same years of experience that didn't allow you to understand how the secondary guarantees of UL are used in the marketplace. Every single application that you have ever sold has required the signature of the insured. Thus, you are jumping to the conclusion that there must not be any exceptions.

Posted: Tue Dec 08, 2009 04:08 pm Post Subject:


Here are some examples of the insured not being a party of the contract and not needing to sign the application.

1) Max insures his car against accident. His car is the insured and does not need to sign the contract.

2) Max insures his horse against death. His horse is the insured and does not need to sign the contract.

3)Max owns a baseball team. There is a clause in his 2nd basement's contract that will pay him a $10,000,000 bonus if he hits 60 homeruns. Max insures this risk. The second baseman does not need to sign the insurance contract.

4)The 2nd baseman's contract also has a clause that guarantees payment if death occurs. Max also insures this risk. Again, the second baseman does not need to sign the insurance contract.

By the way, a third party contract is one in which the contract is designed to benefit a third person and that 3rd person does have contractual rights. The insured is not a 3rd person in a life insurance contract because they don't recieve any benefits from the contract nor do they have any contractual rights.

Posted: Tue Dec 08, 2009 04:54 pm Post Subject:

fjrev, a small clarification:

1) Max insures his car against accident. His car is the insured and does not need to sign the contract.

2) Max insures his horse against death. His horse is the insured and does not need to sign the contract.

Not to get too picky, but the car and the horse are not the "insured." The car and the horse are the objects of insurance, and we insure people who own objects. This is why the credit, character and personal characteristics of the person who owns the object are the primary and critical elements involved. Sure, we always look at the object insured to make sure it meets certain requirements, such as a house being kept in a good state of repair, etc.

InsTeacher 8)

Posted: Tue Dec 08, 2009 10:10 pm Post Subject:

Regardless, the point is still the same that the car, the horse, and the 2nd baseman don't have to sign the application. They are making no representations, agreeing to absolutely nothing, and receiving absolutely no benefits from the insurance.

Posted: Wed Dec 09, 2009 10:32 am Post Subject:

As InsTeacher tried to point out, objects of insurance such as cars and horses are not insureds. When the car is damaged, the owner suffers financial harm not the car itself. So the insurance protects the owner's risk of loss. That's exactly why your auto insurance follows you as the insured regardless of the car you drive, but may not follow the car, if someone drives it without your permission.

Your examples are ridiculous. As for HIV testing, here's what the California Insurance Code (and the Codes of nearly all other states have similar language) says:

799. The purposes of this article are to establish standards for the performance by life and disability income insurers of their duty to avoid making or permitting unfair distinctions between individuals of the same class in the underwriting of life or disability income insurance for the risks of acquired immune deficiency syndrome (AIDS) and AIDS-related conditions (ARC); to establish mandatory and uniform minimum standards for assessing AIDS and ARC risks for determining insurability which are deemed to be sufficiently reliable to be used for life and disability income insurance risk classification and underwriting purposes; to require the maintenance of strict confidentiality of personal information obtained through testing; and to require informed consent before any insurer tests for HIV.

Your first example of the baseball player is not one of life insurance, so it bears no relevance to the discussion -- it's in the same category as insuring a "hole in one" prize in a golf tournament where the risk is the payout itself if the contingent event occurs.

In your second example, please explain how the team owner will obtain what must be a multimillion dollar insurance policy on the player without underwriting, which will require the HIPAA consent to release PMI, medical exam, and HIV testing, without the player's consent? Fails to convince again.

You're right when you say "The insured is not a 3rd person in a life insurance contract" -- but it's because they are the first party and the insurer is the second party. It is the owner who is not the insured who is the third party in a third party contract. And the law of contracts requires all parties to the contract to enter into the contract willingly. They demonstrate that with their signature.

[the 2nd baseman] . . . receiving absolutely no benefits from the insurance.

This does not follow your second baseball example either. You state that the player's contract has a clause that requires payment if the player dies. Who gets the payment? Isn't it the family/estate of the player? Yes, he doesn't "get" the benefit because he's dead, but that's the same as any other life policy. But that doesn't exempt him from participating in the application for insurance.

Posted: Wed Dec 09, 2009 11:49 am Post Subject:

Max, there is no requirement that a company tests for Aids.

The player doesn't benefit from the insurance because his family gets the payment regardless of whether the owner buys the insurance or not.

I'm intentionally failing to convince you because I like watching you go deeper into your belief that I must be wrong and the know everything Max is correct.

Posted: Wed Dec 09, 2009 09:37 pm Post Subject:

I was considering staying out of this thread, but it's gotten a bit contentious so I'll put in another two cents.

I think Max and fjrev are looking at this differently. I believe the OPs concern was the idea of who must actually SIGN a life insurance application. This has nothing to do with insurable interest, etc. which have arisen within the thread. As well, there is a BIG difference as to who has to SIGN the app and what's required to ISSUE the policy. Big difference.

As to the required signatures/consent on individual life and health insurance applications, I quote Oregon law (which is typically about the same in most states) and doesn't include info on EOLI, STOLI or any of those other acronyms

743.027 Consent of individual required for life and health insurance; exceptions. No life or health insurance policy upon an individual, except a policy of group life insurance or of group or blanket health insurance, shall be made or effectuated unless at the time of the making of the policy the individual insured, being of competent legal capacity to contract, applies therefor or has consented thereto in writing, except in the following cases:

(1) A spouse may effectuate such insurance upon the other spouse.

(2) Any person having an insurable interest in the life of a minor, or any person upon whom a minor is dependent for support and maintenance, may effectuate insurance upon the life of or pertaining to such minor.

(3) Family policies may be issued insuring any two or more members of a family on an application signed by either parent, a stepparent, or by a husband or wife.

(4) A person may effectuate insurance that provides for the final expenses of an adult who is dependent upon the person for support and maintenance. [1967 c.359 §342a; 1991 c.182 §2]

So, as you can see, there are absolutely instances whereby a person can apply for coverage on another without signature, but try getting the policy issued without the actual insured's consent.

As you are aware, medical testing, medical records, etc. require the consent (in writing) from the insured person as well as the physical presence of the insured to actually undergo the testing components of the underwriting process. If the insured refuses to undergo any medical requirements or refuses to release the records (HIPAA law), then there's no way the carrier is going to issue.

Can we all agree to simply agree? Sheeeeesh! :D

InsTeacher 8)

Posted: Thu Dec 10, 2009 11:41 pm Post Subject: insurance

GOSH!!..what a thread!! Ok...I'm gonna ask a very simple question here. I'm taking a Life Insurance policy out on my son. He's 16 now. Does he need to sign anything, on the policy? He has no Health problems, etc.

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