A life insurance company may sometimes rely on an applicant’s health history or a change in health to dispute coverage. Wisconsin law places an important limit on one kind of defense: when the insurer’s medical examiner has authority to certify health or declare an applicant acceptable, and reports that conclusion to the insurer, the insurer may be barred from later arguing that the insured failed to meet the policy’s health requirements or had an undisclosed preexisting condition.
That rule appears in Wis. Stat. § 632.50. The Wisconsin Supreme Court explained how it works in Grosse v. Protective Life Insurance Co., 182 Wis. 2d 97, 513 N.W.2d 592 (1994).
What § 632.50 says
In summary, Section 632.50 applies when three things are true:
Under the insurer’s rules, its medical examiner has authority to issue a certificate of health or declare the proposed insured acceptable.
The examiner makes that report to the insurer or its agent.
The insurer later tries to defend a policy claim by arguing that the insured was not in the required health condition when the policy was issued or delivered, or had a preexisting condition not noted in the examiner’s report.
The verbatim text of § 632.50 is as follows:
Estoppel from medical examination. If under the rules of any insurer issuing life insurance, its medical examiner has authority to issue a certificate of health, or to declare the proposed insured acceptable for insurance, and so reports to the insurer or its agent, the insurer is estopped to set up in defense of an action on the policy issued thereon that the proposed insured was not in the condition of health required by the policy at the time of issue or delivery, or that there was a preexisting condition not noted in the certificate or report, unless the certificate or report was procured through the fraudulent misrepresentation or nondisclosure by the applicant or proposed insured
When those requirements are met, the insurer is “estopped”—in other words, prevented—from relying on that health defense. The statute contains an exception when the applicant or proposed insured obtained the examiner’s certificate or report through fraudulent misrepresentation or nondisclosure.
The Wisconsin Supreme Court’s decision in Grosse
In Grosse, the insurer arranged a medical examination while considering an application for life insurance. The examiner was asked whether he knew of a reason the applicant should not be accepted as an insurance risk and answered no.
The factual background in Grosse, was presented as follows:
· On March 30, 1988, following the exam, Mr. Grosse was informed by Protective Life that a policy could be issued. Mr. Grosse did not communicate his acceptance at this time.
· On April 11, Mr. Grosse saw a pulmonary specialist for a recurring cough and shortness of breath. The medical records indicate that the doctor made a preliminary diagnosis of lung cancer. There is nothing in the record, however, to indicate that the doctor informed Mr. Grosse of this preliminary diagnosis.
· On April 12, the same day a biopsy was performed on Mr. Grosse's lung, Mr. Grosse accepted the policy.
· The next day, April 13, Mr. Grosse was informed that he suffered from small cell cancer of the lungs. He did not inform Protective Life of this diagnosis, and the policy was issued on that day. On April 20, Protective Life delivered the policy to Mr. Grosse and on April 25, Mr. Grosse paid the first premium.
· Mr. Grosse died of lung cancer on December 13, 1988
After Mr. Grosse’s death, the insurer denied his wife’s claim, relying on the change in his health between the examination and the policy’s delivery and payment.
The Wisconsin Supreme Court held that § 632.50 barred the insurer from using that health change as a defense on the facts presented. The company had no formal written rule prohibiting its medical examiners from declaring applicants acceptable. An unwritten company policy and application language stating that an examiner could not bind the company did not suffice. The Court treated the examiner’s answer as a declaration of insurability because it called for an evaluation of the applicant as an insurance risk, rather than a report of objective measurements alone.
The exception for fraud
The statutory exception does not make every later-discovered health fact a basis to avoid § 632.50. In Grosse, the Court explained that the insurer’s fraud defense in that setting was that the applicant fraudulently procured the examiner’s favorable certificate or declaration. The insurer could not avoid the statutory estoppel simply by pointing to a later change in health.
Whether an applicant’s conduct amounts to fraud that procured the favorable report depends on the evidence and the circumstances. The statute and Grosse do not resolve every dispute involving application answers, omissions, or later diagnoses.
What the decision does—and does not—mean
Grosse does not mean that every medical examination prevents an insurer from contesting a life insurance claim. Section 632.50 turns on the examiner’s authority under the insurer’s rules and on what the examiner actually reported. A report limited to items such as blood pressure or pulse may be different from an express opinion that the applicant is acceptable for insurance.
The decision also addresses a particular health-based defense under § 632.50. Other questions—such as whether a policy took effect, whether an application answer was a material misrepresentation, or whether a separate policy provision applies—may involve other statutes and policy language. The answer depends on the facts and the policy at issue.
Records that may matter in a coverage dispute
A review of a § 632.50 issue may require the application, the complete medical examination form and report, the policy and delivery documents, and the insurer’s rules governing the examiner’s authority. The timeline can matter too: when the examination occurred, when the examiner reported, when the policy was issued or delivered, when the first premium was paid, and when the health issue was diagnosed or disclosed.
For a beneficiary whose claim has been denied based on health history or a change in health, Grosse is an important Wisconsin case to discuss with a lawyer reviewing the policy and claim file.
This article provides general information about Wisconsin law and is not legal advice. The outcome of a particular claim depends on its facts, policy language, and applicable law.
Contact Mark Santi About Your Wisconsin Life Insurance Claim
If a life insurance company has denied or delayed a substantial claim, or if you are involved in a dispute over who should receive life insurance proceeds, you do not have to simply accept the insurance company's position.
Mark C. Santi, Esq. is a 2004 graduate of the University of Wisconsin – Madison. Mark is a life insurance lawyer with nearly 20 years of litigation experience. Mark is licensed in MN, FL, and NY and is based out of Minneapolis, Minnesota. Mark handles life insurance cases in various states in accordance with ethical guidelines. Mark can review the circumstances surrounding the claim and discuss potential next steps.
Mark requires a minimum 10-hour retainer for hourly matters. For qualifying life insurance claims exceeding $100,000, Mark offers a free initial consultation and will consider a contingency fee arrangement.
Call Mark directly at 612-808-9082
Email: mark@thesantifirm.com
Contact Mark today to discuss your Wisconsin life insurance dispute.
Attorney advertising. Past results do not guarantee future outcomes. The availability of representation, applicable law, and any required local counsel or court admission depend upon the circumstances of the individual matter.