The chief financial officer remembers that he had paid Fiduciary Foo, an agent for Gross Insurance company, the initial installment of $25,000 on an insurance premium for a $10,000,000 business insurance policy two months ago. Unfortunately Fiduciary Foo deceased shortly after receiving the premium, and before he had been able to forward that premium on to Gross Insurance company. Gross Insurance company's claim department has already rebuffed the initial inquiry from Mega's CFO about coverage by claiming that there is no insurance in place since the premium was never received at the insurer. Foo's widow has offered to return the $25,000 premium to Mega. Should the CFO accept that offer of return of premium?
In this exercise, identify as many of the legal issues or potential problems as possible, and reference the law(s) which might control or influence the way in which a business might react to the particular event or occurrence. If you think a particular action is a problem legally, indicate how and why you reach that conclusion. While it is very good to indicate how you think a law would require an issue to be resolved, it is also good to even just identify what the issue is that is raised by a fact situation.
The CFO should not accept the return of premium.
This is a clear case of Agency on the part of the insurance company. Its agent, Foo accepted a premium payment. When this occurred, it was bound to issue a policy and honor the insurance agreement. ...
An offer of return of premium is contemplated.