## Facts

- Gaunt applied for life insurance through the insurer’s soliciting agent, paid the first premium, and signed a printed application containing a conditional-receipt clause tying effectiveness to payment, insurability as of completion of the medical exam (Part B), and home-office approval before death.
- The application included a checkbox for when insurance would become effective: the date of Part B (medical exam) or the date of policy issue.
- After Gaunt signed, the agent checked the “date of issue of policy” option; the trial court found both the agent and Gaunt intended coverage to begin on completion of the medical exam and that the checked box resulted from mutual mistake.
- Gaunt completed the medical examination; the examining physician reported him insurable, and the general agent forwarded the application to the home office with a favorable recommendation.
- The insurer’s medical review approved Gaunt as insurable, but before formal home-office approval was issued, Gaunt died from a gunshot wound.
- The beneficiary (Gaunt’s mother) sued to recover the policy proceeds, including double indemnity; the insurer denied that any coverage was in force and, alternatively, contested double indemnity based on an intentional-injury exclusion.

## Issues

1. Whether the conditional-receipt/application language, construed in light of the parties’ intent and the found mutual mistake, created insurance coverage in force at the time of Gaunt’s death despite the absence of formal home-office approval.
2. If coverage existed, whether the insurer proved the gunshot wound was intentionally inflicted so as to bar double-indemnity recovery.

## Decision

- The Second Circuit reversed the dismissal and remanded with directions to enter judgment for the beneficiary.
- The court held that interim coverage existed as of completion of the medical examination once the insurer was in fact satisfied that Gaunt was insurable under its rules; the insurer could not defeat coverage solely because formal approval had not been completed before death.
- The court held the insurer did not carry its burden to establish that the death fell within an intentional-injury exclusion, and double indemnity was recoverable.

## Legal Principles

- Conditional-receipt and application provisions drafted by an insurer are construed as a single contractual scheme and interpreted against the drafter when reasonably susceptible to more than one meaning.
- Where an applicant pays the first premium and is found insurable as of the medical examination date, language conditioning effectiveness on the insurer being “satisfied” may be read to provide coverage effective from the examination date once satisfaction exists in fact, rather than only upon later administrative approval.
- A mutual mistake in completing standardized application terms may be disregarded to reflect the parties’ actual agreement and cannot be used by the insurer to negate the coverage the transaction was meant to secure.
- An insurer bears the burden of proving application of an exclusion (including an intentional-injury limitation on double indemnity) and fails where the evidence does not establish the exclusion’s factual predicate.

## Conclusion

The court enforced interim life-insurance coverage under a conditional receipt from the date of the medical exam once the insurer had accepted the applicant as insurable, construed ambiguities and a mistaken checked option against the insurer, and allowed double-indemnity recovery because the insurer did not prove an intentional-injury exclusion.


Gaunt v. John Hancock Mut. Life Ins. Co., 160 F.2d 599 (2d Cir. 1947)