Jon Lowe and Dan Denysios are partners in a home furniture business, JD Home Furniture (JDHF). Jon looks after the retail selling and Dan deals with the wholesale purchasing. Because of their respective areas of expertise, if either of them should die, JDHF would face severe challenges. After discussion, Jon and Dan agreed to purchase a $500,000 life insurance policy on each other in order to provide some cash flow to the other partner in case such an event should occur. Jon suddenly died, and the insurer, Full Life Insurance Co., refused to indemnify Dan.

Required:

Explain the legal rules that would apply in this situation and explain the likely outcome.