Security Insurance, Inc., issued an insurance policy to a company providing an employee, Jessica

Garcia, with disability insurance. Soon thereafter, she was diagnosed with "panic disorder and

phobia of returning to work." Garcia lost her job and sought disability coverage. Security denied

coverage, doubting the diagnosis of disability. Garcia and her employer sued Security. During

pretrial discovery, the insurer learned that Garcia had stated on the policy application that she had

never been treated for any "emotional, mental, nervous, urinary, or digestive disorder" or any kind

of heart disease. In fact, before she filed out the application, Garcia had visited a physician for

chest pains and general anxiety, and the physician had prescribed an antidepressant and

recommended that she stop smoking.

1. Did Garcia commit a misrepresentation on her policy application? Explain.

2. If there was any ambiguity on the application, should it be resolved in favor of the

insured or the insurer? Why?

3. Assuming that the policy is valid,doesGarcia's situation fall within the terms of the

disability policy?

4. If Garcia is covered by the policy but is also disqualified by her misrepresentation on the

application for coverage, might the insurer still e liable for bad faith denial of coverage?

Explain.