The following is an exam review question, I have already worked through it but could use a second opinion. Thank you.

Terry and Tracy Traveler had planned to make a trip around the world.As part of their preparations, they decided to purchase life insurance.They discussed their plans with Agnes Agent, representing the Fleecem Insurance Company.As Tracy had indicated to Agnes that she had a history of a heart murmur, Agnes indicated that Tracy would have to have a medical exam.The Travelers advised Agnes that the medical exam would have to wait until they returned. Agnes indicated that it was standard company policy to order the exam but it could wait. Agnes indicated to them that since they signed the application and given one year's premium up front, the policy coverage was binding on the date of the application. The Travelers commenced their around the world tour.While they were away, Fleecem sent a letter to the Travelers which they didn't receive, that rejected their application based upon Tracy's heart murmur.Fleecem indicated in the letter that it would continue to cover Terry if he advised them within ten (10) days that he had a recent physical.As they were traveling, the Travelers never responded.While on their trip, Terry died of a sting from a rare insect.

Upon notification of Terry's death, Fleecem denied coverage, relying upon a clause in the application that the coverage was binding upon acceptance at the home office.Agnes denies any statement regarding coverage.

Tracy files suit against the insurance company to collect the insurance proceeds.Why wins and why?