On January 1, 2005, Sam Smith gave his application for life insurance to his agent, including his first premium payment. On the application, he neglected to notify the company of a mild heart attack he had suffered eight years earlier. On February 15, he received notification from the company that his application had been accepted. He failed to pay the premium due on January 1, 2007, and on January 30, 2007, he died of a massive coronary infarction.

Discuss in detail the liability of the insurance company with reference to specific clauses that apply in this instance.