As discussed in the preceding chapter, a life insurance company may be able to avoid liability under a policy on the grounds of a breach of condition, a misrepresentation, or a concealment. Another possible insurer defense to a suit is lack of coverage under the terms of the policy. An insurer may not be permitted to assert any of these defenses, however, if additional facts show that it has waived the defense, has taken actions that amount to an estoppel, or has conclusively elected not to take advantage of it.

Various factual situations constitute the basis for a waiver, an estoppel, and an election (examples of each will be shown later in this chapter). Although they are legally distinct concepts, it is customary to refer to them all generically as a waiver and to describe any situation that could lead to the loss of an otherwise valid legal defense as a waiver situation. Simply and broadly stated, a waiver situation is one in which an insurance company�s presumably valid defense to a policy claim has been�or may be found to have been�waived by the company.

If the foregoing definition of a waiver situation seems vague and general, it was intended to be. The boundaries of waiver law are indistinct, and the concepts employed tend to be amorphous.

This state of affairs is largely attributable to the underlying purpose of waiver law, which, in the case of life insurance, is to protect the policyowner and his or her beneficiaries against a harsh and overly legalistic interpretation of the life insurance policy and application. In perhaps no other branch of the law is there such a universal tendency to make the law fit the facts and if that is impractical, to create new law. A waiver has been described as "a kind of legal mercy, a way of tempering the wind to the shorn lamb." In the process of providing mercy, the courts "have devised doctrines and asserted principles which are sometimes more creditable to the ingenuity and subtlety of the judges than easily harmonized with decisions rendered, under less violent bias, in other departments of the law."

Edwin W. Patterson, Cardozo Professor Emeritus of Jurisprudence, Columbia University, and an eminent authority on the law of waiver, ascribed the state of confusion existing in this field to the use of "flexible concepts to analyze the significance of foggy facts." Seeing hope for improvement, however, Patterson concluded that "the doctrines of waiver, once used as judicial whitewash to cover a multitude of minor defaults, are now used more sparingly and with more discrimination." Nevertheless, in the years since these statements were made, the lack of clarity about the distinctions between waiver and estoppel has not improved.

Inasmuch as the law of agency is at the foundation of most waiver situations in life insurance, it is helpful to review the pertinent elements of that branch of the law before considering the more specific aspects of waiver.