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Rhode (P) is a widow. Her husband (H), applied for life insurance by arranging for a payment of the initial premium and taking the required physical all on the same day. D’s agent completed a form called a Conditional Receipt. It contained a promise by D to insure H under the policy sought, effective the latest date on which the applicant completed the application and physical examination. The receipt also stated that D had no obligation except to return the payment unless the company determined that as of the completion of the physical and application, that H was an acceptable risk under its limits, rules, and standards. H died of a heart attack the same day. Acting under the receipt, D had to determine if H was an acceptable risk. D investigated H’s application and determined that he was uninsurable. D then returned the payment to P. P sued for the policy amounts. The trial court found for D despite a finding of bad faith.

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