Insurer's ability to contest claims after the contestability cutoff.

Summary

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Insurers are allowed to cancel life or health policies within the first two years for most states but courts have been allowing unlimited contestability in cases where fraud was involved in the application process. Some types of fraud have included having someone else take the medical exam, pretending to be the medical examiner and forgery by the beneficiary. Some states are still holding to the two-year period but most feel that people committing fraud do not deserve the peace of mind from incontestability clauses.

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Insurer's ability to contest claims after the contestability cutoff.

Most states in the United States allow by statute a two-year contestable period for voiding life or health policies,[1] and some insurers require only a one-year contestable period.[2] Because the normal period for rescinding policies is two years from the date of issue, this article refers to that period. Courts have evolved several doctrines to elongate the contestable period to prevent the raiding of the insurer's treasury. This article discusses these doctrines and cases.

DELAY IN SUING

The standard contestability clause provides:

This policy shall become incontestable after it has been in force during the lifetime of the insured for 2 years after the date of issue.[3]

If an insured under a life insurance policy dies within the two-year period but the beneficiary delays suit until the two-year period has elapsed, the insurer nevertheless may seek rescission of the policy.[4] The rationale for this result is that the courts are just, enforcing the clause, as written. Even though beneficiaries urge that the strict construction of the policy against the insurer should lead to ignoring the language extending the deadline, that plea has not been successful.

USE OF AN IMPOSTOR

A. Posing as Insur...

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