Dallas Fort Worth Insurance Lawyer Blog
Fort Worth insurance lawyers need to be aware of a life insurance policy’s incontestability clause.
All life insurance policies must contain an incontestability clause, which is a provision that the policy will be incontestable after it has been in force during the lifetime of the insured for two years from its date, except for nonpayment of premiums. The statute requiring this is found in the Texas Insurance Code, Section 1131.104 for life insurance policies and Article 3.50, Section 2(2) for group life insurance policies. Also, look at Sections 705.101 to 705.105. The effect of these clauses is to limit the preceding defenses so they can apply only during the first and second policy years.
The purpose of the incontestability clause is to protect the insured from a contest as to the validity of the policy after the set period has expired. This is discussed in the 1972, Texas Supreme Court opinion styled, Minnesota Life Insurance Co. V. Morse.
The 1982, 14th Court of Appeals opinion, Parchman v. United Liberty Life Insurance Co., states that the incontestability clauses do not specify whether the policy date or the effective date is considered its date; this creates an ambiguity that must be construed against the insurer. And an insurer may not place a more onerous incontestability clause in the policy in the policy than the one prescribed by statute, although it may provide a shorter period than that prescribed by statute.
In the Parchman case, the policy date in question was October 10, 1977, and the effective date was either July 20, 1977, or August 6, 1977, depending on whether the medical examination was required and completed. Using the policy date, October 10, as the date that the clause began to run provided for a longer period than using the effective date, July 20 or August 6. Thus, the policy’s incontestability clause was more onerous than the one prescribed by statute, so the statute prevailed, and the policy date in the incontestability clause was construed to mean the effective date. In this case, the two-year period began running on the earlier effective date rather than on the later policy date.
Irregardless of all the above, keep this in mind. When an insurance company denies a life insurance claim based on a misrepresentation in the policy application, you must seek the advice of an experienced life insurance lawyer.