Fraud and the Contestability Clause

[VolAgent]

That requires an unequivocal yes or no answer. If you have chewed tobacco at deer camp even once within that period you answer yes. If you lie and die within the two year contestability period (yes, even from an auto accident) and the misrepresentation comes to light, the policy can be rescinded and the claim denied.

Key word, fraud. Yes, those are contested and denied all the time. But are they denied 5 years later as fraud?

 

[adjusterjack]

Key word, fraud. Yes, those are contested and denied all the time. But are they denied 5 years later as fraud?

Probably not. But that, once again, brings up the question of whether there is a fraud exception to the contestability period, either by statute (unlikely) or by case law, which my gut says is rare though we have only scratched the surface with a few states and the majority of those few have ruled the two year limit as sacrosanct.

 

[Allen Trent]

If he took out the policy, answering the questions truthfully, there would be no fraudulent purchase. The company would not have grounds to contest the policy. The secretary would not be able to collect the proceeds because A) the beneficiary change was fraudulent and therefore invalid if he did not sign the change B) In most jurisdictions a person is prevented by law from profiting from the death of someone they had a part in killing..

True, in this case & I understand the person cannot benefit if they committed the murder.

But does the carrier owe the estate of the insured (no immediate relatives) the proceeds because the original purchase of the policy was fraudulently obtained in some aspects such as another person conducting the phone interview or exam

 

[Allen Trent]

Are you not aware that a beneficiary cannot collect on a life insurance policy if the beneficiary is proven to be instrumental in the death of the insured? That has nothing to do with contestability or any fraud exception that might exist.

Yup, I know that. but does the carrier owe the estate (distant relatives or creditors) if the original purchase was part of a fraud, income was lied about, insurable interest lied about and potentially phone IV & exam conducted by another person.

That requires an unequivocal yes or no answer. If you have chewed tobacco at deer camp even once within that period you answer yes. If you lie and die within the two year contestability period (yes, even from an auto accident) and the misrepresentation comes to light, the policy can be rescinded and the claim denied.

Yup, I get that. I thought this thread was talking about Fraud as basis for denial after 2 year contestability. So, my point was I have not found an cases denied after the contestability period for fraud that were not part of a more sinister fraud scheme in obtaining policies based on fraudulent relationships, etc.

 

[rousemark]

Probably not. But that, once again, brings up the question of whether there is a fraud exception to the contestability period, either by statute (unlikely) or by case law, which my gut says is rare though we have only scratched the surface with a few states and the majority of those few have ruled the two year limit as sacrosanct.

The policy states that the answers to questions are representation and not warranties.. And, that a misrepresentation cannot be used to deny a claim after two years.. Therefore a misrepresentation cannot be considered fraudulent.

 

[rousemark]

True, in this case & I understand the person cannot benefit if they committed the murder.

But does the carrier owe the estate of the insured (no immediate relatives) the proceeds because the original purchase of the policy was fraudulently obtained in some aspects such as another person conducting the phone interview or exam

If that be the case, then no.. That would be fraud.. But that was not the scenario you presented at first.. You said the secretary convinced the insured to buy the policy and then she fraudulently changed the beneficiary. If he applied for the policy, signed the app, did the phone interview, etc. the estate would collect.

 

[adjusterjack]

I thought this thread was talking about Fraud as basis for denial after 2 year contestability.

It is.

So, my point was I have not found an cases denied after the contestability period for fraud that were not part of a more sinister fraud scheme in obtaining policies based on fraudulent relationships, etc.

Probably because it's extremely rare and you would have to do some digging to find them.

 

[Allen Trent]

If that be the case, then no.. That would be fraud.. But that was not the scenario you presented at first.. You said the secretary convinced the insured to buy the policy and then she fraudulently changed the beneficiary. If he applied for the policy, signed the app, did the phone interview, etc. the estate would collect.

yeah. the problem in court was trying to figure out which story was true. as crazy as this sounds, there is very little way to prove for a certainty who completed a phone interview or who had labs taken. surprisingly, those items are not stored permanently & you are relying on very low paid examiners to grill a person while taking labs as to whether the person in front of them is the applicant holding the real insureds identification or it is someone that looks similar.

Maybe Farmers ins will make a commercial about a bizarre case like this & end with "we covered that & called it Up next on Dateline NBC another person murdered not long after buying life insurance"

 

[Life Underwriter]

Okie dokie folks, I've seen a few things here regarding Fraud and the Contestability Period. I hope to provide some clarification and do not hesitate to ask if you have any questions.

Material Misrepresentation: Yes, a claim can be denied if Material Misrepresentation is proven within the first 2 years of the policy. While this is certainly easier to prove than fraud, even proving Material Misrepresentation is usually difficult for insurers. It's much more difficult than you'd imagine and while the insurance company will 'contest' the policy claim within 2 years, there is a still a very high likelihood that is will be paid out. It may take a little longer to investigate, but very few policies are denied due to misrepresentation. Again, it's much harder to prove than you'd realize.

Fraud: Yes, after the 2 year contestability period has passed, it is possible for a company to rescind/deny the claim due to fraud. However, let me be clear. It is VERY HARD to prove fraud. Unless there is blatant fraud apparent, the insurance company will pay the claim after the two year mark very quickly (assuming the claimant provided the required paperwork).

Long story short: If a beneficiary files a claim within the first 2 years, be prepared for the claims process to take a bit longer while an investigation takes place (1-6 months).

If the claim is made 2 years + 1 Day after the the policy was issued, expect prompt payment within 30 days and usually shorter than that. Most companies pride themselves on sending out a claim payment within a day or two of receiving the paperwork.


Sincerely,

 

[Brucelee]

is where a contract is signed the governing law? For example if the insurance company is in NJ but the insured is in NY. the governing law in NY?