Even if an applicant for life insurance obtains his life insurance policy by fraud, all is forgiven after the policy has been in force for two years. In New York, a life insurer that has sold a policy to an individual may contest or dispute the policy in the first two years of the policy’s existence. During that time, the policy is contestable.
The basis for contesting the policy relates to misrepresentations or untruths in the application for insurance that the insurance company claims the applicant made when applying for the policy. If misrepresentations exist, then the insurer can cancel the policy as if it never existed, but only if the untruths were material. So if the insurance company would not have sold the policy if it knew the truth from the beginning, New York law allows the insurance company to cancel the policy.
In a recent New York case, AIE Life v. Lincoln Benefit Life, the court definitively found that the insurance policy was procured by fraud. That means the intent of the applicant for the life insurance policy was to trick the insurance company into selling the policy. However, because the life insurance company did not contest the policy until after two years, the court ordered that the policy remain in force.
The case also made clear that if the policy was issued in New Jersey, the outcome would have been very different. In New Jersey, a policy can be cancelled after two years if procured by fraud.
Gisonni Law Firm focuses its practice on life insurance claims and litigation for beneficiaries and policy owners in New York, New Jersey, and the tristate area. For an understanding of your legal rights from the perspective of a highly experienced life insurance attorney, call Gisonni Law Firm today.