When reading your disability insurance policy you may come across a clause entitled “Incontestable.” An example of an incontestable clause from Berkshire (a subsidiary of Guardian Life Insurance Company) is as follows:
This clause is required by statute, and it protects you in a couple of ways.
First, it protects you against being denied coverage because of a preexisting condition. This clause precludes insurance carriers from inquiring into the representations you made on the policy application if the two-year incontestable period has lapsed. In essence, the clause gives insurers a two-year time limit to review policy applications. If the insurance company makes no inquiry in those two years, they lose the ability to rescind the policy based on the accuracy of your representations in the policy application’s paperwork.
For example in the case of Robison v. Brotherhood of R. R. Trainmen Ins. Dept., the plaintiff had been treated for tuberculosis prior to the effective date of the policy. Three years after obtaining the policy he became disabled from tuberculosis. When the insurance company tried to deny the insured’s claim, the Arizona Supreme Court ruled that the incontestable clause of the contract precluded the insurance company from inquiring about the insured’s health prior to the effective date of the policy.
Second, this clause protects you against an insurance company’s attempt to deny a claim based on a representation you made that is not material. For instance, when filling out the application for the insurance policy, you might write down the wrong year that you had some minor knee surgery. An insurance company cannot use such a miniscule and immaterial mistake to deny you coverage when your claim is for debilitating arthritis in your hands which doesn’t allow you to practice properly in your field of medicine.
Third, this clause protects an insured that is completely truthful when filling out the policy paperwork. In Paul Revere Life Ins. Co. v. Haas the court upheld a policy which limited “coverage to sicknesses that ‘first manifest’ themselves after the policy has been issued.” This means that if you have a condition before the insurer issued the policy, but you don’t become aware of it until after the policy has become effective, the condition should be covered.
It is important to remember that and incontestable clause usually includes a caveat: it does not protect an insured that knowingly or fraudulently misrepresents information during the application process. The Haas court stated that the language of the incontestable clause “does not protect insureds who make fraudulent misrepresentations in their applications. Rather, the language is intended to protect those insureds who are unaware of their diseases.” The insurance company in Haas (Paul Revere, a subsidiary of Unum) was allowed to deny coverage of the insured’s eye condition when the insured knew about and had been treated for the disease well before the start of the policy. The court believed that the legislature did not intend for the mandatory incontestable clause to be “an invitation for fraudulent applications for disability insurance.” The preexisting eye condition was deemed to be a fraudulent misrepresentation, and the insurance company denied its coverage. We also discussed this topic in a previous post entitled “Medical History Misstatements On A Disability Insurance Application Can Void The Policy In The Future.”
The outcomes of the cases based on incontestable clauses show how important it is to be truthful throughout the insurance claim process. The more accurate you are about your health condition, the fewer coverage problems you may have down the road.
 Robison v. Brotherhood of R. R. Trainmen Ins. Dept., 73 Ariz. 352, 241 P.2d 791 (1952), opinion modified on reh’g on other grounds, 74 Ariz. 44, 243 P.2d 472 (1952).
 Paul Revere Life Ins. Co. v. Haas, 137 N.J. 190, 210, 644 A.2d 1098, 1108 (1994).
 Id. at 190, 208, 644 A.2d 1098, 1107.