New 11th Circuit Opinion Should Remind Life and Health Insurers to Conduct Due Diligence Upon Application for a Policy
This article was authored by Marcus & Manning, P.A. Partner Andrew Marcus
On January 25th, the U.S. Court of Appeals for the Eleventh Circuit adopted the Florida Supreme Court’s opinion that the life insurance incontestability provision in Florida Statute supersedes the requirement that a person procuring life insurance have an insurance interest in the life of the insured at the inception of a policy.
In Florida, all life insurance policies must have a clause that policies are incontestable after they have been in force for two years. However, Florida Statutes also require that a person procuring insurance must have an insurable interest in the life of the insured at the inception of the policy.
In this case, the insurance company was seeking to invalidate policies after the two-year contestability period because there was no insurable interest. The 11th Circuit found that there was a conflict between the two laws and certified the question to the Florida Supreme Court. The Florida Supreme Court answered that the plain language of the law dictated that policies are incontestable after a two-year period and, therefore, that law prevailed. Accordingly, the 11th Circuit found that the insurer’s attempts to invalidate the policies should fail.
In addition to life insurance, health and long term care insurance policies are required to contain similar incontestability clauses. Thus, this ruling will likely apply to those lines of insurance as well.
This case serves as a reminder to insurers that underwriters should conduct their due diligence upon a person’s application for a policy. Failure to do so will risk the forfeiture of otherwise valid arguments down the road and the causing of unnecessary expenses.