1. Why are incontestability clauses placed in life insurance contracts?

2. Do incontestability clauses work to the mutual advantage of the insurer and the insured?

3. Express your opinion on whether or not there should be an imposter defense to incontestability clauses.

The Allstate life insurance policy on which this case centers went into effect on September 20, 2000, insuring the life of John Miller. The policy stated that if the insured died while the policy was in force, Allstate would pay a death benefit to the policy beneficiaries upon receiving proof of death. As required by Fla. Stat. § 627.455, the policy further provided that it would become incontestable after remaining in force during the lifetime of the insured for a period of two years from its effective date. John Miller died on April 20, 2003— more than two years after the policy went into effect. The beneficiaries accordingly filed statements seeking to collect benefits under the policy. Rather than disburse the benefits, Allstate sought a declaratory judgment that the policy was void alleging that the application was completed using fraudulent information and that an imposter had appeared at the medical exam in place of John Miller. The beneficiaries counter-claimed, alleging breach of contract based on Allstate’s failure to pay benefits upon proof of death in accordance with the insurance policy’s terms. From a judgment in favor of the beneficiaries Allstate appealed.

JUDICIAL OPINION

BARKETT, C. J.… Florida law requires that “[e]very insurance contract shall provide that the policy shall be incontestable after it has been in force during the lifetime of the insured for a period of 2 years from its date of issue.…” Fla. Stat. § 627.455.…

The Florida Supreme Court has explained that incontestability clauses, such as the one contained in § 627.455, are “in the nature of, and serve[ ] a similar purpose as, a statute of limitations.” Prudential Ins. Co. of Am. v. Prescott, 130 Fla. 11, 176 So. 875, 878 (1937). As such, while incontestability clauses “recognize[ ] fraud and all other defenses, [they] provide[ ] a reasonable time in which they may be, but beyond which they cannot be, established.” Id. The incontestability clause thus works to the mutual advantage of the insurer and the insured, “giv[ing] the insured a guaranty against expensive litigation to defeat his policy after the lapse of the time specified, and at the same time giv[ing] the company a reasonable time and opportunity to ascertain whether the [insurance] contract should remain in force.” Id.  ……………….