Opinion ID: 77633
Heading Depth: 3
Heading Rank: 4

Heading: The William Buchner Policy Issued by AUL

Text: 95 William Buchner, a resident of Illinois, applied for a $100,000.00 life insurance policy with AUL on March 5, 1986. AUL asserts that he had been diagnosed with HIV in 1985. AUL had Buchner complete an interview with a medical examiner on April 14, 1986 as part of the application process and the examiner asked Buchner whether he had been diagnosed within the past ten years with any symptoms of a blood disorder or been affected by any serious illness, disease, or injury not listed on the application. Buchner did not disclose his HIV infection. 96 On April 28, 1986, AUL issued Buchner a $100,000.00 life insurance policy, which contained the following incontestability clause: 97 INCONTESTABILITY. This policy will not be contested after it has been in force during the lifetime of the insured for 2 years from its date of issue. 98 Buchner assigned his policy to MBC on July 20, 1995. Thus, Buchner held the policy for at least nine years before he assigned it, and the contestability period expired seven years earlier. AUL did not assert that Buchner procured the policy through fraud or that the receivership aided and abetted his efforts until the insurers filed their amended ancillary complaint on March 15, 2005. Buchner is still alive, and the receivership entities have not asserted a claim for benefits on his policy. 99 Since Buchner executed his insurance application in Illinois, we apply Illinois law to determine whether AUL can challenge the validity of the Buchner policy at this point. Illinois, like the other states that we have examined, does not recognize a fraud exception to incontestability clauses. The Supreme Court of Illinois held as far back as 1921 that the incontestability clause in a life insurance policy is a valid provision, which bars the insurer from making any defense against the policy, after the expiration of the contestable period, except for nonpayment of premiums. Ramsay v. Old Colony Life Ins. Co., 297 Ill. 592, 595, 131 N.E. 108, 109 (1921). The court cautioned that even fraud in procuring the policy is not available [as a defense] to avoid [the effect of the incontestability clause]. Id. 100 Thus, we find that AUL's claim for a declaratory judgment that the Buchner policy was void ab initio on the grounds of fraud (count XXI) is time-barred since the contestability period on the policy expired nearly twenty years ago. Additionally, the incontestability clause in the Buchner policy also bars AUL's other claims, which all rely upon allegations that the Buchner policy is tainted by fraud. AUL's other claims include the aiding and abetting fraud (count XVIII), a conspiracy claim (count XVII), and two RICO claims predicated on mail fraud (count XIX and XX). Once again, we affirm the district court's decision to dismiss these claims even though the court reached its decision for alternative reasons. 101