Court Opinion

ID: 9564126
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:54:38.712936+00
Date Added: 2024-06-11T09:18:14.167972
License: Public Domain

Justice Meyer
dissenting.
I dissent.
By its holding today, the Court expressly declines to follow the rule adopted by the overwhelming majority of jurisdictions which hold that upon reinstatement of a life insurance policy, the contestability period contained in the original policy is renewed as to misrepresentations in the reinstatement application.
One commentator has restated the rule which the majority opinion declines to adopt:
[T]he great weight of authority holds that upon reinstatement the contestable period begins running anew. Therefore, the company can contest the validity of the reinstatement for fraud or other reasons at any time within the new contestable period (same length of time as the original contestable period) which started running upon the day the policy was reinstated. As to fraud, the general rule is that reinstatement will be avoided if the insurer can prove the allegedly false representation of a material fact.
7 S. Williston, A Treatise on the Law of Contracts § 921 at 655 (3d ed. 1963) (emphasis in original) (footnotes omitted). See also 1A J. Appleman & J. Appleman, Insurance Law and Practice § 320 at *266356 (1981); Annot. “Insurance: Incontestable Clause as Affected by Reinstatement of Policy,” 23 A.L.R. 3d 743 (1969).
One of the leading authorities on insurance law has stated that the majority rule “seems . . . quite the best reasoned of the diverse results reached.” 1A J. Appleman & J. Appleman, Insurance Law and Practice § 320 at 356 (1981). In approving the majority rule, commentators explain the application of an incontestability clause to a reinstated policy:
In this policy, it is provided that in the event of lapse or forfeiture for nonpayment of premiums, the policy may be reinstated by complying with certain conditions. By reinstatement is meant that the policy is put back into force and effect; not that a new policy is issued containing different terms or provisions. It is only reasonable, reason these courts, that the old defenses which were barred by the running of the first incontestable clause remain barred — they are not automatically revived. But as to new representations made which may be false and fraudulent, the insurer is entitled to a reasonable time to investigate and to determine their truth.
1A J. Appleman & J. Appleman, Insurance Law and Practice § 320 at 356 (1981).
This view is supported not only by a majority of courts which have addressed the issue, but also by sound public policy. The rationale for the majority rule was set forth in New York Life Ins. Co. v. Burris, 174 Miss. 658, 165 So. 116 (1936):
Any other view would open the door to the grossest deceit and fraud in securing the reinstatement of a policy that had become incontestable under its original provisions. The contrary view would permit the holder of a lapsed policy, wherein the original contestable period had expired, who was facing impending death from a known fatal malady, to secure reinstatement by false and fraudulent representations of his continued good health and insurability, and then rest securely behind the protection of the original incontestable clause.
Id. at 671-72, 165 So. at 120.
Ironically, in support of the position it adopts today, the majority opinion relies on cases decided under Arkansas and Utah *267law no longer applicable in either state. In both jurisdictions, the legislature has long since recognized the wisdom of the view taken by a majority of jurisdictions which have addressed the question at issue in this case.
The Arkansas cases, Munn v. Robinson, 92 F. Supp. 60 (W.D. Ark. 1950) (diversity jurisdiction, Arkansas law applied), and New York Life Ins. Co. v. Dandridge, 202 Ark. 112, 149 S.W. 2d 45 (1941), would be decided differently under legislation enacted in 1959, some twenty-seven years ago. Current Arkansas law provides:
The reinstatement of any policy of life insurance or annuity contract hereafter delivered or issued for delivery in this State may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to con-testability after original issuance.
Ark. Stat. Ann. § 66-3324 (1980) (emphasis added).
Likewise, a different result would have obtained in Burnham v. Bankers Life & Casualty Co., 24 Utah 2d 277, 470 P. 2d 261 (1970), cited in the majority opinion, if the insurance policy in that case had been written subsequent to the 1963 legislation, enacted some twenty-three years ago, which provided in pertinent part:
(1) A reinstated policy of life insurance or annuity contract may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to contest-ability after original issuance.
1963 Utah Laws ch. 45, p. 236.1
*268The majority opinion seeks to distinguish, but in effect overrules, Petty v. Insurance Co., 212 N.C. 157, 193 S.E. 228 (1937). In Petty, the Court ruled that the “representation in the certificate of health was required as a condition precedent to reinstatement.” Id. at 162, 193 S.E. at 231. The certificate of good health was “material as a matter of law,” and thus a truthful answer was required in the certificate. Because the statements in the health certificate were false, the company was allowed to deny that coverage had been reinstated.
The majority acknowledges that “presentation of evidence of insurability satisfactory to the company” was a condition precedent to reinstatement of Mr. Chavis’ life insurance policy. The majority reasons that because “[e]vidence was presented to the company concerning the defendant’s health” and because Southern thereafter reinstated the lapsed policy, the company “obviously” found satisfactory Chavis’ evidence of good health.
If the reasoning of the majority opinion were applied to the facts in the Petty case, no doubt the outcome would have been different; the insurer would have been estopped to deny coverage inasmuch as the company had obviously found the insured’s representations to be satisfactory, because it “reinstated the policy and accepted from the insured annual premium payment.” Petty, 212 N.C. at 158, 193 S.E. at 229.
I trust that by implicitly overruling Petty, the majority opinion will stir the legislative branch to enact legislation which will restore wisdom and fairness in the application of insurance incontestability provisions to reinstatement of lapsed policies.

. The Utah law currently in force provides in pertinent part:
“A reinstated life insurance policy or annuity contract may be contested for two years following reinstatement on the same basis as at original issuance, but only as to matters arising in connection with the reinstatement. Any grounds for contest available at original issuance continue to be available for contest until the policy has been in force for a total of two years during the lifetime of the insured.”
Utah Code Ann. § 31A-22-403(3) (1986).