Last Monday, the Fifth Circuit examined whether a Texas statute mandating incontestability of life insurance policies after two years applied to policy reinstatements and determined that it did, even though the statute did not expressly reference reinstatements.  In Cardenas v. United of Omaha Life Insurance Company, 2013 WL 5433487 (5th Cir. (Tex.), September 30, 2013), the insured’s policy lapsed after 4 years.  The insured applied for reinstatement but misrepresented her current health condition on the reinstatement application.  The policy was reinstated and the insured died thirteen months later.  The insurer denied the claim and rescinded the policy.  The beneficiary sued and the jury found the insured’s misrepresentations were material and intentional and returned a verdict in favor of the insurer.

On appeal, the beneficiary argued the court failed to correctly apply Texas law to incontestability provisions in life insurance policies and that coverage should be afforded.  The Fifth Circuit carefully reviewed the applicable statutes and administrative code provisions and found that, even though the statutes and code provisions did not expressly reference the two year incontestability provision as applying to reinstatements, in order to give meaning to all provisions and to render none superfluous the court held such an inference was reasonable and appropriate.  Accordingly, the Fifth Circuit affirmed judgment in favor of the insurer.

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