Age Adjustment Not a “Contest”

In Nicolaou v. United of Omaha Life Insurance Co., No. 3:22-CV-202 (JAM), 2023 WL 130540 (D. Conn. Jan. 9, 2023), the District of Connecticut confirmed that a life insurance policy’s contestable provision and the age adjustment provision are two distinct contractual rights.

In Nicolaou, the subject policy was issued in 2014. In 2021, the insured died and the beneficiary/plaintiff submitted a claim for the proceeds. Upon discovering that the insured was 10 years older than stated on the application for the policy, United of Omaha applied the misstatement of age provision and reduced the proceeds payable to that which would have been payable with premiums adjusted to the correct age.

The pro se plaintiff filed suit, alleging that the age adjustment constituted an untimely “contest” prohibited by the policy’s contestable provision. The defendant-insurer moved for summary judgment, urging the court to determine that an insurance company may enforce the terms of a misstatement-of-age provision notwithstanding the terms of an incontestability provision. Judge Meyer cited “numerous court rulings that have allowed the enforcement of a misstatement-of-age provision notwithstanding a policy's incontestability provision,” including most significantly the Eighth Circuit’s decision in Yang v. Farmers New World Life Ins. Co., 898 F.3d 825, 827–28 (8th Cir. 2018).

Judge Meyer’s decision is consistent with general law and other courts that have confronted this issue. Under general doctrines of contract interpretation, an insurer may “contest” a policy based on a misrepresentation of age in accordance with the policy’s contestable provision. The misstatement of age provision, on the other hand, may be invoked during the contestability period, at the election of the insurer or after the contestability period has expired.

Prior to Nicolaou, a handful of courts had addressed the interplay between contestability provisions and misstatement of age provisions, and they have given effect to both provisions. In the Yang case, on which Judge Meyer relied in Nicolaou, the Eighth Circuit recognized that courts must interpret a policy to give effect to both the contestable provision and the misstatement of age provision. Yang, 898 F.3d at 827–28. In Yang, the court specifically cautioned that a policy containing a contestable provision and a misstatement of age provision should not be construed in a manner that neutralizes one provision over the other. Similarly, in Equitable Life Assur. Soc. v. First Nat. Bank of Birmingham, 113 F.2d 272 (5th Cir. 1940), the Fifth Circuit described the distinction between an insurer’s right to contest a policy (challenging the validity of the policy) versus an age adjustment (adjusting the amount of liability/risk).

The contestable provision and the age adjustment provision are distinct contractual rights, and they are not inconsistent with each other or otherwise ambiguous. They can — and should — be given effect and read in harmony.