At one time it was the view of the courts and the state insurance departments that once the contestable period had expired, no denial of liability on the grounds of lack of coverage could be sustained unless the hazard involved in the litigation was specifically excluded in the incontestable clause itself. Moreover, no hazard could be excluded from the scope of the incontestable clause unless the exclusion was recognized in the statute governing the clause.

This doctrine was attacked when the superintendent of insurance of the state of New York refused to approve a proposed aviation exclusion in a Metropolitan Life Insurance Company policy on the grounds that the exclusion was in conflict with the New York statute prescribing the substance of the incontestable clause. The superintendent�s decision was appealed to the courts, and the issue was resolved in the Conway decision. The New York Court of Appeals ruled that there was nothing in the law that prohibited the issuance of such a restricted policy. The decision declared that the New York statute requiring an incontestable clause "is not a mandate as to coverage, a definition of hazards to be borne by the insurer. It means only this, that within the limits of the coverage, the policy shall stand, unaffected by any defense that it was invalid in its inception, or thereafter became invalid by reason of a condition broken . . . [Where] there has been no assumption of risk, there can be no liability . . ."

Following the Conway decision, the various insurance commissioners reversed their rulings on the inclusion of aviation riders. Today it is the accepted view that a company may exclude any hazard that it does not wish to cover.

In general, the right to limit coverage has been invoked only with respect to aeronautical activities, military and naval service in time of war, and suicide. With advances in aeronautics, the aviation exclusion has lost most of its significance, and with few exceptions war clauses are not currently being added to policies. However, some insurers insert war clauses in new policies being sold to persons likely to be involved in a military action, such as the American troops participating in United Nations peacekeeping actions in Bosnia and in Irag. Once policies have been issued with such an exclusion, the clause remains part of the contract as long as it is kept in force. Limitations on the coverage of suicide, however, are contained in all policies.

Since the Conway decision, insurance companies could undoubtedly exclude death from suicide throughout the duration of the contract unless prohibited by statute. They feel, however, that it is a risk they should properly assume, and their only concern is that they not be exposed to the risk of issuing policies to persons contemplating suicide. Consequently, they exclude death from suicide, whether the insured be sane or insane, for the first year or two after issue of the policy, with the risk thereafter being assumed in its entirety by the company. If the insured does commit suicide during the period of restricted coverage, the company�s liability is limited to a refund of the premiums paid.

While the suicide exclusion is normally of the same duration as the contestable period, the suicide clause is independent of the incontestable clause. Since most suicide exclusions are of 2 years� duration and some policies are contestable for only one year, a conflict could develop if the insured commits suicide during the second year of the contract. With few exceptions, the courts have upheld the company�s right to deny coverage of suicide beyond the contestable period.

The incontestable clause is a part of the policy and cannot become effective until the policy has gone into force. There must be a contract before there can be an incontestable clause. Therefore the incontestable clause does not bar a defense that the policy was never approved by the insurance company.

On principle, it would seem that if a policy provides that it will not become effective until certain conditions have been fulfilled, there would be no contract at all until those conditions had been satisfied. Hence the incontestable clause itself, as part of the contract, would not be operative. This would suggest that the incontestable clause should not prevent the insurer from denying liability on the grounds that the applicant was not in good health at the time the policy was delivered or that some other condition precedent was not fulfilled. However, most of the courts have reached the conclusion that the delivery-in-good-health requirement and other such conditions precedent should be accorded the same treatment as representations. Since the incontestable clause was designed to deal with misrepresentations, it follows therefore that the clause should bar suits based on nonfulfillment of conditions precedent if, at any time, both of the parties had treated the policy as having been operative. This is the rule in most jurisdictions.

Most life insurance policies contain a provision that stipulates that in the event of a misstatement of age (or sex), the amount payable under the policy will be such as would have been purchased at the correct age (or sex) by the premium actually paid. In most states a provision to this effect with respect to age misstatements is required by statute. In jurisdictions where the provision is mandatory, no conflict with the incontestable clause can arise. Even where the clause is not a matter of statute, the right of the company to reduce the amount of insurance (even after the contestable period has expired) has seldom been questioned. This is undoubtedly due to the fact that the misstatement-of-age (or sex) adjustment was firmly established before any controversy developed over the right of a company to limit the coverage of a policy beyond the contestable period. If it had been held that misstatement-of-age (or sex) adjustments were subject to the incontestable clause, insurance companies would probably have found it necessary to require proof of age (or sex) before issuing a policy.

A misstatement of age that contravenes a company�s underwriting rules may, at the company�s option, serve as a basis for rescission. It has been held, however, that such action has to be taken during the contestable period. If the misstatement is discovered beyond the contestable period, it can still be dealt with in the conventional manner.

It sometimes happens that a life insurance policy in the form issued by the company does not represent the actual agreement between the company and the applicant. This may be due to simple clerical errors, such as a misspelled name or an incorrect date, or to more substantial mistakes, such as an incorrect premium, wrong face amount, inappropriate set of surrender values, or incorrect set of settlement options. The mistake may favor either the insured or the company. The overwhelming majority of such mistakes are rectified without any controversy or litigation. From time to time, however, a policyowner will oppose the correction of a mistake in his or her favor. In one such case, the policy actually applied for and issued was an ordinary life contract, but through a printer�s error, the surrender values shown in the contract were those for a 20-year endowment insurance policy. The company discovered the error 2 months after the policy was issued but had to resort to legal action to rewrite the contract.

The appropriate legal action in such circumstances is a suit for reformation of the contract. This is an equitable remedy under which the written instrument is made to conform to the intention of the parties. The party seeking relief must establish that there was either a mutual mistake in drafting the written instrument or a mistake on one side and fraud on the other.

The remedy of reformation is clearly available to an insurance company during the contestable period. Moreover, it has long been the rule that reformation to correct a clerical error is not barred by the incontestable clause. A suit to rectify a mistake "is not a contest of the policy but a prayer to make a written instrument speak the real agreement of the parties."

All life insurance policies contain a provision permitting reinstatement in the event of lapse, subject to certain conditions. One of the conditions is usually evidence of insurability satisfactory to the company. Reinstatement will almost always necessitate a statement by the insured as to the current status of his or her health and will frequently involve a complete medical examination. It will also involve aspects of insurability other than health, just as at the time of original issue. A question arises about the legal effect of a misrepresentation or concealment in the reinstatement application not discovered until after the policy has been reinstated. Specifically, can a reinstated policy be rescinded after the original contestable period has expired?

If the incontestable clause specifically refers to a reinstatement of the policy, the language of the clause will control. For example, assume the clause provides that "this policy shall be incontestable after it has been in force during the lifetime of the insured, for a period of 2 years from the issue date or the date of its last reinstatement." In this event, the contract�s reinstatement should begin a new 2-year contestable period. The insurer�s renewed right to contest is applicable only to information provided in the reinstatement application.

When the incontestability clause does not refer to a reinstatement, there are conflicting views. One view, greatly in the minority, holds that the concept of incontestability does not apply to the reinstatement process. Under this view, a suit for rescission or a defense against a claim is subject only to the conventional statute of limitations on fraud�which begins to run only after the fraud has been discovered.

At the other extreme, and also in the minority, is the view that the reinstatement clause is subject to the original incontestable clause. If the original period of contestability has expired before the application for reinstatement is submitted, the reinstated policy is incontestable from the date of reinstatement. If a policy is reinstated during the original period of contestability, the reinstated policy can be contested during the remaining portion of the contestable period.

The majority opinion adopts a middle ground and holds that a reinstated policy is contestable for the same period of time as is prescribed in the original incontestable clause. If the policy was originally contestable for a period of

2 years, the reinstated policy is again contestable for the same length of time. This is true even when the policy is lapsed and reinstated before the original period of contestability has expired. The reasoning is that the company needs the same period of time in which to detect any fraud in the application for reinstatement as it needed in connection with the original issue. It is hardly necessary to add that the policy becomes contestable again only with respect to the information supplied in the reinstatement process. In other words, the company does not have the right to question the validity of the contract on the grounds of irregularities in the original application.