G. H. Brown, J.c.c. (temporarily assigned).
In this action plaintiffs John S. Lindsay, Jr. and Thelma Lindsay are husband and wife. They sue on a major medical expense policy issued by defendant to recover the cost of treating her illness. Additionally, they demand a declaratory judgment as to the validity of future claims.
Defendant denies liability on the ground that issuance of the policy was induced by fraud. In particular, it is alleged
that Mr. Lindsay, the named insured, deliberately misrepresented the physical condition of his wife (a "covered person") in answering questions propounded in the application, so that her adverse medical history was concealed. The same set of facts serves as the footing for five separate defenses. In a sixth defense it is alleged that the claim is based upon a sickness contracted before the policy was in force and therefore not covered by its terms. Defendant also counterclaims against the named insured for reimbursement, with costs and attorneys fees, for any moneys paid in the event of liability.
Now before the court is a motion by plaintiffs to strike, as insufficient in law, the six separate defenses, the counterclaim and all references to fraud in the answer. They contend that the claim cannot be contested for alleged fraud because of the following provision in the policy:
"Incontestable: (a) After this policy has been in force for a period of two years during the lifetime of any Covered Person, it shall become incontestable as to the statements contained in the application of such Covered Person."
The Uniform Individual Accident and Sickness Policy Provisions Law, as drafted in 1950 by the National Association of Insurance Commissioners, has now been adopted in nearly every American jurisdiction. It was enacted by New Jersey in 1951, N.J.S.A. 17:38-13.1 et seq. The clause above quoted is derived from N.J.S.A. 17:38-13.2(A)(2)(a).
It is required by statute that such policies shall include a provision by which the insurer must surrender certain defenses, based upon the application, after a fixed time has elapsed. Alternative clauses are offered. The following provision may be used:
"Time limit on certain defenses: (a) After three years from the date of issue of this policy no misstatements, except fraudulent misstatements, made by the applicant in the application for such policy shall be used to void the policy or to deny a claim for loss incurred or disability (as defined in the policy) commencing after the expiration of such three-year period."
Where a policy is non-cancellable (such as the one here involved) the insurer may, in lieu of the foregoing, stipulate as follows, ...