The contestability period is one of the most misunderstood provisions in life insurance. It is often described by insurers as a near automatic escape hatch, but legally, it is nothing of the sort. In a recent New York Life claim denial involving a one hundred thousand dollar policy, the insurer attempted to rescind coverage after the insured died within the first two years. After a detailed challenge, the denial was reversed and the full benefit was paid.
This case illustrates how insurers misuse the contestability clause and how seemingly minor issues are exaggerated to justify denial.
What the Contestability Period Actually Allows an Insurer to Do
Most life insurance policies contain a two year contestability clause. During this window, the insurer may review the application if the insured dies and determine whether the policy was issued based on incorrect information. If the insurer can prove that a misstatement was both false and material, meaning it would have affected underwriting or pricing, the company may attempt to rescind the policy and return premiums instead of paying the death benefit.
What the clause does not allow is automatic denial. The insurer bears the burden of proof. They must show that the answer was wrong, that it mattered, and that the policy would not have been issued as written had the truth been known.
In practice, insurers often ignore these requirements.
How New York Life Denied This Claim
In this case, the insured passed away approximately sixteen months after the policy went into force. The beneficiary submitted a timely claim and expected payment within weeks. Instead, New York Life issued a contestability investigation letter and requested extensive medical records going back several years.
The denial was ultimately based on an alleged failure to disclose a prior medical visit. The insurer claimed that a single outpatient encounter showed symptoms that should have been reported on the application. Based on that omission, New York Life attempted to rescind the policy and refund premiums.
The problem was that the visit did not involve a diagnosis, treatment, or follow-up care. The insured had been evaluated, reassured, and discharged. No condition was ever identified, and no medication was prescribed.
Why the Denial Was Legally Defective
Contestability denials often collapse once the legal standard is applied correctly. In this case, the insurer failed on multiple fronts.
First, the application question itself was vague. It asked about diagnosed conditions and ongoing treatment, not isolated evaluations that resulted in no findings. Courts routinely interpret ambiguous application questions in favor of coverage.
Second, the insurer could not show materiality. Internal underwriting guidelines confirmed that even if the visit had been disclosed, the policy would have been issued at the same rate and amount. That alone defeats a contestability denial.
Third, the alleged omission had no connection to the cause of death. While causation is not strictly required during contestability, New York courts often consider whether the omitted information actually increased the risk that led to death. Here, it clearly did not.
How Contestability Investigations Are Commonly Abused
This case followed a pattern we see repeatedly. When a death occurs inside the two year window, insurers almost automatically launch a fishing expedition. They request years of records, prescription histories, and sometimes employment or travel records, hoping to uncover any discrepancy.
Common tactics include:
Treating borderline readings as undisclosed diagnoses
Recharacterizing routine checkups as medical conditions
Claiming applicants should have disclosed symptoms they were never diagnosed with
Using hindsight to inflate the significance of harmless records
Ignoring what underwriting would actually have done
Families often assume the insurer is entitled to do this and accept the denial without realizing how weak the legal basis really is.
How the Claim Was Won
The denial was challenged with a structured response, not a general appeal. The strategy focused on narrowing the issue to materiality and application language.
We obtained the full underwriting file, including internal guidelines, and demonstrated that disclosure of the visit would not have changed issuance. We also presented physician statements confirming that no diagnosis existed and that the insured had no reason to believe the visit was medically significant.
Once confronted with its own underwriting standards and the lack of legal support for rescission, New York Life reversed course and paid the full one hundred thousand dollar benefit.
What Happens After the Contestability Period Ends
Once the two year period expires, the insurer loses the right to rescind for innocent misstatements. Only intentional fraud remains, and fraud must be proven with clear evidence of deception. Many insurers attempt to blur this distinction by continuing to cite contestability concepts even after the window closes.
We frequently see carriers argue that the policy never properly took effect, that premiums were delayed, or that coverage was conditional, all in an effort to revive contestability arguments after the fact. These positions are often unsuccessful when challenged.
Why Beneficiaries Should Be Cautious With Contestability Denials
Contestability denials are among the most frequently overturned life insurance denials. The issue is not whether the insured made a perfect application. The issue is whether the insurer can meet its legal burden.
Refunding premiums is not a neutral outcome. It is a denial of the contract the insured paid for. Accepting that refund without review can permanently waive the right to challenge the decision.
Final Takeaway
The contestability period is not a free pass for insurers to deny claims. It is a limited investigative window governed by strict legal standards. When insurers stretch those standards, denials often fail.
This New York Life case is one of many where a denial issued during the contestability period could not withstand scrutiny once the facts, application language, and underwriting rules were properly examined. Families facing similar denials should know that these cases are frequently winnable and that the insurer’s first answer is rarely the final one.