Material Misrepresentations – New Jersey

Material misrepresentations in life insurance applications are a leading cause of claim denials in New Jersey. Our law firm has vast experience challenging the material misrepresentation defense for New Jersey life insurance policies.

What constitutes a material misrepresentation?

A material misrepresentation refers to a false statement made by the insured in a life insurance application. Material misrepresentations often involve issues such as:

• Medical history and current health status
• Financial assets and income
• Existing life insurance policies
• Use of alcohol or tobacco
• Engagement in hazardous hobbies or activities

According to New Jersey law, an insurer can refuse a death benefit claim if a material misrepresentation is identified, even if it was made inadvertently and not with fraudulent intent, and even if it doesn’t pertain to the cause of death. This is outlined in N.J.S.A. § 17B:24-3, which states:

A false statement in an application for a policy or contract can only prevent recovery if it materially influenced the insurer’s decision to accept the risk or the hazard it assumed.

The two-year contestability period in New Jersey

In New Jersey, if the insured dies within two years of the policy issuance, the insurer can deny a claim based on material misrepresentation. However, if the policy has been active for more than two years at the time of death, the insurer should not be able to reject the claim on these grounds. This rule is specified in N.J.S.A. § 17B:25-4.

Are there exceptions to this two-year contestability period?

Life insurance companies argue that New Jersey law allows them to deny claims for material misrepresentations even after the two-year contestability period has ended. In Ledley v. William Penn Life Ins. Co., 138 N.J. 627, 635 (1995), the New Jersey Supreme Court noted that an insurer may reject a claim if fraud was involved in the policy application.

In such cases, after the two-year mark, the insurer must demonstrate not only that a material misrepresentation occurred but also that it was made with fraudulent intent.

However, as New Jersey life insurance attorneys who litigate material misrepresentation cases, we contend that the two-year contestability period was legislatively enacted and may not be undermined by judicial rulings.

Post-claim underwriting

When an insured dies within the two-year period, insurance companies typically request medical and financial records to check for discrepancies against the application. If discrepancies arise, there is a significant risk of denial based on material misrepresentation.

While insurers often do not verify medical and financial information before issuing policies, they routinely do so after a claim is filed during the contestability period. This approach, known as “post-claim underwriting,” has faced criticism from consumer advocates, as it often leads to a relaxed initial underwriting when the policy is issued followed by a strict and rigorous review only when a claim is made, putting beneficiaries in a difficult situation.

How can you challenge a denial based on material misrepresentation in New Jersey?

If you encounter a denial based on material misrepresentation in New Jersey, there are strategies to contest it.

The misrepresentation may not be deemed “material,” meaning the insurer would likely have issued the same policy regardless if the alleged misrepresentation had not been made and the true facts were known. Additionally, arguments about waiver or estoppel might apply if the insurer was aware of or reasonably should have detected the undisclosed medical condition.

For further information on defenses against material misrepresentation in New Jersey life insurance cases, visit our webpage on the subject.

If you’ve experienced a life insurance denial due to material misrepresentation, contact New Jersey life insurance attorney Eric Dinnocenzo at (212) 933-1675 for a free consultation.