Lauer v. American Family Life Insurance Co., 199 Ill. 2d 384

Summary

The Illinois Supreme Court held that an insurance policy may validly provide that its two-year contestability period begins on the policy's issue date rather than the date of a conditional receipt. The court concluded that the policy's incontestability clause complied with section 224(c) of the Illinois Insurance Code and remained enforceable when the insured died. Because the insured materially misrepresented his terminal lung cancer, the insurer was entitled to rescind the policy, and the circuit court's dismissal was affirmed.

Holdings

1. Section 224(c) of the Illinois Insurance Code authorizes an insurer to provide that the contestability period begins on the policy's issue date. The incontestability clause using the April 12, 1997 issue date was therefore valid and enforceable, and the policy remained contestable when Lauer died.
2. Because the policy was still contestable when Lauer died and the undisputed evidence established that he materially misrepresented his health, American Family was entitled to rescind the policy. The circuit court correctly dismissed the beneficiary's breach-of-contract claim.

Questions Presented

1. Whether section 224(c) of the Illinois Insurance Code permitted the insurer to make the policy's two-year contestability period begin on the policy's issue date rather than on the date of a conditional receipt.
2. Whether the insurer was entitled to rescind the policy and whether the beneficiary's breach-of-contract claim was properly dismissed based on the insured's undisputed material misrepresentations.

Disposition

reversed