Amex Life Assurance Co. v. . Superior Court
14 Cal. 4th 1231, 930 P.2d 1264, 60 Cal. Rptr. 2d 898 (1997)
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Rule of Law:
An insurer cannot invoke the "impostor defense" to deny a life insurance claim after the contestability period has expired when the named insured personally applied for the policy, even if an impostor took the required medical examination. Such a situation constitutes fraud in the procurement of the policy, which is barred by the incontestability clause, rather than a lack of mutual assent that would render the policy void ab initio.
Facts:
- In January 1991, Jose Morales, who knew he was HIV positive, applied for a life insurance policy from Amex Life Assurance Company (Amex).
- Morales intentionally misrepresented his health status on the application, denying he had the AIDS virus.
- In March 1991, Morales sent an impostor to take the mandatory medical examination required by Amex.
- The paramedic who conducted the exam noted significant discrepancies in height and weight between Morales's application and the person being examined, and also noted the person produced no identification.
- Amex issued a life insurance policy to Morales effective May 1, 1991, which contained a two-year incontestability clause.
- Morales paid all premiums due on the policy for over two years.
- Shortly before his death, Morales sold his policy to Slome Capital Corp., a viatical settlement company.
- On June 11, 1993, more than two years after the policy's effective date, Morales died of AIDS-related causes.
Procedural Posture:
- After Amex denied the life insurance claim, Slome Capital Corp. sued Amex in superior court (trial court) for breach of contract and other claims.
- Amex filed a motion for summary judgment, arguing the "impostor defense" rendered the policy void from its inception.
- The superior court denied Amex's motion, ruling that California law did not recognize the impostor defense.
- Amex (petitioner) sought a writ of mandate from the Court of Appeal (intermediate appellate court) to compel the superior court to grant its motion.
- The Court of Appeal denied the writ as to the contract claim, finding that the impostor defense, even if it existed, did not apply to the facts of this case.
- The California Supreme Court granted Amex's petition for review.
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Issue:
Does a life insurance policy's statutorily required incontestability clause bar an insurer from denying a claim on the basis that an impostor took the required medical examination, when the named insured personally applied for the policy and paid all premiums for the duration of the contestability period?
Opinions:
Majority - Chin, J.
Yes. A life insurance policy's incontestability clause bars an insurer from denying a claim on this basis after the contestability period has expired. The court reasoned that when the named insured personally applies for the policy, a contract is formed with that individual, establishing a meeting of the minds. The subsequent use of an impostor for the medical exam is a form of fraud in the procurement of the policy, which is precisely the type of defense that the incontestability clause is designed to bar after the statutory period has lapsed. The clause functions as a statute of limitations, requiring insurers to investigate and act with reasonable promptness. Amex had ample opportunity and information—such as the physical discrepancies and lack of identification—to discover the fraud within the two-year period but failed to do so, instead choosing to collect premiums. To allow the defense now would undermine the public policy of providing security to beneficiaries and would reward the insurer's lack of diligence.
Analysis:
This decision clarifies the scope of the "impostor defense" in California, narrowly limiting its potential application. It reinforces the strong public policy behind incontestability clauses, which is to provide certainty and repose for policyholders and their beneficiaries. The ruling places a clear burden of diligence on insurers to verify the identity of applicants and medical examinees and to investigate potential fraud within the two-year contestability window, rather than after a claim is filed. Future cases involving impostors will likely turn on the key distinction established here: whether the named insured personally initiated the application, thereby creating a valid underlying contract subject to the incontestability clause.
