written or oral misrepresentation, or warranty therein made, in the negotiation of a contract or policy of life insurance, or in the application therefor or proof of loss thereunder shall defeat or void the policy, or prevent its attaching, unless the matter misrepresented increases the risk of loss."

Statutory provisions, such as those referred to in the preceding paragraph, have been declared constitutional and obligatory by both the United States Supreme Court, and various state supreme courts, and therefore control all policies issued subsequently to the enactment of the law. They are supported by many writers on the ground that most policyholders are ignorant of the true significance of warranties, and that many may thus incur a technical forfeiture of the contract through inadvertent misstatements in their applications.

The Incontestable Clause. The severity of warranties is also greatly alleviated by the general practice of the companies making their policies incontestable after one or two years following the date of issue, except for the non-payment of premiums. So-called "incontestable clauses" usually read to the following effect: "This policy shall be incontestable after one year from its date except for non-payment of premium." 99 10 Such clauses represent a clear illustration of the modern tendency on the part of the companies to liberalize their contracts, and much can be said in their favor. From the standpoint of the insured and the beneficiary such clauses remove the fear of law suits especially at a time. namely, after the death of the insured when it may be

9 John Hancock Mutual Life Insurance Company v. Warren, 181 U. S. 73.

10 The time limit stated in the clause varies in different policies from one to five years, although one year is the limitation most frequently applied. According to the standard provisions required. by the laws of New York, incontestability is authorized either from its date or after one or two years. Some clauses also specify other exceptions than non-payment of premiums as, for example, misstatement of age, fraud in procuring the contract, and prohibited occupations or residence.

difficult for the beneficiary successfully to combat with competent testimony the company's charge of a violation of the contract. From the standpoint of the solicitor the exist ence of the clause increases business by making the policy attractive to the public. Again, from the standpoint of public policy it is undesirable to have widows, children or other dependents protected by a contract which throughout the lifetime of the insured may be subject to forfeiture, possibly for trivial violations, which forfeiture might remain unknown until the death of the insured, and thus leave the dependents without the protection which it is the essential purpose of life insurance to give. Moreover, if policies can be contested at the time of the insured's death, the issue must be determined in the courts, thus involving long delay in the settlement of the claim at the very time when the need for speedy payment is greatest. Considerations like these have, no doubt, been responsible for the requirement of incontestable clauses in life-insurance policies by the statutes of no less than eleven states.

In view of the aforementioned reasons the incontestable clause should be regarded as a conspicuous feature of the policy contract, and may be considered as similar to a short statute of limitation. By inserting this policy provision the company undertakes to make all necessary investigations concerning the good faith and all other circumstances surrounding the insured's application within the time limit stipulated in the clause. The company also definitely agrees not to resist the payment of the claim if there has been no violation of the contract during the first year (or whatever the time limit may be) following the issuance of the policy and if during that time the company has taken no action to rescind the contract. It is understood, however, that the clause does not waive any of the remedies or provisions which the contract provides must be complied with by the claimant following the death of the insured.

The wording of the clause would seem to make the policy incontestable for any reason whatsoever, except for non-pay

11

ment of the premium or such other particulars as may be stipulated in the policy. In fact the courts have shown a decided tendency to hold uppermost in mind the interests of innocent beneficiaries, and to this end have quite generally adopted the rule that the clause prevents the insurer from setting up a defense of fraud, suicide or death at the hands of justice. Lack of insurable interest, however, has been considered a necessary exception. Such an interest, as will be explained later, is necessary owing to considerations of public policy. Therefore, it has been held that the absence of such an interest will cause the policy to fall even though it contains an incontestable clause.1

12

The Suicide Clause.- Owing to the difficulty of defining clearly the term “suicide,” insurance companies now protect themselves by including some such clause as the following in their contracts: "If within one year from the date hereof the insured shall, whether sane or insane, die by his own

11 In this respect, as pointed out by Richards: "Two pertinent and distinct questions are presented for the determination of the courts in connection with this subject; first, what does the language of the clause fairly mean? second, if it is so worded as to include fraud, is the provision so far opposed to public policy as to be void to that extent? The answer to the first question is clear. Fraud when not among the exceptions is covered. In disposing of the second question, the courts have very generally concurred that the clause is not invalid though intended to cover fraud, and that the company is not excused from payment because of fraud in procuring the policy, or for breach of warranty, intentional or unintentional, provided it seeks no relief until after the expiration of the period of limitation specified in its contract." (Page 533.)

Again he states: "The insurer makes whatever examination he chooses to make before closing his engagement and commands methods of getting at the material facts with a measure of thoroughness and accuracy. Now and again he may be seriously deceived by an applicant; nevertheless it is more important that millions of honest families should purchase peace of mind and immunity from litigation than that insurers should be given a longer and better opportunity of detecting and taking advantage of occasional fraud which in their own interest they have expressly agreed to ignore." (Page 534.)

12 Clement v. Insurance Company, 101 Tenn. 22,

it

hand, the liability of the company under this policy shall be limited to the amount of the reserve hereon." Such a limitation upon the company's liability the courts have generally construed as reasonable, and as Elliott concludes: "Under it the insurer is not liable, although the insured kills himself while in a condition which renders him wholly unconscious of the moral nature of the act." 13 Full support of this view has been given by the United States Supreme Court

which decided in a leading case 14 that "for the purpose of this suit it is enough to say that the policy was rendered void, as the insured was conscious of the physical nature of his act and intended by it to cause his death although, at the time, he was incapable of judging between right and wrong and of understanding the moral consequences of what he was doing."

Accidental self-destruction, however, cannot be regarded as coming within the scope of the modern suicide clause; in fact, cannot be considered as suicide at all. Moreover, in case of doubt as to whether the death occurred through suicide or accident, the presumption is always in favor of accident. The company also, when raising the defense of suicide, "whether sane or insane," must assume the burden of proving conclusively that the case is one of intentional self-destruction.

Other Policy Provisions.- Life-insurance contracts sometimes contain other provisions which limit the liability of the company. Reference is had to prohibitions or restrictions, not already referred to in previous chapters, which relate to the insured's occupation after the issuance of the policy, residence and travel, military and naval service in time of war, intemperance, death while violating law, or death at the hands of justice. Relative to these restrictions the tendency has been towards a liberalization of the contract. Public opinion has favored a policy which is not loaded down with unnecessary restrictions, and the aforementioned instances

13 ELLIOTT, CHARLES B., Treatise on the Law of Insurance, 412. 14 Bigelow v. Berkshire, etc., Insurance Company, 93 U. S. 284

are the exception and not the rule. It may also be accepted as a principle that whatever is not prohibited or restricted in the policy becomes an implied privilege to the insured, especially where the policy contains an incontestable clause.15

15 In discussing the incontestable clause, Richards makes the following significant comments: "If the general incontestable clause bars the insurance company from setting up in defense the act of suicide, even when committed by a sane man, it is difficult to discover any sufficient reason for allowing the company to except from its application, the death of the insured by legal sentence and execution for crime. The act of suicide, it may often be shown, is committed with the express purpose of hastening payment of the insurance money; whereas it rarely appears that the insured is actuated by any thought of insurance on his own life when persuaded to commit crime. So far as innocent beneficiaries are concerned the reasons for allowing them to take their insurance money are no stronger in case of suicide than in the case of legal execution; and so far as the insurance company is concerned it shows no equity in its own favor in either case inasmuch as it has expressly contracted by the clause in question to raise no such defense.

"Where beneficiaries, as well as insurer, are in no wise responsible for hastening the date of maturity, it is not altogether clear, that in disregard of the express terms of the contract the insurer should be so unexpectedly favored, and the beneficiaries so heavily penalized. Premiums are often paid for many years, and at great sacrifice, a sacrifice felt, perhaps, by all the members of the household. Before leaving the insurance moneys with the company and depriving innocent widows and children of their natural means of support, in violation of the terms of the contract, the courts must be convinced that the general welfare of the community will thereby be promoted. Accordingly it is not surprising that the drift of opinion in the state courts is in the direction of extending the operation of the incontestable clause to the fullest protection of innocent beneficiaries." RICHARDS, GEORGE, Treatise on the Law of Insurance, 536.