State RegulationsNJ specificDifficulty 3/5
An insured made an honest misstatement in the application for an individual health policy. After the policy's time limit on certain defenses has expired, what can the insurer do about that misstatement?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
N.J.S.A. 17B:26-5 is the individual health time limit on certain defenses provision. It allows the insurer to use misstatements in the application only during the time limit stated in the policy; after that period expires, the misstatement can no longer be used to contest a claim, aside from the provision's standard exceptions such as nonpayment of premiums. Honest misstatements thus become unassailable once the window closes, and the New Jersey Department of Banking and Insurance polices overreaching on this point.
Why the other options are wrong
- A) Rescission for misstatements is cut off once the policy's time limit on defenses runs out.
- B) The time limit bars using old misstatements to reduce claims as well as to deny them after the period ends.
- D) The protection does not depend on the insured's consent; it applies by the terms of N.J.S.A. 17B:26-5.
Memory hook
When the defenses clock runs out, old misstatements can no longer be the insurer's weapon.