Appeal from the Circuit Court, Sixteenth Judicial Circuit,
Kane County; the Hon. CHARLES G. SEIDEL, Judge, presiding.
MR. JUSTICE DAVIS DELIVERED THE OPINION OF THE COURT.
At issue in this case is the meaning and effect of the incontestibility clause of defendant's disability insurance policy, which provides:
"Time Limit on Certain Defenses: (a) After two years from the policy date no misstatements made by the Insured in the copy of the application for this policy shall be used to void the policy or deny a claim for loss incurred or disability (as defined in this policy) commencing after the expiration of such two-year period."
Section 357a(1)(b) of the Insurance Code (Ill Rev Stats 1963, c 73, par 969a(1)(b)), upon which said clause is predicated, provides in pertinent part:
"969a Accident and Health Policy Provisions.
"Except as provided in paragraph (3) of this section each such policy delivered or issued for delivery to any person in this state shall contain the provisions specified in this subsection in the words in which the same appear in this section; . . .
"(b) A provision as follows:
"`TIME LIMIT ON CERTAIN DEFENSES: (i) After three years from the date of issue of this policy no misstatements except fraudulent misstatements, made by the applicant in the application for such policy shall be used to void the policy or to deny a claim for loss incurred or disability as defined in the policy) commencing after the expiration of such three year period.'"
Plaintiff brought this action on October 17, 1963, seeking a declaratory judgment that he is entitled to recover benefits under the disability insurance policy issued by defendant to him, on January 27, 1961, and to keep said policy in full force and effect. The amended complaint alleged that plaintiff became totally disabled on October 30, 1962, less than two years from the policy date; that defendant notified plaintiff on April 26, 1963, that it would discontinue the acceptance of premiums and the policy would remain in force and effect only until May 26, 1963; that more than two years had passed since the policy date; that defendant had taken no affirmative action within said two-year period to contest the policy; and that it was now estopped to do so.
Defendant filed a motion to dismiss the amended complaint, relying on an affidavit stating that the plaintiff had been hospitalized for chronic alcoholism on at least eight occasions in the year prior to the issuance of the policy, although plaintiff's application for the policy denied that he had been hospital-confined, or had been under observation, or had medical or surgical advice or treatment during the previous five years. Defendant's motion relied specifically on the fact that plaintiff's disability commenced less than two years after the date of the policy; that plaintiff made material misstatements in his application for insurance; and that defendant exercised its option to refuse to accept a renewal premium on the policy, as permitted under the terms of the policy. Defendant prayed that the complaint be dismissed because: (a) the policy was terminated by defendant's refusal to accept premiums, and (b) plaintiff had no right to recover benefits for a claim which commenced within two years of the policy date, because there were material misstatements in his application.
The trial court entered a judgment order dismissing the second amended complaint, with prejudice, at plaintiff's costs. Said order made findings which were substantially based on the allegations of defendant's motion to dismiss.
Plaintiff urges that any ambiguity in the policy should be construed favorably to him; that in view of defendant's failure to bring a court action to cancel or rescind the policy within two years of its date, the defendant cannot now raise the defense of misrepresentation and fraud; and that we should construe the incontestability clause of this disability policy in the same manner, and upon the same principles, as incontestability clauses in life insurance policies.
Defendant asserts that the material misstatements in plaintiff's application for disability insurance are a complete defense to plaintiff's claim for loss, which commenced within two years of the date of the policy; and that the policy ...