## Facts

- Equitable issued a group life insurance policy (effective January 1, 1965) to an association-created insurance trust for employees of member companies.
- The master policy limited coverage to “full-time employees,” defined as working at least 32 hours per week.
- Before issuance, Harvey A. Crawford submitted an enrollment request listing three purported employees for coverage, including his wife, Rose A. Crawford.
- Rose applied for coverage, stating she was the company’s secretary-treasurer and worked at least 32 hours weekly.
- Equitable issued Rose a certificate of insurance for $10,000, naming Harvey as beneficiary, and providing that coverage was subject to the master policy terms.
- The master policy contained an incontestability clause making the policy incontestable after two years (except for nonpayment of premiums); more than two years passed before the claim arose.
- Approximately four years after issuance, Rose died; her death certificate listed her occupation as “housewife.”
- Equitable investigated and concluded Rose was not an employee meeting the policy’s eligibility requirements, and denied the claim on the ground that coverage never attached.
- Harvey sued for the $10,000 proceeds and obtained summary judgment; the appellate court affirmed; the Illinois Supreme Court granted review and reversed.

## Issues

1. Whether a group life insurance policy’s incontestability clause bars the insurer, after the contestable period, from denying benefits on the ground that the decedent was never an eligible employee within the class insured by the policy.

## Decision

- The Illinois Supreme Court reversed the judgments for the beneficiary and remanded.
- The court held the incontestability clause did not prevent the insurer from asserting that Rose was not an eligible employee under the master policy.
- The clause barred only challenges to the policy’s validity after the stated period, not defenses that coverage never attached because the insured was outside the defined eligible class.
- Because eligibility was a coverage-defining requirement, not a ground for rescission of an otherwise applicable policy, summary judgment for the plaintiff was improper.

## Legal Principles

- An incontestability clause generally prevents an insurer, after the specified period, from contesting the validity of the policy (e.g., by seeking to avoid or rescind based on procurement-related misstatements), except as the clause permits (such as nonpayment of premiums).
- Incontestability does not enlarge the risks assumed or create coverage for persons who never fell within the policy’s definition of insureds.
- A defense that a claimant was never within the eligible class insured by a group policy is a coverage defense and is not barred by an incontestability clause.
- Coverage cannot be created by waiver, estoppel, or an insurer’s failure to discover ineligibility during the contestable period.

## Conclusion

The court held that, even after the incontestability period, an insurer may deny group life benefits by showing the decedent was never an eligible employee under the policy’s coverage terms, because incontestability bars only challenges to validity, not the assertion that coverage never attached.


Crawford v. Equitable Life Assurance Soc’y of the U.S., 56 Ill. 2d 41, 305 N.E.2d 144 (Ill. 1973)