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FISCHER v. MASSACHUSETTS CAS. INS. CO.

June 30, 1978

Milton C. FISCHER, Plaintiff,
v.
MASSACHUSETTS CASUALTY INSURANCE COMPANY, Defendant



The opinion of the court was delivered by: BRODERICK

ORDER

I have considered Magistrate Sol Schreiber's Recommendation herein, which I adopt in its entirety. Based on the Magistrate's Recommendation, the following action is taken:

 Defendant's motion for summary judgment is denied.

 Plaintiff's motion for summary judgment is granted in part, pursuant to Rule 56(d), F.R.Civ.P.; defendant's first, second, third, fourth, fifth and eighth affirmative defenses are stricken, and defendant's counterclaim is dismissed.

 SO ORDERED.

 MAGISTRATE'S RECOMMENDATION

 By order of the Honorable Vincent L. Broderick, the above-captioned case was referred to the undersigned for all pretrial purposes.

 This is an action to collect disability benefits allegedly due under an insurance policy issued in June 1973 by defendant Massachusetts Casualty Insurance Company to plaintiff Milton C. Fischer. Both sides have moved for summary judgment. In addition, plaintiff has moved to dismiss defendant's affirmative defenses and counterclaim.

 When Fischer applied for the policy he failed to reveal to the insurance company that he had been hospitalized for heart attacks in 1969 and 1970 and had thereafter remained under the care of a cardiovascular specialist.

 In June 1975 the Brooklyn luncheonette and candy store plaintiff owned with other relatives was sold and he lost his job of thirty-seven years as counterman. Since then he has not been gainfully employed.

 The complaint in this action seeks $ 700 per month for the period since September 1975, when Fischer says he became disabled by heart disease, as well as a declaratory judgment that he is entitled to benefits while he is disabled or for a period of sixty months, if that is less, according to the terms of the policy.

 The principal issue framed by the respective motions for summary judgment is whether the incontestable clause bars an insurance company from denying benefits for disability caused by disease revealing itself prior to issuance of a policy, when the insuring clause of the policy purports to cover only "sickness which first manifests itself during (its) term."

 The inclusion of an incontestable clause is mandated in all accident and sickness policies by Section 164(3)(A) of the Insurance Law of New York, enacted in 1951. Under this provision of the Insurance Law the insurer has the option to use an incontestable clause which permits benefits to be denied if the insured's policy application is later found to contain fraudulent misstatements. Section 164(3)(A) refers to such a clause as a "Time Limit on Certain Defenses" provision. Defendant insurance company chose not to use that type of clause in Fischer's policy; instead, it employed an incontestable clause ostensibly protecting the policy from contest on the basis of fraudulent misstatements after the two-year contestable period had run.

 Fischer's policy contains under Part X, General Provisions, a clause labeled "Incontestable." The language of this provision is mandated by the Insurance Law for accident and sickness policies not employing the alternate Time Limit on Certain Defenses clause and it reads as follows:

 
After this Policy has been in force for a period of two years during the lifetime of the Insured, it shall become incontestable as to the statements contained in the copy of the application.
 
b. No claim for loss incurred or disability (as defined in the Policy) commencing after two years from the date of issue of this Policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date ...

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