2021 Colorado Code
Title 10 - Insurance
Article 7 - Life Insurance
Part 1 - General
§ 10-7-102. Life Insurance Policies - Requirements

1. It is unlawful for any foreign or domestic life insurance company to issue or deliver in this state any life insurance policy unless the policy contains the following provisions:
   1. A provision that all premiums shall be payable in advance, either at the home office of the company or to an agent of the company, upon delivery of a receipt signed by one or more of the duly authorized officers, unless the first payment is set forth in the policy, in which case the policy itself shall be a receipt;
   2. A provision that the policy shall constitute the entire contract between the parties and shall be incontestable after it has been in force during the lifetime of the insured for two years from its date, except for nonpayment of premiums and except for violation of the conditions of the policy relating to naval and military service in time of war or other prohibited risks, and, at the option of the company, provisions relative to benefits in the event of total and permanent disability and provisions which grant additional insurance specifically against death by accident may also be excepted;
   3. A provision that no statement made by the insured shall avoid the policy unless it is contained in a written application and a copy of such application is endorsed upon or attached to the policy when issued;
   4. A provision that, if the age of the insured is misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age;
   5. A provision which fulfills the requirements of section 10-3-205. This provision shall not be required in nonparticipating policies.
   6. As to any policy issued prior to the operative date of the “Standard Nonforfeiture and Valuation Act”, a provision fulfilling the requirements of section 10-7-107; except that such provision is not required in term insurance of twenty years or less; as to any policy issued on or after the operative date of the “Standard Nonforfeiture and Valuation Act”, provisions which fulfill the provisions of sections 10-7-302 to 10-7-307;
   7. A table showing in figures the loan values, if any, and the options available under the policies each year upon default in premium payments, during at least the first twenty years of the policy or during the life of the policy, if less than twenty years, beginning with the year in which such values and options become available;
   8. A table showing the amounts of installments in which the policy provides its proceeds are payable;
   9. A provision for a grace of one month, not less than thirty days, for the payment of every premium after the first year which is subject to an interest charge, during which month the insurance shall continue in force; but if the insured dies within the month of grace, the unpaid premium for the current policy year may be deducted in any settlement under the policy;
   10. If a policy is advertised or marketed as a means of payment of final expenses for final disposition or funeral merchandise or services other than according to the provisions of article 15 of this title 10, the policy must state in predominate type:

2. Any of the provisions of subsection (1) of this section or portions thereof relating to premiums not applicable to single premium policies shall to that extent not be incorporated therein.

THIS POLICY DOES NOT GUARANTEE THAT ITS PROCEEDS WILL BE SUFFICIENT TO PAY FOR ANY PARTICULAR SERVICES OR MERCHANDISE AT TIME OF NEED OR THAT SERVICES OR MERCHANDISE SHALL BE PROVIDED BY ANY PARTICULAR PROVIDER.

History. Source: L. 13: P. 350, § 43. C.L. § 2516. L. 27: P. 449, § 1. CSA: C. 87, § 57. CRS 53: § 72-3-4. L. 61: P. 465, § 10. C.R.S. 1963: § 72-3-4. L. 95: (1)(j) added, p. 1046, § 2, effective May 25. L. 2021: IP(1) and (1)(j) amended,(SB 21-006), ch. 123, p. 489, § 4, effective September 7. History. Source: L. 13: P. 350, § 43. C.L. § 2516. L. 27: P. 449, § 1. CSA: C. 87, § 57. CRS 53: § 72-3-4. L. 61: P. 465, § 10. C.R.S. 1963: § 72-3-4. L. 95: (1)(j) added, p. 1046, § 2, effective May 25. L. 2021: IP(1) and (1)(j) amended,(SB 21-006), ch. 123, p. 489, § 4, effective September 7.

Section 31 of chapter 123 (SB 21-006), Session Laws of Colorado 2021, provides that the act changing this section applies to final dispositions of human remains or human fetuses made on or after September 7, 2021.

For the operative date of the “Standard Nonforfeiture and Valuation Act”, see § 10-7-315 .

Analysis

• I. REQUIRED PROVISIONS.
  • A. In General.
  • B. Incontestable Clause.
  • C. False Statements.
  • D. Correct Age.
  • E. Grace Period.

• II. NONAPPLICABILITY.

This section is a limitation on the general right of contract and such statutes are strictly construed. In case of doubt they are resolved in favor of the contract right. Mut. Life Ins. Co. v. Daniels, 125 Colo. 451 , 244 P.2d 1064, (1952).

In case of an ambiguity, the matter is to be construed most strongly against the insurer. Coxen v. W. Empire Life Ins. Co., 168 Colo. 444 , 452 P.2d 16 (1969).

Supplemental or modifying contracts are not prohibited. It will be noted that the terms of this section do not prohibit the company and insured from entering into supplementary or modifying contracts not contemplated when the policy was issued. Sethman Elec. & Mfg. Co. v. Mtn. States Life Ins. Co., 93 Colo. 64 , 23 P.2d 952 (1933).

Supplemental or modified contracts are admissible in evidence. In an action on a life insurance policy, evidence in the form of a note and supplemental contract for the extension of time of payment of an overdue premium was held properly admitted over the objection that they tended to vary the terms of the original policy. Sethman Elec. & Mfg. Co. v. Mtn. States Life Ins. Co., 93 Colo. 64 , 23 P.2d 952 (1933).

The incontestable clause is intended not to enlarge the scope of the insurer's promise so as to include liability for death due to causes which are excluded either by express terms of the policy or by implication of law, but to make certain the enforceability of the promise as set out in the policy. Properly interpreted, therefore, the incontestable clause does not exclude a defense based on a suicide clause. Such a defense does not contest the validity of the policy, as does a defense of fraud in procuring the policy; it supports the policy, but asserts that by its terms the insurer is not bound to pay where death is caused by suicide. Mut. Life Ins. Co. v. Daniels, 125 Colo. 451 , 244 P.2d 1064 (1952).

It means only this, that within the limits of the coverage the policy shall stand, unaffected by any defense that it was invalid in its inception or thereafter became invalid by reason of a condition broken. Mut. Life Ins. Co. v. Daniels, 125 Colo. 451 , 244 P.2d 1064 (1952).

Incontestable clause should not be used to interpret ambiguous provisions of contract. It is apparent that the incontestability clause was placed in the policy by reason of the requirement of the statute. This being so, it is improper to draw from the clause an implication of contestability by reason of death during the first two years caused by disease originating prior to issuance of the policy. A provision necessitated by statute should not be used to determine the intent of the parties as to the meaning of an ambiguous clause in another portion of the document. Coxen v. W. Empire Life Ins. Co., 168 Colo. 444 , 452 P.2d 16 (1969).

The regulation of insurance companies and their policy provisions is within the police power of the state which through its general assembly may, within reasonable limits, prescribe the terms of such contracts. Union Mut. Life Co. v. Bailey, 99 Colo. 570 , 64 P.2d 1267 (1937); Mut. Life Ins. Co. v. Daniels, 125 Colo. 451 , 244 P.2d 1064 (1952).

Two-year period is a time for insurer to discover fraud. The two-year period is a time within which, by the exercise of proper diligence, the insurer may discover any fraud perpetrated in the procurement of the policy, and within which it may protect itself against any such fraud. Union Mut. Life Co. v. Bailey, 99 Colo. 570 , 64 P.2d 1267 (1937).

Contestability period runs from date permanent policy is issued not from date conditional receipt providing temporary coverage was issued. Permanent life insurance policy was not “issued” until insured complied with certain insurer requirements, so insurer was still within two-year contestability period when it challenged policy based on fact that deceased had lied about drug history on application. Pappageorge v. Federal Kemper Life Assurance Co., 878 P.2d 56 (Colo. App. 1994).

Time limits on incontestability clause run anew as to matters affecting validity of reinstatement. In action to recover proceeds from term life insurance policy, incontestability clause in policy which lapsed for non-payment of premiums did not apply to bar insurer's assertion of defense that misrepresentations were made in reinstatement application. Spencer v. Kemper Investors Life Ins., 764 P.2d 408 (Colo. App. 1988).

No statement of the insured may avoid the policy unless contained in written application. Since this section provides that no statement made by the insured shall avoid the policy unless it is contained in a written application, any alleged representations or misrepresentations which the deceased made are not available to avoid or cancel the policy. Universal Life & Accident Ins. Co. v. Bopp, 141 Colo. 324 , 347 P.2d 783 (1959).

Contents of this section contained in the policy. Under the provisions of this section, a life insurance policy must contain clauses reciting that it constitutes the entire contract, and that no statement of the assured shall avoid the policy unless contained in the written application, a copy of which is attached to the policy. N.Y. Life Ins. Co. v. Fukushima, 74 Colo. 236 , 220 P. 994 (1923).

In order to avoid a policy, it was incumbent upon the insurer to prove not only that the answers in the application were false and material, but in addition that the applicant intended to deceive the insurer. Gomogda v. Prudential Ins. Co. of Am., 31 Colo. App. 154, 501 P.2d 756 (1972).

Test must be one of fraud and deceit. In Colorado an insurance policy cannot be avoided on the basis of false statements or declarations of an applicant, unless such statements or declarations are material to the risk or form the basis on which the policy is issued and they are made with knowledge on the part of the applicant of matters which make them false or misleading. Thus, the test is one of fraud or deceit. Gomogda v. Prudential Ins. Co. of Am., 31 Colo. App. 154, 501 P.2d 756 (1972).

Fraud and deceit test expanded to include required showing that insurer was ignorant of false statement of fact or concealment of fact and is chargeable with knowledge and that the insurer relied, to its detriment, on representation in issuing policy. Hollinger v. Mut. Benefit Life Ins. Co., 560 P.2d 824 (1977).

Test applied in Spencer v. Kemper Investors Life Ins., 764 P.2d 408 (Colo. App. 1988).

When true age makes insured ineligible. Material misrepresentation of the age of insured whereby he obtained membership in a fraternal benefit society to which his true age made him ineligible held to bar a recovery on the certificate. Wiltshire v. Modern Woodmen of Am., 76 Colo. 460 , 232 P. 925 (1925).

This section and § 10-7-107 do not require an insurance company to reinstate a policy which has lapsed. Colo. Life Ins. Co. v. Winegarner, 95 Colo. 261 , 35 P.2d 860 (1934).

Nor do they provide for any benefits for a lapsed policy. This section and § 10-7-107 do not provide for any benefit to the insured after the lapse of the grace period, when this occurs before the payment of three full years' premiums. Colo. Life Ins. Co. v. Winegarner, 95 Colo. 261 , 35 P.2d 860 (1934).

Section does not apply to fraternal benefit societies. Where the decedent obtained membership in a fraternal benefit society to which his true age made him ineligible and which society is specifically excepted by § 10-7-104 , from the operation of this section, it was held that an action by the beneficiary was not maintainable. Wiltshire v. Modern Woodmen of Am., 76 Colo. 460 , 232 P. 925 (1925).