More than 2 years after an individual accident and health policy was issued in New York, the insurer learns that the insured had knowingly and fraudulently misrepresented a diagnosed heart condition in the application. Under N.Y. Ins. Law §3216(d)(1)(B), what is the effect of the time limit on certain defenses?

Why C is correct

Under N.Y. Ins. Law §3216(d)(1)(B), the time limit on certain defenses bars the use of misstatements to void the policy or deny claims after 2 years from the date of issue, except fraudulent misstatements. Fraud is carved out of the protection, so an insurer that discovers a knowingly false health statement after the 2-year period may still raise it; only innocent or nonfraudulent misstatements become unusable after the period runs.

Why the other options are wrong

• A) Incontestability under the provision protects only nonfraudulent misstatements; fraudulent ones remain contestable beyond the 2-year period.
• B) The provision does not force the insurer to pay first and sue later; because the misstatement was fraudulent, the insurer may deny or contest directly.
• D) Fraud is the exception that survives the 2-year period; discovering it after that period does not bar the defense.

Memory hook

Two years bars honest mistakes, but fraud stays contestable.