State RegulationsNC specificDifficulty 3/5
Two years after an individual major medical policy was issued in North Carolina, the insurer discovers the insured negligently misstated information on the application; the misstatement was not fraudulent. Under G.S. 58-51-15(a)(2)a, the insurer:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under G.S. 58-51-15(a)(2)a, after two years from issue or reinstatement no misstatement except a fraudulent one may be used to void the policy or deny claims. Even for policies within the statutory exceptions, such as major medical with benefits of at least $5,000, disability income coverage of at least $100 per month for 12 months, and franchise policies, the carve-out reaches only fraudulent misstatements, and this one was merely negligent.
Why the other options are wrong
- A) The two-year defense limit bars retroactive voiding for a non-fraudulent misstatement.
- B) Blanket denial of affected claims after two years on a negligent misstatement violates the time limit on defenses.
- D) The statute addresses voiding and claim denial, not premium surcharges as a remedy for aged misstatements.
Memory hook
Two years, then only fraud bites.