Court upholds voiding of insurance policy based on fraud

A Federal appeals court has determined that an insurer acted properly in refusing to pay life insurance benefits to the survivor of a man with AIDS who fraudulently obtained the insurance. The Eleventh U.S. Circuit Court of Appeals said the late Anthony C. Fioretti fraudulently obtained the policy from Massachusetts General Life Insurance Company in 1986 when he applied for an $1.9 million policy. To qualify for the coverage, Fioretti used an HIV-negative individual to pass an HIV-antibody test. After his death from AIDS-related complications in 1989, the insurance company denied payment of the claim. His brother sued on the basis of an incontestability clause in the policy barring the company from voiding the contract after two years of the effective date. However, the District Court based its decision on the fact that the Supreme Court of New Jersey has ruled an insurer can deny coverage in the case of fraud.