McDaniel v. Medical Life Insur. Co., 1999 U.S. App. LEXIS 28423 (8^th Cir. November 3, 1999) -This court affirmed the district court’s summary judgment against Jean McDaniel, who sought death benefits from Medical Life Insurance Company's (MedLife) under her late husband’s life insurance policy. The district court found that McDaniel failed to prove that her decedent, Dennis McDaniel, devoted at least thirty hours per week to the business of the employer—a requirement for eligibility under the plan.

Due to the pleadings of the parties, the case presented a fairly narrow issue on appeal: whether an incontestability clause in a group life insurance policy barred the insurer from offering, as a defense to nonpayment, the ineligibility of the decedent. Both parties agreed that the decedent did not work the thirty hours per week necessary to be eligible for group life insurance coverage under the MedLife policy. The incontestability clause of the policy stated: "MedLife will not use any incorrect statements by a Covered Person about their insurability to void coverage or deny any claim for coverage that has been in force for a period of 2 years during a Covered Person's lifetime . . . . This Policy will be incontestable after 2 years from its issue date except for nonpayment of premiums."

This court agreed with MedLife that the incontestability clause is inapplicable to this circumstance because MedLife did not challenge the validity of the group policy itself nor the veracity of any representations made by the decedent in his policy application. As a matter of law, an incontestability clause does not bar an insurer's defense based upon ineligibility. Since no particular ERISA section governs the effect of incontestability clauses, this court looked to federal common law and the state law of Ohio (because of significant contacts there). This court concluded that incontestability clauses apply to bar insurers from contesting coverage or denying a claim by a covered person, and do not relieve plaintiffs from initially establishing coverage under the specific language of the policy.