All the following statements concerning the contest of a life insurance policy within the meaning of the incontestable clause are correct EXCEPT

• A. A majority of courts have held that a contest requires a court action that challenges the validity of the policy as a contract.
• B. Once a policy has been properly contested, the contestable period stops running.
• C. The requirement of a contest can be satisfied only by a suit in equity for rescission brought by the insurer.
• D. The courts usually hold that the incontestable clause is inapplicable to contests seeking to enforce a contract's terms.

Answer: (C)

The key idea is how the incontestable clause works: after a policy has been in force for a couple of years, the insurer generally cannot contest the policy’s validity based on misstatements in the application, with limited fraud-type exceptions. Contests are court actions that challenge the policy as a contract, and once a contest is properly started, the contestable period stops running. The remedy for contest is not limited to one particular procedural route. Specifically, saying that the contest requirement can be satisfied only by a suit in equity for rescission brought by the insurer is too narrow—contests can be pursued in different forms in court, and rescission is just one possible equitable remedy, not the exclusive path. The clause is typically not invoked when the dispute is about enforcing the contract’s terms, rather than challenging the contract’s validity. So the statement about exclusive use of an equity rescission suit is the incorrect one.