The opinion of the Court was delivered by
The primary issue is whether within the period of contestability an insurer may rescind the life insurance policy of an insured whose false representations in his insurance application affected the insurer’s estimate of the risk and the calculation of the premium. After a non-jury trial, the Chancery Division held that the false statements of the decedent, Albert Manzo, Jr., in his application constituted equitable fraud warranting rescission of the policy. The Appellate Division reversed, holding that the false statements did not materially affect either the insurance company’s acceptance of the risk or the hazard assumed. 234
N.J.Super.
266,
-I-
In June 1983, Manzo, a forty-six-year old resident of Wayne, New Jersey, signed Part I of a two-part application to purchase a $500,000 life insurance policy from Mass.Mutual. The conclusion of Part I states that the policy will not take effect unless *108 “at the time of payment * * * all statements in the application are complete and true as though they were made at that time.”
On June 28, 1983, in the course of a medical examination by Mass. Mutual’s doctor, Manzo falsely answered “no” to the following questions in Part II of the application:
4. Have you ever been advised of, treated for, or had any known indication of:
P. Sugar, albumen, blood or pus in urine * * *?
G. Diabetes, thyroid or other endocrine * * * disorder?
Manzo also falsely denied consulting a physician other than for a routine check-up in the five years prior to the application. In fact, during that time Manzo had been hospitalized twice.
The conclusion of- Part II contained the following clause immediately above the space reserved for the applicant’s signature:
To the best of my knowledge and belief all answers and statements are full, complete and true and were correctly recorded before I signed my name below.
Manzo signed the completed Part II of the application on June 28, 1983, the day of the examination.
Mass. Mutual obtained a statement from Dr. Hooshang Kipiani, Manzo’s personal physician, that at his last physical check-up, in July 1983, Manzo had been in “good physical condition.” On July 29, 1983, Manzo paid Mass. Mutual $200 and signed a “conditional receipt,” which stated that the insurance would not take effect unless “all answers and statements in any part of the application having an earlier date are complete and true as though given on the date of this receipt.” On August 22,1983, Manzo was found in the trunk of his car, shot to death. Mass. Mutual issued Manzo’s policy on August 31, 1983, effective June 13, 1983, at standard rates, with an annual premium of $1,345. The policy contained a rider providing that Mass. Mutual would waive Manzo’s premiums if he were to become disabled.
Following Manzo’s death, Mass. Mutual conducted a further investigation, which revealed Manzo’s long history of diabetes *109 and related problems. Based on this information, Mass. Mutual filed suit against Manzo’s primary beneficiary, Anna Marie Manzo, a/k/a Nina Manzo, and the Estate of Albert Manzo, Jr., seeking rescission because of equitable fraud.
Manzo’s medical records showed that in 1968, he was hospitalized and diagnosed by Dr. Kipiani as having diabetes mellitus. As Dr. Kipiani testified, diabetes may be controlled with medicine and diet, but is incurable. Manzo thus suffered from the disease when he filled out the insurance application. Furthermore, Manzo’s medical records indicate that his diabetes was not “well controlled.” Blood tests performed during Manzo’s two 1979 hospitalizations revealed an extremely high glucose level in his blood, evidencing his inability to control his diabetes.
Manzo unquestionably knew of his diabetic condition. Dr. Kipiani had discussed Manzo’s diabetes with him and had warned him of the necessity of controlling the disease. Additionally, Dr. Kipiani had prescribed medication for Manzo’s diabetes and put him on a low-calorie diet. Furthermore, on June 18, 1982, just one year before completing the Mass. Mutual insurance application, Manzo signed an application for life insurance from General Life Insurance Company of Wisconsin. In Part II of that application, he had answered affirmatively when asked whether he had ever been treated or had any known indication of diabetes or sugar in his urine.
After reviewing Manzo’s medical records, Dr. William Coons, medical director for Mass. Mutual, concluded that if he had known of Manzo’s condition before the issuance of the policy, he would have recommended that Mass. Mutual issue a “rated policy” with moderate-to-high premiums, instead of a policy with standard rates. John Behan, the underwriter who had authorized the issuance of Manzo’s policy, testified that knowledge of Manzo’s diabetes would have affected his judgment in approving the application, estimating the risk, and fixing the premium. Specifically, Behan testified that he would not have *110 issued the policy at standard rates but would have set the premium at two and one-half times those rates. Further, he would not have authorized the rider waiving the premium in the event of disability. Finally, he would have required Manzo to undergo additional tests and would have requested Dr. Kipiani to complete a “diabetes questionnaire” before issuing any policy-
The trial court found that Manzo knew he had diabetes when he signed' the application, a finding that the Appellate Division concluded “is supported by adequate and credible evidence.” 234
N.J.Super.
at 285,
The Appellate Division reversed. 234
N.J.Super.
at 296,
In dissent, Judge Landau disagreed with the majority that the Life and Health Insurance Code,
N.J.S.A.
17BA7-1 to :26A-8, permits rescission only if an insurer proves that the misrepresented facts either would have rendered the applicant uninsurable or that they were causally related to the loss. 234
N.J.Super.
at 296,
We conclude that the dissenting opinion represents the better view. In sum, we hold that equitable fraud should be available as a grounds for post-loss rescission and that within the period of contestability an insurer may rescind a policy if the insured knowingly misrepresented facts that would have affected the estimate of the risk and the premium charged.
II
Initially, the Appellate Division questioned the fairness of allowing a life insurer to invoke equitable fraud after the death of the insured. 234
N.J.Super.
at 289,
Both
Formosa
and
Russ
held that a life insurance policy may be rescinded because of equitable fraud, even after the death of
*112
the insured, if the insurer files suit within the period of contest-ability.
Formosa, supra,
166
N.J.Super.
at 13,
The statute provides:
There shall be a provision that the policy (exclusive of provisions of the policy or any contract supplemental thereto relating to disability benefits or to additional benefits in event of death by accident or accidental means or in event of dismemberment or loss of sight) shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of 2 years from its date of issue.
[N.J.S.A. 17B:25-4.]
Through limiting the time period in which insurance companies could contest life insurance contracts, the Legislature balanced the interests of the insurer in rescinding a fraudulently-obtained policy with those of the insured in security of coverage. By its terms, the statute does not limit contestability to the lifetime of the insured. We would contravene the words and policy of the statute if we were to impose such a limitation. A court may not disregard the plain words of a statute merely because they occasionally lead to an unhappy result. Within the period of contestability, an insurer may contest a policy for equitable fraud whether the insured is dead or alive. Consequently, Mass. Mutual, which contested the policy within the *113 two-year statutory period, may properly rely on equitable fraud as grounds for rescission.
-III-
It remains to consider whether Mass. Mutual has established that Manzo committed equitable fraud. To warrant rescission, Manzo’s misrepresentations must be material within the meaning of N.J.S.A. 17B:24-3(d), which provides:
The falsity of any statement in the application for any policy or contract covered by this section may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer.
In its construction of the statute, the Appellate Division concluded that the insurer must prove that the insured lied with the intent to defraud, 234
N.J.Super.
at 294,
-A-
We first discuss the Appellate Division’s conclusion that
N.J.S.A.
17B:24-3(d) allows rescission only if the applicant had an “intent to defraud” the insurance company. 234
N.J.Super.
at 294,
N.J.S.A. 17B:24-3(d) addresses only the effect of the false statement on the actions of the insurer. It says nothing about the intent of the insured. In 1951, moreover, the Legislature deleted language from a predecessor statute, 1937 N.J.Laws 618 § 6 (amended 1951), which applied only to accident and sickness policies. The predecessor statute provided:
The falsity of any statement in the application for any policy covered by this act shall not bar the right to recovery thereunder unless such false statement was *114 made with actual intent to deceive or unless it materially affected either the acceptance of the risk or the hazard assumed. [Emphasis added.]
The deletion of the emphasized language is persuasive evidence of the Legislature’s intent not to impose such a requirement in actions to rescind insurance policies. Hence, we conclude that N.J.S.A. 17B:24-3(d) does not require proof of an actual intent to deceive.
The Appellate Division was concerned about the seeming unfairness of permitting an insurer to rescind after the death of the insured on the basis of an unintentional misrepresentation. New Jersey courts have traditionally attempted to alleviate this apparent unfairness by distinguishing between “subjective” and “objective” questions. 234
N.J.Super.
at 285,
In this case, the application asked Manzo whether he had been “advised of, treated for, or had any other known indication of” diabetes or sugar in his urine. The application also inquired whether Manzo had consulted a physician within the preceding five years. Manzo answered these questions falsely. He also falsely answered the question whether he had suffered any “mental or physical disorder” within the preceding five years. The trial court found that Manzo knew and believed that he had diabetes at the time that he answered those questions. Mass. Mutual thus met its burden of proving that Manzo’s misrepre
*115
sentations constituted equitable fraud. It need not go further and prove that Manzo harbored an intent to defraud.
See Russ, supra,
112
N.J.Super.
at 271,
-B-
We now turn to the interpretation of the “materiality” requirements of N.J.S.A. 17B:24-3(d). The language of the statute is in the disjunctive. A false statement bars “the right of recovery” if it “materially affected either the acceptance of the risk or the hazard assumed by the insurer.” N.J.S.A. 17B:24-3(d) (emphasis added). The Appellate Division determined that Manzo’s misrepresentations did not affect either alternative. In making that determination, the Appellate Division concluded that only those misrepresentations that render an applicant uninsurable are material to the acceptance of the risk. We believe that conclusion is too restrictive. So stringent a test would be an incentive for dishonesty; it puts the dishonest applicant in a better position than the honest one. (Under such a test, an insurer would be bound unless the misrepresented disability would have precluded the issuance of the policy. Thus, the dishonest applicant would stand to gain if the lie goes undetected and would risk nothing by lying.
We believe that a better test of materiality is one that encourages applicants to be honest. See
Longobardi v. Chubb,
121
N.J.
530, 541-42,
In 1922, the Court of Errors and Appeals found that false concealment of medical history on a life insurance application was material to the insurer’s risk if it “naturally and reasonably influence[d] the judgment of the underwriter in making the contract at all, or in estimating the degree or character of the risk, or in fixing the rate of premium.”
Kerpchak v. John Hancock Mut. Ins. Co.,
97
N.J.L.
196, 198,
New Jersey courts have uniformly relied on
Kerpchak
to determine the materiality of false statements in life insurance applications.
See, e.g., Parker Precision Prods. Co., supra,
The
Kerpchak
test also comports with the legislative intent. Although it has amended
N.J.S.A.
17B:24-3(d) on several occasions since
Formosa
was decided in 1979, the Legislature has never redefined materiality. The Legislature’s failure to modify a judicial determination, while not dispositive, is some evidence of legislative support for the judicial construction of a statute.
White v. Township of N. Bergen,
77
N.J.
538, 576,
*117
Leading commentators on insurance law similarly have embraced a definition based on whether the misrepresentation reasonably related to the estimation of the risk or the assessment of the premium.
See
Appleman,
supra,
§ 7294 at 368; 7 Couch,
Insurance 2d
§ 35:79 at 127 (1965) (Couch). Additionally, the test has been widely accepted by courts in other jurisdictions when interpreting language similar to that of
N.J.S.A.
17B:24-3(d).
See, e.g., Bush v. Washington Nat’l Ins. Co.,
In this case, Manzo misrepresented his health and medical history on his application for insurance. If Mass. Mutual had known the facts, it would have requested more information and issued a policy at a premium two and one-half times the standard rate that Manzo was charged. Thus, Manzo’s misrepresentations “naturally and reasonably” affected Mass. Mutual’s estimation of the degree of the risk and its calculation of the premium. It follows that the misrepresentations “materially affected * * * the acceptance of the risk” and that Mass. Mutual is entitled to rescind the policy. As regrettable as the loss of coverage may be to his beneficiary, that loss is compelled by Manzo’s misrepresentations.
The Appellate Division recognized that an insurer need show only that the misrepresentation materially affected either the acceptance of the risk or the hazard assumed. 234
N.J.Super.
at 293-94,
By requiring a causal connection between the disability misrepresented and the insured’s death, the decision below conflicts not only with
Formosa,
but also with the general rule that “in the absence of a statute establishing a different rule, there need be no causal connection between the cause of death and the misrepresentation.” Couch,
supra,
§ 37:110 at 632. This rule is accepted by a majority of jurisdictions. Couch,
supra,
§§ 37:87 at 102 and 37:110 at 632; Appleman,
supra,
§ 245 at 125; R. Keaton and A. Widiss,
Insurance Law, A Guide to Fundamental Principles, Legal Doctrines and Commercial Practices
572 n. 20 (West 1988) (the “clear majority rule” is that no causal connection is required);
see, e.g., Shafer v. John Hancock Mut. Life Ins. Co.,
410
Pa.
394, 399,
The judgment of the Appellate Division is reversed and the judgment of the Chancery Division is reinstated.
*119 For reversal and reinstatement — Chief Justice WILENTZ and Justices CLIFFORD, HANDLER, POLLOCK, O’HERN, GARIBALDI and STEIN — 7.
Opposed —None.