I have no specific knowledge of the Three-Year Rule. I simply quoted what is in IRS Pub 575. However, the implication seems to be that previous distributions under the Three-Year Rule would have have long ago distributed all of the investment in the contract, making current distributions fully taxable. However, given that there have no distributions until now, it seems that the Three-Year Rule would not have been used.
To find the details of the Three-Year Rule you would probably need to find a copy of the tax code as it existed prior to the changes made by the Tax Reform Act of 1986.
