Gould v. Savings Bank Life Insurance Fund, 36 N.Y.2d 667 (1975)

Under New York Banking Law Article 6-A, knowledge possessed by an officer of a savings bank regarding an applicant’s misrepresentation on a life insurance application cannot be imputed to the Savings Bank Life Insurance Fund, which holds exclusive authority to approve the issuance of such policies.

Summary

This case concerns a dispute over a life insurance policy issued by a savings bank. The insured made a material misrepresentation about his health on the application. The beneficiary argued that the bank’s officer knew about the misrepresentation, thus waiving the right to deny the claim. The New York Court of Appeals held that because the Savings Bank Life Insurance Fund has exclusive authority to approve policies, the knowledge of the bank officer cannot be imputed to the Fund, and therefore there was no waiver. The decision emphasizes the statutory framework governing savings bank life insurance in New York and clarifies the limited agency role of individual savings banks.

Facts

The decedent applied for a $30,000 life insurance policy from Eastern Savings Bank. In the application, he stated that he had never been treated for high blood pressure and had not consulted a physician in the past five years. These statements were false; he had been treated for hypertension. The application was completed in the presence of the bank’s assistant vice-president, who managed its life insurance department. The trial court found that the misrepresentation was material.

Procedural History

The beneficiary sued to recover benefits. The trial court instructed the jury to find for the bank unless they found the bank waived its defense due to the officer’s knowledge. The jury found for the plaintiff. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

Issue(s)

Whether knowledge possessed by an officer of a savings bank regarding an applicant’s misrepresentation on a life insurance application can be imputed to the Savings Bank Life Insurance Fund, thereby creating a waiver of the misrepresentation defense.

Holding

No, because the Savings Bank Life Insurance Fund has exclusive statutory authority to approve the issuance of savings bank life insurance policies; therefore, the knowledge of the savings bank officer cannot be imputed to the fund.

Court’s Reasoning

The court emphasized the unique legal structure of savings bank life insurance under New York Banking Law Article 6-A. The Savings Bank Life Insurance Fund has the exclusive authority to approve the issuance of policies, prepare forms, determine premium rates, and prescribe health standards. Section 271 of the Banking Law states that “no policy or contract shall be delivered or issued for delivery except with the approval of the fund.” Although an individual savings bank can reject applications, it cannot approve them. The court rejected the Appellate Division’s determination that the bank acted as an agent of the Fund, stating that the statutory scheme is “tight” and the distribution of authority is inconsistent with a principal-agent relationship. The court reasoned that without an agency relationship, the officer’s knowledge could not be imputed to the Fund, and therefore, no waiver could be established. The court concluded that the case was submitted to the jury on an erroneous legal theory and, because the misrepresentation was material and there was no waiver by the Fund, the complaint should be dismissed.