New York Law Review

Tag: insurance application

  • Massachusetts Mutual Life Insurance v. Tate, 42 N.Y.2d 1046 (1977): Material Misrepresentation in Insurance Applications

    Massachusetts Mutual Life Insurance Co. v. Tate, 42 N.Y.2d 1046 (1977)

    An insurance policy may be voided if the applicant makes a material misrepresentation on the application, even if the misrepresentation was made in good faith.

    Summary

    Massachusetts Mutual Life Insurance Company appealed a decision denying their attempt to rescind a life insurance policy issued to the deceased, Mrs. Tate. The insurance company argued that Mrs. Tate made material misrepresentations on her application by failing to disclose consultations with a psychiatrist, Dr. Ferrell, prior to the policy’s issuance. The trial court ruled in favor of the insurance company, rescinding the policy, but the Appellate Division reversed. The Court of Appeals reversed the Appellate Division, reinstating the trial court’s judgment, holding that the misrepresentation was material.

    Facts

    Prior to applying for a life insurance policy from Massachusetts Mutual, Mrs. Tate and her husband consulted with Dr. Ferrell, a physician and friend, regarding marital problems. Mrs. Tate did not disclose these consultations on her insurance application. Mrs. Tate accurately disclosed a surgery for a lung cyst and her father’s death from pneumonia. After Mrs. Tate’s death from pneumonia, Massachusetts Mutual sought to rescind the policy based on the alleged misrepresentation regarding the consultations with Dr. Ferrell.

    Procedural History

    Massachusetts Mutual brought an action in the Supreme Court, Nassau County, seeking to rescind the life insurance policy. The Supreme Court ruled in favor of Massachusetts Mutual, rescinding the policy. The Appellate Division reversed the Supreme Court’s decision. Massachusetts Mutual appealed to the New York Court of Appeals.

    Issue(s)

    Whether Mrs. Tate’s failure to disclose consultations with Dr. Ferrell on her insurance application constituted a material misrepresentation sufficient to void the insurance policy.

    Holding

    Yes, because the dissenting opinion at the Appellate Division, adopted by the Court of Appeals, found that the undisclosed consultations were material to the insurance company’s assessment of risk.

    Court’s Reasoning

    The Court of Appeals adopted the reasoning of the dissenting opinion in the Appellate Division, which concluded that Mrs. Tate’s failure to disclose her consultations with Dr. Ferrell constituted a material misrepresentation. The dissent emphasized that the consultations addressed marital problems, which could be indicative of underlying emotional or mental health issues. The dissenting justice at the Appellate Division stated that the misrepresentation was material because “an insurer is entitled to determine for itself whether such consultations are of sufficient import to influence its decision to accept the risk.” (56 AD2d 173, 182-183). Even if Mrs. Tate believed she was only receiving counseling, the insurer had a right to evaluate that information. The dissent further reasoned that the insurance company’s decision to issue the policy despite Mrs. Tate’s disclosure of lung surgery and her father’s death from pneumonia did not negate the materiality of the undisclosed psychiatric consultations. The dissenting judge concluded that the insurer should be permitted to make its own determination of the significance of omitted information in assessing risk. Judge Fuchsberg dissented, arguing that Mrs. Tate’s consultations should be viewed as marital counseling, akin to seeking advice from clergy or counselors, and not necessarily as treatment for a mental health condition. He also argued that because the insurer issued the policy despite other disclosures, the failure to disclose the consultations should not be considered material. Ultimately, the majority of the Court of Appeals sided with the original trial court’s determination that the misrepresentation was indeed material.

  • Krakower v. Mutual Life Insurance Company of New York, 39 N.Y.2d 705 (1976): Admissibility of Insurance Applications When Multiple Applications Are Attached

    Krakower v. Mutual Life Insurance Company of New York, 39 N.Y.2d 705 (1976)

    When an insurance policy includes multiple applications for coverage on different individuals, the inadmissibility of one application due to illegibility does not automatically render the other, legible applications inadmissible under New York Insurance Law § 142.

    Summary

    Arnold Krakower applied for a life insurance policy, making declarations about his health. The policy also included an application for his wife’s coverage. After Krakower died, the insurance company sought to rescind the policy, alleging misrepresentations in Krakower’s application regarding his medical history. The copy of the wife’s application attached to the policy was found to be illegible. The New York Court of Appeals held that the illegibility of the wife’s application did not bar the admissibility of Krakower’s legible application in evidence to prove his misrepresentations. The court reasoned that the applications pertained to separate lives, coverage, and risks and should be treated distinctly for admissibility purposes under Insurance Law § 142.

    Facts

    Arnold Krakower applied for a $40,000 term life insurance policy with MONY, declaring himself in good health. He disclosed annual checkups, colds, and viruses in the past five years. During a physical examination, he admitted to past surgeries and a routine EKG, denying any other medical conditions or medication. He also applied for a $5,000 term life insurance on his wife, indicating she had no health impairments except for colds and viruses. The policy was issued, with both applications attached. Krakower died within a year from complications of polycythemia vera, a blood disease he had suffered from for 20 years. Investigations revealed that Krakower had been hospitalized on several occasions for this condition, contrary to his application statements.

    Procedural History

    MONY denied the claim and sought to rescind the policy due to misrepresentation. The trial court initially denied summary judgment, questioning the legibility of the application copies attached to the policy. At trial, the plaintiff stipulated to the legibility of Krakower’s applications, leaving only the legibility of his wife’s application as the issue. The jury found the wife’s application illegible. The trial court then ruled that the illegibility of the wife’s application did not prevent the insurer from proving the falsity of Mr. Krakower’s application and dismissed the complaint. The Appellate Division reversed, holding that section 142 rendered decedent’s application inadmissible. The Court of Appeals reversed the Appellate Division and reinstated the trial court’s order.

    Issue(s)

    Whether the illegibility of a copy of an insurance application for one insured (the wife) attached to a policy, also containing a legible application for another insured (the husband), prevents the insurer from introducing the husband’s application into evidence to demonstrate misrepresentation, under New York Insurance Law § 142.

    Holding

    No, because under these circumstances and for this particular purpose, the applications which relate to different lives, separate coverage and distinct risks, must be viewed as separate and distinct; thus, Insurance Law § 142 should not be applied to render the husband’s applications for insurance inadmissible.

    Court’s Reasoning

    The Court of Appeals focused on the purpose of Insurance Law § 142, which is to protect the insured by providing them with the opportunity to examine the application and correct any errors. The court emphasized that the second sentence of § 142, regarding admissibility, was added to prevent insurers from using applications not attached to the policy as evidence, overriding the holding in Abbott v. Prudential Ins. Co. The court reasoned that although attached to the same policy, the applications related to different lives, coverage, and risks. Therefore, the illegibility of the wife’s application should not bar the admissibility of the husband’s legible application. To hold otherwise would be a misapplication of the statute. The court stated, “[N]o application for the issuance of any such policy * * * shall be admissible in evidence unless a true copy of such application was attached to such policy when issued.” The court emphasized that the applications pertained to separate risks and coverages, and therefore should be treated as distinct for the purpose of admissibility under § 142.

  • Neuss v. United States Life Ins. Co., 30 N.Y.2d 244 (1972): Duty to Furnish Insurance Application Copies to Debtor in Credit Insurance

    Neuss v. United States Life Ins. Co., 30 N.Y.2d 244 (1972)

    In credit insurance obtained as an option by the debtor, the insurer must furnish the debtor with a copy of the insurance application for it to be used as a defense against a claim.

    Summary

    The widow of a deceased purchaser of mutual fund shares sued the insurers to recover under a diminishing term life insurance policy. The deceased had falsely denied any heart disease in his insurance application. The insurer claimed the application was returned to Crosby Plans Corporation, the group policyholder, as permitted by statute. The Court of Appeals held that the insurer could not use the fraudulent application as a defense unless a copy was furnished to the deceased during the contestability period. The Court reversed the grant of summary judgment for the insurers, finding questions of fact whether the deceased received a copy or if he was estopped from recovery due to being a sales representative.

    Facts

    The deceased, an attorney and sales representative for a registered dealer of Crosby Plans Corporation, purchased mutual fund shares on an installment plan. He opted for diminishing term life insurance to cover his remaining payments. In his application, he falsely denied any heart disease, despite a history of heart attacks and hospitalizations. He also understated his age. He died four months later, owing $16,700 on the shares.

    Procedural History

    The plaintiff, the deceased’s widow, sued the insurers. The Supreme Court denied the plaintiff’s motion for summary judgment and granted summary judgment for the defendant insurers. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether, in the context of credit insurance obtained as an option by the debtor, the insurer must furnish the debtor (or his estate) with a copy of the insurance application containing misrepresentations for it to be used as a defense against a claim?

    Holding

    Yes, because in credit insurance where the debtor elects and pays for the insurance, the statute and policy language require that the insured (debtor) or beneficiary receive the insurance application in order for the insurer to use misstatements in the application as a defense.

    Court’s Reasoning

    The Court reasoned that Insurance Law § 142 requires copies of life insurance applications be attached to the policy to allow the insurer to use misstatements as a defense. For group life policies, § 161 requires insureds or beneficiaries receive copies of individual applications. The approved policy form here stated, “a copy of the instrument containing the statement is or has been furnished to the Debtor or to his estate.” The purpose of furnishing copies of statements is to allow insureds to correct errors or expose contract invalidity. The reference to “estate” only means if death occurs before delivery in the regular course of events. The court noted that unlike typical creditor insurance, this insurance was optional and paid for by the debtor, with the wife as ultimate beneficiary. Crosby’s interest was primarily in the commissions. Therefore, the wife was the true beneficiary. The Court found that the insurers may not assert the fraudulent insurance application unless furnished to the deceased during the contestability period. However, summary judgment was improper because factual issues remained as to whether deceased received a copy as a sales representative, and whether he had a duty to disclose fully all facts relevant to the transaction. The Court referenced the principle that fraud extrinsic to the insurance application, excluded for failure to attach it to the policy, may still ground a defense.