Goldmann, Freund and Conford. The opinion of the court was delivered by Conford, J.A.D.
[48 NJSuper Page 2] Plaintiff recovered against the defendant in the Law Division as beneficiary under a group
life insurance policy. The insured was John H. Savoyne, a merchant seaman, who died February 2, 1955. The insurance policy was an agreement dated January 14, 1951 between the defendant and Trustees of the NMU Pension and Welfare Plan, New York, New York, entered into by the latter as a result of a collective bargaining agreement between National Maritime Union of America, CIO, and various employers of merchant seamen for whom the union is collective bargaining representative. The premiums for the life insurance were paid by the Trustees out of a fund to which employers contributed. The Trustees contracting for the insurance include both employer-trustees and union trustees. The sole question involved on this appeal is whether an amendment of the agreement of insurance operative to shorten by three months the coverage by the policy of the life of Savoyne became effective without notice to him of the amendment. Judge Graf, sitting without a jury, held in the negative, and we agree with the result so determined.
The policy recites that it is delivered in New York and is governed by the laws of that jurisdiction. It automatically covers any employee of an employer-member of the plan when such employee completes 20 days on the payroll of one or more employers within any period of six consecutive calendar months. At its inception the policy language, so far as here material, had the effect of automatically terminating the life insurance of an employee on the last day of the second calendar quarter following the calendar quarter in which his last day of employment occurred. On August 18, 1954 the policy was amended so as to change the foregoing reference to the second calendar quarter, etc., to the first calendar quarter, etc. The policy, moreover, provides that any employee, upon written application to the company within 31 days after the termination of his insurance, "shall be entitled to have issued to him by the company, without evidence of insurability" an individual policy of life insurance for the same amount as under the group policy, provided payment of the premium is made within the same
31 day period. The amendment left this provision intact. A certificate summarizing the insurance agreement and certifying to the coverage thereunder was furnished by the Company to the Trustees and delivered to the insured, as required by the agreement. This included information as to the time of termination of the insurance under the policy and as to the right of conversion just mentioned.
Savoyne's last services as an employee of any employer under the policy were rendered August 20, 1954. He was never given notice of the amendment referred to. It is agreed by the parties that if the amendment is legally effective in his case, his death on February 2, 1955 occurred too late for recovery of the death benefit; per contra , if a proper construction of the policy called for notice to Savoyne of the amendment as a condition of its applicability in his case.
The original policy provides: "Termination of this Policy or amendments thereto shall not require the consent of any employee or beneficiary." The physical contract document is a printed form which contains the language "or notice to," but stricken out, after the words "consent of."
At the trial a New York lawyer testified for defendant and gave it as his opinion, citing court decisions, that under New York law the amendment was effective without notice to the insured. In a letter opinion finding in favor of plaintiff the trial court found that there was no New York decision applicable to the case presented but concluded that the giving of notice was an implied requirement of the amending procedure in view of the deletion of the verbiage concerning notice in the original document and of the fact that on one prior occasion when the policy was amended notices were sent to all employees insured.
The controversy presented by this case falls into the general field of inquiry as to whether and when cancellation, modification or substitution of a master group policy requires consent by or notice to an insured employee. See Annotation , 142 A.L.R. 1288 (1943), which reflects the wide contrariety of viewpoint to be found in the reported
cases. Analogies to orthodox insurance cases are difficult because of the introduction of another contracting party, the employer or other employee-representative, and the assumption by that party of many of the functions which would normally fall to the insured. Note: "Cancellation of Group Insurance Policy by Employer without Consent of Employee," 49 Yale L.J. 585, 587 (1940). The distinction made in some of the cases based upon the circumstance that the insured does not contribute to the premiums, Vance on Insurance (3 d ed. 1951), p. 1042, is not properly significant here, as the origin of the policy in collective bargaining in effect constitutes the insurance a part of the compensation of the employee-insured and thus paid for by his labor. See 49 Yale L.J., op. cit., supra (at p. 590); Keane v. Aetna Life Insurance Co. of Hartford, Conn. , 22 N.J. Super. 296, 305 (App. Div. 1952). Moreover, the narrowed issue emerging from the precise position taken by the plaintiff makes it unnecessary to pinpoint the nature of the interest or status of either the insured or the beneficiary under the policy. It is conceded that the amendment did not require the consent of the insured or the beneficiary, and it is not argued that, apart from the provisions of the policy, the nature of insured's interest in the insurance contract made it mandatory that he be given notice of the amendment. The position taken is merely that, as a matter of fair construction of the intent of the contracting parties, the provision for notice of an amendment of this purport and effect is to be read into the agreement by reasonable implication in the light of the surrounding circumstances.
As noted, the policy is to be construed under the law of New York. No New York cases are cited or discoverable, however, which appear to be in point. Section 204, par. 3 of the New York Insurance Law (27 McKinney's Consol. Laws of N.Y., Part 2, p. 39) requires that a certificate-holder under a group policy containing a right of conversion to another type of life insurance within a specified time after the happening ...