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Allen v. Metropolitan Life Insurance Co.

Decided: March 29, 1965.


For reversal -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Jacobs, J.


The Appellate Division reversed the judgment entered in the Law Division in favor of the plaintiff Anne D. Allen and directed that judgment be entered in favor of the defendant Metropolitan Life Insurance Company. 83 N.J. Super. 223 (1964). We granted certification on the plaintiff's application. 43 N.J. 133 (1964).

On April 4, 1960 Richard Tambouri, an agent of the defendant insurance company, and Frank Cafaro, the assistant manager of the company's Westwood office, called at the home of Harley Allen for the purpose of selling him a life insurance policy. Also present were Allen's wife Anne and her brother Joseph. After some discussion Allen agreed to purchase a $12,000 policy, naming his wife as beneficiary. Tambouri filled in Allen's answers to the questions in Part A of the application for the policy and Allen signed it. The application set forth that the company would incur no liability "except as may be provided in a Conditional Receipt given on and bearing the same date as this application."

Upon his signing of the application Allen gave Tambouri a check in the sum of $576.42 for the first annual premium. The check was payable to the Metropolitan Life Insurance Company and was deposited by the company in regular course.

Tambouri delivered a conditional receipt which provided in pertinent part as follows:

" If the amount received on this date is equal to the full first premium on the policy applied for and (1) the application as originally submitted is approved at the Company's Home Office for the policy applied for, either before or after the death of the Life Proposed, then in such circumstances the policy applied for will be issued effective as of this date or (2) if the Life Proposed dies within 30 days from this date as a result of accidental bodily injury caused by external violence, then, provided that a death benefit does not become payable under a policy issued pursuant to (1) above or under a policy other than the one originally applied for, the Company will pay the amount of life insurance applied for (not including any additional accidental means death benefit) subject to the following conditions: (a) the aggregate amount payable under this provision and similar provisions of all conditional receipts issued by the Company in connection with applications on the Life Proposed shall not exceed $25,000, (b) payment will be made in one sum to whoever would have been entitled to payment if a policy had been issued, (c) no such payment will be made if death occurs as the result of suicide."

On April 28, 1960 Allen was stricken with a coronary occlusion and died almost immediately. On the same day Tambouri became aware of Allen's death. On May 5, 1960 Dr. Entmacher, the company's associate medical director, was informed of Allen's death. Later that day he declined to approve the application and thereafter the company denied all liability to the plaintiff except for return of the $576.42 premium which was tendered but refused. In due course, the plaintiff instituted her action against the company in the Law Division seeking recovery of the face amount of the policy.

In the Law Division, the plaintiff testified that when the application was being discussed on April 4th, Messrs. Tambouri and Cafaro told her husband that there would be immediate coverage if the premium were paid in advance and no other reason was given by them for the making of such advance payment. She also testified that when the conditional receipt was given to her husband, Mr. Tambouri said, "here is your binder." Her testimony was corroborated by that of

her brother. Messrs. Cafaro and Tambouri testified that Allen was told there would be immediate coverage "if there was nothing organically wrong." In a pretrial deposition, Mr. Cafaro had testified that he recalled a conversation after Allen had signed the application in which Mr. Tambouri had said to Allen that he would get coverage commencing now if he paid his premium in advance. Interoffice correspondence after Allen's death indicated that the manager of the company's Westwood office customarily described the conditional receipt as a "binding receipt."

Judge Marini, sitting in the Law Division, viewed the conditional receipt as an ambiguous instrument and received the oral testimony as to the discussions which preceded its signing for such aid it might serve in resolving the ambiguity. He explicitly found that the Allens had been told that there was immediate coverage,*fn1 and he inquired rhetorically: if there were no immediate coverage, why would the company take the advance premium and of what benefit "could a thing of this sort be to a person who applies for insurance." He rejected the company's contention that its responsibility under the conditional receipt should turn on the insurability of the applicant, pointing out that the receipt said nothing about the assured being in good health "or that he is organically sound"; and he concluded that Allen was covered by "interim insurance" without regard to any ultimate finding on the issue of insurability.

When Allen made his application for insurance he told Messrs. Tambouri and Cafaro that he had been hospitalized some weeks earlier and when he appeared before Dr. Spranz on April 8th for his physical examination he answered fairly all of the questions which appeared in Part B of the application. These answers included reference to the fact that on March 11, 1960 he had complained of severe pain localized to the pit of his stomach, was admitted to Pascack Valley

Hospital in Westwood, had two electrocardiograms and gallbladder and gastrointestinal X-rays, and was discharged after 7 days without symptoms and with the positive finding of a sluggish gallbladder. The results of Dr. Spranz's own medical examination of Allen, set forth in Part C of the application, were negative except for a finding that he was overweight.

The application containing Parts A, B and C was sent to the company's home office in New York where it was received on April 12th and was thereafter processed through several underwriters. On April 28th, the company's medical correspondence division sent a request to the Pascack Valley Hospital for a report and the report was received at the company's home office on May 2nd. On May 5th the application, along with the hospital report, was received by Dr. Entmacher and on the same day he rejected it. The report, as sent to the defendant, contained a diagnosis of acute cholecystitis and anginal syndrome whereas the hospital's original records referred to acute cholecystitis and "anginoid" syndrome. Dr. Entmacher testified that acute cholecystitis is inflammation of the gallbladder, that anginal syndrome relates to pain arising from an inadequate supply of oxygen to the heart muscle, and that the term anginoid is properly defined as resembling angina.

Dr. Entmacher referred in his testimony to the defendant's Medical Impairment Guide which contains a list of medical impairments and the appropriate action to be taken. The Guide contained an entry relating to gallbladder disease which provided that if the disease had occurred less than one year previously and no operation had been performed there was an extra rating of $3.50 per thousand dollars of insurance. It contained no entry for anginal or anginoid syndrome but did contain an entry for anginal pectoris. Dr. Entmacher testified that this entry would apply to anginal syndrome, that the medical rating for anginal pectoris is the same as for coronary thrombosis ...

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