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Klos v. Mobil Oil Co.

Decided: December 15, 1969.

EMILY KLOS, PLAINTIFF-APPELLANT,
v.
MOBIL OIL COMPANY, ET AL., DEFENDANTS-RESPONDENTS



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

Proctor

[55 NJ Page 119] Plaintiff seeks to recover for the death of her husband under an accident insurance contract obtained from defendant American Home Assurance Company (American) and solicited by American through defendant Mobil Oil Company's mailing and billing facilities. On cross motions for summary judgments by the parties, the trial court granted judgments in favor of both defendants on the ground that the policy was not yet effective on the date of the decedent's alleged accident.*fn1 The Appellate Division affirmed

in an unreported opinion and we granted plaintiff's petition for certification. 54 N.J. 168 (1969).

The facts material to this appeal are not in dispute. Plaintiff's husband, Stanley Klos, 82 years of age, was the holder of a Mobil Oil Company credit card. The billing date for charges accruing under the credit card was the 17th of each month. With his September 1964 billing, Klos received a letter, a brochure, and an application form soliciting him, as a Mobil credit cardholder, to purchase an accident insurance policy from American. The application provided for four available coverages with appropriate blocks in which an applicant could place a check mark next to the desired coverage.*fn2 Klos selected Plan Two which provided, in pertinent part, that the cardholder would be billed $9.00 quarterly and that his beneficiary would receive $25,000 if he met with an accidental death. Klos completed and signed the application form and mailed it on or about October 8, 1964, in a postage prepaid envelope provided by American for that purpose. The application was received by American on October 16. On October 20, a policy was mailed to Klos which he received on October 22. On November 4, 1964, Klos died, allegedly of injuries he suffered as a result of a fall in his home on October 25, three days after he had received the policy.

The issue raised by this case is the effective date of the policy coverage. There are a number of possibilities

suggested in the various pieces of literature and documents which American issued. The letter accompanying the brochure and the application form did not contain any date of coverage, but the brochure provided that the accident policy "will become effective 7 days prior to your next Mobil billing date following receipt of your application." The brochure also stated that the insured would be given a "10-day right to study policy * * * to be sure the coverage meets your expectations. If you are not satisfied, return it and there will be no charge to you and no obligation on your part." The application form which Klos signed on October 8 contained the following printed statement immediately above his signature: "I understand that coverage is not effective until policy is issued." Finally, on October 20 the insurance company mailed out the policy to Klos in an envelope on which was printed, "Important -- Your Insurance Policy is Enclosed!" The policy contained the same ten-day examination period that appeared in the brochure. On the first page under the caption "Coverage Schedule" the "Effective Date" for coverage was specified as November 10, 1964.

On the motions for summary judgment, the plaintiff first contended that the policy was effective as of October 10 in accordance with the language of the brochure. She reasoned that the decedent was covered seven days prior to the billing date following American's receipt of the application. Since American received the application on October 16, a day before the next billing date, she argued that the decedent was covered on October 10. In the alternative, she argued that, in accordance with the language of the application, the policy was at least effective as of the date of its issuance on October 20.

The trial court rejected both contentions. It reasoned that the October 10 date could not govern since the clause in the brochure is ambiguous and must be subordinated to the language of the application, particularly since the plaintiff conceded in her affidavit that her husband did not rely on

the brochure's clause. The court also rejected the October 20 date and concluded that the specific date of November 10 in the policy should govern. Since the decedent's alleged accident occurred before November 10, the court held that there could be no recovery. The Appellate Division affirmed, substantially for the reasons expressed by the trial court. We disagree with these conclusions and accordingly reverse.

At the outset we note that the techniques used in marketing the insurance we are dealing with here are quite different from the traditional methods and have become widespread through the growing use of credit cards. Companies which issue credit cards, such as Mobil Oil Company, frequently mail out literature soliciting cardholders to purchase various commodities to be billed through their credit facilities. In the present case, the literature, which included a letter, a brochure, and an application, solicited Mobil's cardholders to purchase accident insurance from American. The brochure and the letter ...


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