[111 NJSuper Page 266] Bankers National Life Insurance Company (Bankers) instituted this action against Rita Cooper, the named beneficiary in an insurance policy issued by Bankers on the life of her deceased husband, Seymour Cooper (insured). Plaintiff seeks to rescind the policy alleging that it had lapsed for non-payment of a premium due April 5, 1967 and that in an application made on June 5, 1967 to reinstate the policy, the insured made a false representation that he had not been treated by a physician since the effective date of the policy. At the trial defendant conceded that the insured made a material misrepresentation in his application for reinstatement which would entitle plaintiff to rescind the policy. However, she contends that the premium due April 5, 1967 was paid on or about April 12, 1967 well within the 31 day grace period. Hence, she asserts the policy did not lapse for non-payment of a premium
and the reinstatement application is irrelevant. She counterclaims for the proceeds of the policy.
The policy in the amount of $50,000 was issued to Seymour Cooper on October 5, 1966 and provided for quarterly premiums of $344.10 payable on January 5, April 5, July 5 and October 5 of each year with a 31 day grace period. If any premium remained unpaid at the end of the grace period, the policy lapsed as of the due date. If a lapse occurred as the result of a default in a premium payment, the policy provided for reinstatement at any time within five years of the default upon receipt by Bankers of a satisfactory reinstatement application and upon the payment of all overdue premiums plus interest.
In conformity with the provisions of the policy, Bankers, contending that it had not received the April 5, 1967 premium payment, caused the policy to lapse. A lapse notice and a reinstatement application were forwarded to the insured after the expiration of the grace period. The lapse notice stated that to apply for reinstatement all questions on the reinstatement application must be answered. Said notice and application were sent to the insured c/o Windsor Cleaners, Inc. (Windsor) at its address in Newark, New Jersey. Windsor paid the insurance premiums for policies on the lives of three of its officers, Sara Brooks, President, Jack Brooks her son, Executive Vice President, and the insured, its former Executive Manager. The reinstatement application was returned to Bankers at its home office in Montclair, New Jersey accompanied by a check in payment of the premium drawn by Windsor and dated June 1, 1967 (but received by Bankers on May 31, 1967). There was also enclosed a handwritten note from the insured which stated:
"Please check your records as we did not get notice of premium due.
The reinstatement application was unacceptable to Bankers because the insured failed to specifically answer each
question but instead made the notation across its face, "No change since original application." A second application dated June 5, 1967 and signed by the insured was approved by Bankers and a letter dated June 7, 1967 was forwarded to him to the effect that the policy had been reinstated. In the reinstatement applications the insured acknowledges that the policy lapsed for non-payment of the premium due on April 5, 1967.
The policy includes the standard incontestability clause which provides that the policy shall be incontestable, except for the non-payment of premiums, after it has been in force during the insured's lifetime for a period of two years from its date of issue. The reinstatement application provides, however, that if after the policy lapses, it is reinstated, the incontestability provisions of the policy "shall run anew from the date of such reinstatement, but only with respect to the statements and answers contained in (the) application."
The insured died on November 4, 1968 within two years from the effective date of the reinstatement application. The cause of death was a malignant brain tumor. Thereafter, the defendant submitted proof of claim to the plaintiff. Having discovered that decedent made a material misrepresentation in his reinstatement application, plaintiff elected to rescind the policy and notified defendant of such election. However, if the policy did not lapse, the misrepresentation in the reinstatement application was irrelevant and the policy became incontestable on October 5, 1968.
Thus, the basic issue is whether the policy lapsed for nonpayment of the premium due April 5, 1967. Defendant asserts that on April 12, 1967 a check representing the quarterly premium due April 5, 1967 was mailed by Windsor to Bankers at its home office. This check, she contends, was never presented for payment nor ...