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Downs v. Prudential Insurance Co.

Decided: June 4, 1974.

EDWARD J. DOWNS, PLAINTIFF,
v.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, DEFENDANT



Thuring, J.s.c.

Thuring

Plaintiff seeks summary judgment on the ground that the incontestability provisions of a life insurance policy issued to his deceased wife became operative, barring defenses asserted by defendant insurance company. Plaintiff's motion is directed to whether the counterclaim for rescission based upon equitable fraud states a claim upon which relief can be granted.

Sometime prior to July 1, 1960 The Prudential Insurance Company of America issued a noncontributory group policy to the Board of Trustees, Teachers' Pension and Annuity Fund, State of New Jersey. Following the death of his wife on March 1, 1970 plaintiff received from defendant the benefits payable under the policy in the amount of $20,011.50.

On July 1, 1960 a contributory group policy designated as GC-14300, which is the subject of this litigation, was issued as between the same parties. That policy was later amended

to provide that its members had the right to apply for additional insurance by making contributions and furnishing evidence of insurability satisfactory to the insurance company. On January 5, 1970 plaintiff's wife, a teacher, applied for and subsequently received approval for the additional insurance coverage.

The amendment provided:

1. The section 'Insured Members' appearing on pages 3 and 4 of the policy is enlarged to include the following provision:

Each person who is a Member on January 1, 1970 but is not then insured under this Policy may become insured hereunder by (x) making request, within the Enrollment Period described below, to participate on a date on which he is actively at work and performing all his regular duties at his customary place of employment, (xx) agreeing to make the contributions required by the Policyholder therefor pursuant to the section 'Contribution of Individual Members' and (xxx) furnishing evidence of insurability satisfactory to the Insurance Company.

The insurance under the aforesaid policy became effective July 1, 1970.

Following the insured's death the Division of Pensions referred the claim to defendant in view of the fact that the member, Tina A. Downs, died within two years from the date of the issuance of the policy. Plaintiff's request for payment of the insurance policy proceeds was officially refused by defendant on September 15, 1972 on the ground that the insured had failed to truthfully set forth her health status at the time she made application for insurance.

The complaint demanding the proceeds of the policy was filed on July 5, 1973, and answer and counterclaim were filed July 30, 1973 seeking rescission of the insurance contract for misrepresentation by the insured of material facts concerning her health and on the ground of mutual mistake.

Each insured did not receive a copy of the group policy but received a certificate evidencing coverage under the group policy. A group life policy and the certificate issued thereunder together constitute the contract between the parties, Metropolitan Life Ins. Co. v. Poliakoff, 123 N.J. Eq. 524

(Ch. 1938) and "[o]rdinarily an insured holding a certificate of insurance is held to have constructive knowledge of the group insurance policy," Wells v. Wilbur Driver Co., 121 N.J. Super. 185, 197 (Law Div. 1972). The certificate itself was silent as to the incontestability clauses in question; thus, reference must be made to the group policy provisions and to N.J.S.A. 17:34-15(c) to reach a ...


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