On appeal from the Superior Court, Law Division, Morris County.
Botter, Pressler and O'Brien. The majority opinion of the court was delivered by O'Brien, J.A.D. Botter, P.J.A.D., dissenting.
This is an appeal by defendant insurance company from a summary judgment in favor of plaintiffs, owner and beneficiaries of a life insurance policy for the face amount of the policy plus interest. Plaintiffs cross-appeal from the dismissal of their claim for punitive damages and their application for counsel fees. We affirm.
Plaintiff June H. Meier, trustee under trust dated November 25, 1978 (June Meier), was the owner and a beneficiary of a policy of life insurance issued by defendant New Jersey Life Insurance Company (NJL) in the face amount of $250,000, insuring the life of her husband Frank Meier. Plaintiff Nordling Dean Electric Company, Inc. (Nordling), of which Frank Meier was an executive, is the beneficiary to the extent of the cash value of the policy and was also the collateral assignee of the policy as security for its advancement of premium payments.*fn1 After payment of these sums to Nordling, the balance of the proceeds was payable to June Meier.
Premiums on the policy were payable quarterly, on February 11, May 11, August 11 and November 11. The policy had an automatic premium loan provision (APL), which was triggered first by non-payment of the premium due August 11, 1980, and again on November 11, 1980. It is admitted that the policy had sufficient value to pay the premium due February 11, 1981, which should have been paid by March 14 (the end of the 31-day grace period). Allegedly, NJL did not resort to the APL to pay the February premium because on March 11, 1981 it received a message from Sanford Feingold, its agent, dated March 9, which stated: "Please be advised that the above captioned policy has been surrendered." The first question raised by this appeal is whether this message, followed by
receipt by NJL of the executed cash surrender form, constituted a "proper written request" to make the APL ineffective as permitted under the terms of the policy. That question is determinative of the issue of whether the policy was in default at the time of Frank Meier's death. We decide both these questions in plaintiffs' favor.
We regard these documents as only notice of an intention to surrender. Under the terms of the policy surrender is a unitary action requiring submission of both the executed cash surrender form and the policy itself or an executed lost policy agreement. The actions of NJL subsequent to receipt of these documents do not reflect that it had accepted them as a "proper written request" to make the APL provision "ineffective." It never advised June Meier or Nordling that the policy was in default or continued as "Reduced Paid Up Insurance" as it had done with the other policy which did not have sufficient cash surrender value for an APL. The fact that NJL did not process the APL is not determinative*fn2 since, as a matter of internal procedure, APL's were never processed until at least 15 days after expiration of the grace period. Notice to June Meier of the APL's for payment of the August 11 and November 11 premiums were not sent until 43 days and 73 days respectively after the expiration of the grace period. However, it would seem to us reasonable for the policy owner to expect that the APL would "automatically" pay a "premium due and remaining unpaid" as required by the policy, within the grace period. Yet the cash surrender form executed by June Meier was not received by NJL until March 26, 1981, 12 days after expiration of the grace period. Furthermore, it appears that NJL did not
take the position that the policy had lapsed for non-payment of premium because the APL had been revoked by the owner until after Frank Meier's death. We reject this argument and treat the policy as if the APL had been made for payment of the February 11 premium. See Board of Trustees of Unitarian Church v. Nationwide Ins. Co., 88 N.J. Super. 136, 140 (App.Div.1965), where a similar argument that a policy was in default was rejected by the court.
Subsequent to its receipt of the message from its agent that the policy had been surrendered, NJL sent a letter to June Meier, dated March 13, 1981, expressing regret at the news that she wished to terminate her policy, and concluding:
If after due consideration, you still wish to surrender your policy, please complete the enclosed cash surrender form and return it to our office with the policy itself. Upon receipt we will release the cash value to you promptly.
The only provisions in the policy concerning cash surrender are as follows:
CASH VALUE -- The cash value of this policy at any time when there is no premium in default shall be as stated in the table of non-forfeiture values. This policy may be surrendered for its cash surrender value. . . .
SURRENDER VALUE -- The surrender value of this policy is the cash value less any indebtedness. The surrender value will be paid by the Company upon the owner's written request and surrender of this policy.
In response to its letter of March 13, 1981, NJL received a note from its agent, Sanford Feingold, dated March 24, 1981, enclosing the request for cash surrender value form executed by June Meier. This document was on the letterhead of NJL and presumably was the same document enclosed in the ...