Defendant, Paul Revere Variable Annuity Insurance Company has moved for summary judgment against plaintiff Rosemary Daly, the beneficiary of a $250,000 life insurance policy issued by Paul Revere in which her late husband John Daly was the insured.*fn1 Paul Revere has refused payment on the policy on the grounds of equitable fraud. Paul Revere maintains that the application for insurance contained material misrepresentations. In opposing the motion, the beneficiary does not argue that questions of fact exist as to the misrepresentations, but raises issues of first impression concerning the interpretation and application of N.J.S.A. 17B:24-3 a and c as to the admissibility in evidence of the application for the life insurance policy that was issued. The beneficiary contends the Paul Revere improperly converted an application for disability insurance into an application for life insurance and that Daly never in fact applied for life insurance with Paul Revere. As a consequence it is argued that the application should not be admissible in a suit based on the life insurance policy.
A recitation of the facts pertinent to this summary judgment motion which are not disputed is in order. The deceased, Daly, was the vice president of Morris Industries, Inc., Pomptom Plains, New Jersey. Morris Industries is a closely held corporation, entirely owned by the president Alvin Nochenson. Daly had been with Morris Industries 16 years and had extensive authority in the management of the business. His earned income, including pension and profit sharing was $149,000 a
year. Daly entered into an agreement with his employer in which Morris Industries promised to purchase life and disability insurance for him. In late October or early November 1981 Daly was contacted by Joseph Priester, a special agent with the New York Life Insurance Company. Priester was informed that Daly sought a $250,000 life insurance policy and a disability insurance policy.
Throughout the month of January 1982 Daly completed applications for insurance. First, on January 17, 1982 he completed part one of Paul Revere's application. Later, on January 19, 1982 he completed an application for life insurance with New York Life. Finally on January 25, 1982 Daly completed part two of Paul Revere's application. Paul Revere's application is a dual purpose application. It may be used for life insurance or health insurance. The sections completed by Daly clearly indicate it was to be used for disability insurance. Part two of Paul Revere's application is the section which contains an applicant's individual medical history. It is part two of Daly's application which Paul Revere alleges to contain material misrepresentations. Paul Revere does not contest the fact that the application completed by Daly on January 17 and 25, 1982 were originally to be used for disability insurance.
It should be noted that at some point New York Life declined to underwrite a life insurance policy for Daly. However, in late February or early March 1982 Priester was involved in negotiations with Michael Drew, an agent for Paul Revere, concerning Paul Revere possibly underwriting both life and disability insurance for Daly. When Paul Revere made the final decision to offer Daly both life and disability insurance is unclear. Nonetheless, on April 1, 1982 Paul Revere mailed out a disability policy for Daly with an issuance date of January 1, 1982. On April 8, 1982 Paul Revere issued a $250,000 life insurance policy on Daly's life. Daly received the policy on April 13, 1982. Attached to the life insurance policy was the Paul Revere application, parts one and two completed by Daly on January 17 and 25, 1982 respectively. Pursuant to the agreement between
Daly and his employer, Morris Industries promptly paid Paul Revere the required premiums. Less than a month after the issuance of the life insurance policy, on May 7, 1982, Daly died of hypertensive heart disease with acute coronary insufficiency superimposed on an old myocardial infarct (left-ventricular).
Paul Revere declined payment on the policy and the beneficiary brought suit for the $250,000 face value of the policy. Paul Revere has moved for summary judgment on two grounds. First, that part two of Daly's insurance application contained material misrepresentations, thereby entitling Paul Revere to rescind the policy based on equitable fraud. Formosa v. Equitable Life Assurance Society of U.S., 166 N.J. Super. 8 (App.Div.1979), certif. den. 81 N.J. 53 (1979). Second, the failure of a condition precedent to the insurance contract that Daly's health at the time of the issuance of the policy remain the same as stated in the application. Prahm v. Prudential Insurance Co., 99 N.J.L. 288 (E. & A.1923).
In part two of the application Daly represented, among other things, that he in the past five years had not had an xray, electrocardiogram, blood or urine test or any other lab test. He also claimed to have seen a doctor only once in the past five years and the examination was for treatment of a jogging injury he suffered in 1971. Daly alleged he had not been hospitalized for treatment or observation in the past five years. He represented he never had any known indication of treatment for chest pain, high blood pressure and diseases of the heart, blood vessels or lungs. At the bottom of both parts one and two of the application, just above his signature and in clear print, Daly acknowledged that to the best of his knowledge and belief all of the statements made in the application were true and that he understood the statements and the application would become part of any insurance policy issued on it.
Paul Revere served upon the beneficiary requests for admissions on August 19, 1983. The requests for admissions which included hospital and medical records detailed Daly's ten year
history of high blood pressure, heart illness and treatment. No response whatsoever to the requests for admission was made. By virtue of R. 4:22-1, Daly's long ...