On appeal from Superior Court, Chancery Division, Passaic County.
Petrella, Shebell and Landau. The opinion of the court was delivered by Petrella, P.J.A.D. Landau, J.A.D., dissenting.
[234 NJSuper Page 269] Massachusetts Mutual Life Insurance Company (Massachusetts Mutual) instituted suit against the Estate of Albert Manzo, whom it had insured, and his wife as the named beneficiary. It sought a declaratory judgment that its so-called "conditional receipt" executed by Manzo, as well as its life insurance policy issued after Manzo's death in connection with that receipt, were not effective to pay benefits because certain conditions precedent had not been met. Massachusetts Mutual also sought
rescission of the life insurance policy on the ground of equitable fraud. This relief was sought notwithstanding that Manzo died from causes totally unrelated to any illness; he was shot to death. After a bench trial the judge essentially adopted the proposed findings of facts submitted by plaintiff's attorneys*fn1 and concluded that the issuance of the insurance policy had been induced by Manzo's equitable fraud. A judgment rescinding the policy was entered.
On this appeal appellants argue that: (1) the doctrine of equitable fraud should be unavailable to an insurer after a loss has occurred; (2) the misrepresentations were either not material or not proved to be material by clear and convincing evidence so as to preclude coverage, particularly since Manzo died of an unrelated risk; (3) the judge erred in not permitting defendants to reopen their case; and (4) Parts I and II of Manzo's application for insurance to Massachusetts Mutual were improperly admitted into evidence.
Albert Manzo, the decedent, had been solicited for the purchase of a Massachusetts Mutual life insurance policy by Jack LaRocca of Twentieth Century Consultants, Inc., an authorized agent of Massachusetts Mutual. On or about June 8, 1983 Manzo signed Part I of a two part application to purchase a $500,000 policy. Above Manzo's signature on the last page of
Part I, which called for certain general information from the prospective insured, was the following:
LIABILITY OF COMPANY -- The first premium (or the cost to reinstate) may be paid to the Company's agent in exchange for a Conditional Receipt signed by that agent. If this is done, the Company shall be liable only as set forth in that Receipt. If the first premium (or cost to reinstate) is not paid, the Company shall have no liability unless and until:
* The application has been approved by the Company at its Home Office; and
* The first premium (or cost to reinstate) has been paid during the lifetime of all persons to be insured by the policy; and
* In the case of new life insurance, the policy has been delivered to the person named as owner in the policy; and
* At the time of payment (and delivery for new life insurance) all statements in the application are complete and true as though they were made at that time.
If any of these conditions is not met, the new life insurance (or reinstatement) applied for shall not take effect.
On June 28, 1983 Manzo signed Part II of the application which, in pertinent part, contained the following printed clauses above his signature:
I agree that: (1) this application consists of Parts 1 and 2 and any amendments and supplements which shall be attached to the policy issued, and (2) no knowledge on the part of any agent, medical examiner or any other person as to any facts pertaining to me shall be considered as having been made or brought to the knowledge of the Company unless stated in either Part 1 or 2 of this application or any amendments or supplements.
To the best of my knowledge and belief all answers and statements are full, complete and true and were correctly recorded before I signed my name below.
Part II was apparently completed in conjunction with a physical examination on June 28 by Dr. Bruce Berberian who had been retained by Massachusetts Mutual for that purpose. Berberian apparently recorded Manzo's answers to the questions on Part II based on Manzo's responses. The following questions and answers are relevant to this appeal:
2. A. Name and address of your physician.
B. Date and reason last consulted.
[Ans.] Jan. 1982 cold-medicine
4. Have you ever been advised of, treated for, or had
F. Sugar, albumen, blood or pus in urine. . . ? X
G. Diabetes, thyroid or other endocrine X
6. Other than above, within the past five years
A. Had any mental or physical disorder? X
B. Had a checkup, consultation, illness, injury, X
D. Had electrocardiogram, X-ray, other diagnostic
For any questions answered "Yes," give particulars below. For medical histories, include nature of ailment, date, duration and attending physicians.
6. B & D -- 3/23/82 Dr. Kipiani saw proposed insured for routine physical exam -- and EKG-normal.
Dr. Berberian also completed a medical examiner's report which was sent with Part II of the application to Massachusetts Mutual. The report indicated that Manzo, born December 12, 1936, was on June 28, 1983 six feet three inches tall, and weighed 275 pounds. A urine sample obtained by Dr. Berberian was forwarded to Massachusetts Mutual which had a laboratory analysis performed on the sample. The result was negative. No traces of sugar were found in the urine.
Massachusetts Mutual requested and obtained from Dr. Hooshang Kipiani, Manzo's personal physician, an attending physician's statement indicating that at the time of Manzo's last checkup in July 1983 (after the application date) his weight was 283 1/2 pounds and he was in good physical condition. On July 24, 1983, Manzo paid LaRocca $200 as the first premium on the policy and executed a conditional receipt which said at the top that it did not create any temporary or interim insurance, but was only utilized to set the effective date for the policy Massachusetts Mutual had under consideration for issuance. The receipt contained certain conditions:
Conditions That Must Be Met Before Any Insurance Becomes Effective. The insurance (or reinstatement) applied for will become effective ONLY IF all the following conditions are met.
1. All required parts of the application and medical examinations and tests we require have been completed within 60 days of the date of this receipt.
2. Each person proposed for insurance is an acceptable risk under our limits, rules and standards for the basic policy plan and amount of insurance applied for (or to be reinstated) and for any rider or agreement applied for (or to be reinstated).
3. The payment made is the correct first premium (or cost to reinstate) for insurance on the basis applied for, including any extra premium required for a substandard risk.
4. On the date of this receipt, all answers and statements in any part of the application having an earlier date are complete and true as though given on the date of this receipt.
If any of these conditions is not met, the insurance shall not take effect. Then, this receipt will terminate and our only liability will be to return the payment made.
The conditional receipt acknowledged that LaRocca received $200 on behalf of Massachusetts Mutual "to pay the first premium for an insurance policy on the life of Albert Manzo." It also said just above Manzo's signature:
I have read this receipt and have received a signed copy of it. I understand that it states when the insurance (or reinstatement) applied for will become effective if all required conditions are met, but that it does not provide any temporary or interim insurance. I agree to the terms, conditions and limits of this receipt.
There is no dispute that subsequently Massachusetts Mutual's underwriting department reviewed the policy and made a determination to issue it based on the information it had. This included the fact that on August 22, 1983, Manzo was found dead in the trunk of a car, the victim of a gunshot wound. Notwithstanding this knowledge, Massachusetts Mutual issued and ...