On appeal from the Superior Court, Appellate Division, whose opinion is reported at 234 N.J. Super. 266 (1989).
For reversal and reinstatement -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None. The opinion of the Court was delivered by Pollock, J.
The primary issue is whether within the period of contestability an insurer may rescind the life insurance policy of an insured whose false representations in his insurance application affected the insurer's estimate of the risk and the calculation of the premium. After a non-jury trial, the Chancery Division held that the false statements of the decedent, Albert Manzo, Jr., in his application constituted equitable fraud warranting rescission of the policy. The Appellate Division reversed, holding that the false statements did not materially affect either the insurance company's acceptance of the risk or the hazard assumed. 234 N.J. Super. 266, 560 A.2d 1215 (1989). One judge dissented, and the defendant-insurer, Massachusetts Mutual Life Insurance Company (Mass.Mutual), appealed as of right. R. 2:2-1(a)(2). We now reverse the judgment of the Appellate Division and reinstate the Chancery Division's judgment of rescission.
In June 1983, Manzo, a forty-six-year old resident of Wayne, New Jersey, signed Part I of a two-part application to purchase a $500,000 life insurance policy from Mass.Mutual. The conclusion of Part I states that the policy will not take effect unless
"at the time of payment * * * all statements in the application are complete and true as though they were made at that time."
On June 28, 1983, in the course of a medical examination by Mass. Mutual's doctor, Manzo falsely answered "no" to the following questions in Part II of the application:
4. Have you ever been advised of, treated for, or had any known indication of:
F. Sugar, albumen, blood or pus in urine * * *?
G. Diabetes, thyroid or other endocrine * * * disorder?
Manzo also falsely denied consulting a physician other than for a routine check-up in the five years prior to the application. In fact, during that time Manzo had been hospitalized twice.
The conclusion of Part II contained the following clause immediately above the space reserved for the applicant's signature:
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.
Manzo signed the completed Part II of the application on June 28, 1983, the day of the examination.
Mass. Mutual obtained a statement from Dr. Hooshang Kipiani, Manzo's personal physician, that at his last physical check-up, in July 1983, Manzo had been in "good physical condition." On July 29, 1983, Manzo paid Mass. Mutual $200 and signed a "conditional receipt," which stated that the insurance would not take effect unless "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."
On August 22, 1983, Manzo was found in the trunk of his car, shot to death. Mass. Mutual issued Manzo's policy on August 31, 1983, effective June 13, 1983, at standard rates, with an annual premium of $1,345. The policy contained a rider providing that Mass. Mutual would waive Manzo's premiums if he were to become disabled.
Following Manzo's death, Mass. Mutual conducted a further investigation, which revealed Manzo's long history of diabetes
and related problems. Based on this information, Mass. Mutual filed suit against Manzo's primary beneficiary, Anna Marie Manzo, a/k/a Nina Manzo, and the Estate of Albert Manzo, Jr., seeking rescission because of equitable fraud.
Manzo's medical records showed that in 1968, he was hospitalized and diagnosed by Dr. Kipiani as having diabetes mellitus. As Dr. Kipiani testified, diabetes may be controlled with medicine and diet, but is incurable. Manzo thus suffered from the disease when he filled out the insurance application. Furthermore, Manzo's medical records indicate that his diabetes was not "well controlled." Blood tests performed during Manzo's two 1979 ...