On Appeal from the United States District Court for the District of New Jersey; D.C. Civil Action No. 89-01524.
Becker, Nygaard and A. Leon Higginbotham, Jr., Circuit Judges.
A. LEON HIGGINBOTHAM, JR., Circuit Judge
Appellee, Robert Spivak ("Spivak"), is an insurance broker who handled the insurance needs of Benjamin and Wanda Glezerman for the period of approximately twenty years prior to Benjamin Glezerman's death. Benjamin Glezerman died on September 14, 1988. Prior to that date, Wanda Glezerman handled most of the communications regarding the policy at issue in this case.
The present litigation was brought by Wanda Glezerman, as trustee for her husband's estate, for damages based on appellee Columbian Mutual Life Insurance Company's ("Columbian") failure to pay death benefits on a Columbian policy sold to Benjamin Glezerman by Spivak. Wanda Glezerman is suing Spivak, CMS Companies ("CMS") (the firm that serviced the policy), and Columbian. The district court granted appellees' motion for summary judgment on the ground that the appellees owed no duty to Glezerman in the circumstances of this case. We affirm in part, vacate in part, and remand for further proceedings in accordance with this opinion.
Spivak had a close affiliation with CMS. The Glezermans received letters signed by Spivak on CMS letterhead, and Wanda Glezerman testified that she thought Spivak was a partner in CMS. See Appendix ("App.") at 7. Spivak acknowledged that he placed all his business with CMS, and that CMS provided all the servicing of Spivak's accounts. See id. at 8-9. Spivak's offices were in the same building as CMS, and he shared CMS staff. See id. at 9.
The life insurance policy at issue became effective on September 14, 1979. Each annual premium was set out in the policy. The premium increased from $9,313.20 in the first year to $37,026.60 in the twentieth year, see App. at 34, and was payable in two semiannual installments, one due in September and one due in March. For the year in question, the annual premium was $18,064.80. The policy provided for a thirty-one day grace period in which the insured could pay the premium after the due date and still retain coverage. See App. at 29; see also N.J.S.A. § 17B:25-3 (mandating a minimum of thirty days as a grace period prior to cancellation of a life insurance policy). Finally, the policy provided terms for reinstatement in the event of cancellation for non-payment of premiums. In order to qualify for reinstatement, the insured was required to provide proof of insurability, and then pay all overdue premiums at 5% interest. See App. at 39.
For purposes of summary judgment, the following facts concerning the relationship between the Glezermans and Spivak are taken as true. Columbian sent premium statements to CMS, not the Glezermans. See App. at 20. There was no set procedure for the Glezermans to follow when making premium payments. Premiums were occasionally paid to Spivak's office, and occasionally to Columbian. On some occasions, CMS paid the premium, billing the Glezermans later. See App. at 15. One of the premiums paid by CMS was $15,000. Further, the amount in the premium statement was not always the amount actually due, because Spivak advised the Glezermans to occasionally borrow against their policies to make premium payments. See App. at 14. Spivak also told the Glezermans from which of their financial accounts to pay the premium. See Supplemental Appendix ("Supp. App.") at 23-24.
Finally, because each premium payment represented a large sum of money, the Glezermans had established a special procedure wherein CMS would notify them as the grace period drew to a close so that they could pay at the very last minute. The servicing department of CMS monitored the Glezermans' premium payments. Spivak acknowledges this procedure was agreed to and followed by appellees. See App. at 20, 23. As Wanda Glezerman described it:
From the beginning of time, I always got the notice from [Spivak] first and then he would catch up with the grace period and they will tell me when to send the check and how much to send, whether there was a difference or there wasn't [in the amount owed from the amount on the statement] and from what account to pay it.
In the spring of 1986, the Glezermans received notification from Columbian, via CMS, indicating that the premium on Benjamin Glezerman's life insurance policy was due. See Supp. App. at 22. That notification specified both the due date for the premium payment, and the end of the grace period. See Supp. App. at 118.*fn1 Soon thereafter, Spivak telephoned Wanda Glezerman and discussed the payment with her. Spivak told Glezerman not to worry about the payment because she still had time to pay. See App. at 45. The next communication the Glezermans received notified them that the policy had lapsed. See App. at 84.
CMS and Spivak had received notice that the Glezermans' policy had lapsed from Columbian shortly after the end of the grace period. That notice included a late payment offer to bring the policy back into force. See App. at 46. Apparently no action was taken pursuant to this notice, and there is no evidence in the record as to whether the Glezermans were informed of Columbian's late payment offer.
On May 6, Wanda Glezerman sent two checks that had been previously prepared in anticipation of April 14, the end of the grace period. See Supp. App. at 132. Per the instructions of a CMS employee, these checks were back dated to the last day of the grace period, although they were actually written on May 6. Wanda Glezerman was told that the policy would be reinstated. See App. at 48. Instead of automatically reinstating the policy, however, Columbian required the Glezermans to file a request for reinstatement, and a medical form to be completed with reference to Benjamin Glezerman.
Also in the beginning of May, Spivak contacted the general agent at Columbian and tried to get the policy reinstated. See App. at 51. CMS employees originally gave Spivak a reason to believe that Columbian was prepared to reinstate the policy without further medical evidence, see id. at 52, but by the end of May or the beginning of June, Spivak knew that Columbian did not want to reinstate the policy because of medical reasons. See id. at 53. On June 9, 1986, Spivak wrote to the Glezermans and told them that Columbian had reinstated the policy. See id. at 54. Spivak now admits that the policy was never reinstated after the lapse in March. The premium ...