This opinion deals with the effect, if any, that the inability of an applicant for insurance to communicate in English should have when the court is considering whether the insurer has a right (under Massachusetts Mutual Life Insurance Co. v. Manzo, 122 N.J. 104, 111, 584 A.2d 190 (1991)), to rescind a policy of insurance within the contestability period. This question arises in the context of a motion by defendant North American Company for Life and Health Insurance ("insurer") for summary judgment dismissing plaintiffs' complaint and allowing it to rescind a life insurance policy that it issued to the decedent, Juan Rivera. Defendants Charles Kimber and the Tribus Agency join this motion, which plaintiffs oppose.
Plaintiffs seek to recover insurance proceeds under the subject policy, which the insurer issued on the life of Mrs. River's late husband, Juan P. Rivera, in March 1988. Plaintiffs have joined as defendants the insurer and Charles Kimber, the insurance producer who sold the policy. By way of counterclaim, the insurer seeks rescission of the policy due to alleged material misrepresentations by the insured in his application for insurance.
The policy was issued as part of an enhancement of Juan Rivera's benefits package that was being undertaken by his employer, Dynamic Metals. The present record would support a finding that Rivera was not responsible for paying the policy's premiums and that this expense would be paid by Dynamic Metals.
There were specific questions on the application dealing with pre-existing medical conditions. The answers stated that Rivera had not been treated by a physician in the last five years nor had he ever been treated for high blood pressure. In fact, Rivera had been treated by a physician for high blood pressure during that period. The insurer asserts that these incorrect answers constituted
knowing misstatements by Rivera, the applicant, that were material to the risk insured and relied upon by the insurer in its issuance of the policy. Rivera died of cancer in December 1988.
Plaintiffs have set forth facts from which the trier of fact could find that the issuing agent came to Rivera's place of employment, questioned each worker, and completed each worker's application himself. There is deposition testimony to the effect that Kimber, the issuing agent, read the application to Rivera and filled it out for Rivera, and that Rivera simply signed the application where Kimber indicated. Plaintiffs have set forth facts tending to show that Rivera's understanding of the English language was extremely limited, that he read and spoke Spanish almost exclusively, and that he never had any formal training in English and had only an eighth grade education, which he completed in Puerto Rico. These allegations in turn raise issues of fact concerning Rivera's ability to understand the insurance application and to knowingly misrepresent the fact he had been treated for hypertension, and the question for the court on this motion is whether those facts are material.
The insurer seeks to rescind Rivera's policy on the basis of equitable fraud. The New Jersey Supreme Court has affirmed the well-established law of this State that equitable fraud will support rescission of an insurance policy:
In sum, we hold that equitable fraud should be available as a grounds for post-loss rescission and that within the period of contestability an insurer may rescind a policy if the insured knowingly misrepresented facts that would ...