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Brill v. Guardian Life Ins. Co. of America

October 24, 1995

ROBIN BRILL, PLAINTIFF-RESPONDENT,
v.
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, A CORPORATION OF THE STATE OF NEW YORK, DEFENDANT, AND KRA INSURANCE AGENCY, INC., A CORPORATION OF THE STATE OF NEW JERSEY, AND CHARLES R. GOULD, DEFENDANTS-APPELLANTS.



On certification to the Superior Court, Appellate Division.

The opinion of the Court was delivered by Coleman, J. Chief Justice Wilentz and Justices Handler, Pollock, O'hern, Garibaldi and Stein join in Justice COLEMAN's opinion.

The opinion of the court was delivered by: Coleman

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

ROBIN BRILL v. THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA ET AL. (A-123-94)

Argued May 2, 1995 -- Decided October 24, 1995

COLEMAN,J., writing for a unanimous Court.

On June 15, 1989, Robert Brill met with his insurance broker, Charles Gould, of the KRA Insurance Agency, Inc. (KRA) and informed Gould that he wanted a $750,000 term life policy as soon as possible. Gould explained that there was a three-step process before securing a policy: 1) completing and signing an application, 2) undergoing a medical examination, and 3) giving a "binder check." Gould explained that there was a four to six week review process before a policy could be issued by Guardian Life Insurance Co. (Guardian). Brill had been treated for chronic stomach problems and expressed concern that Guardian might issue him a rated policy (one surcharged with an additional premium), which he did not want. Brill signed the application after Gould recorded certain information. Brill would not give a deposit to the insurance company before he knew a standard policy would be issued.

The application stated that Brill's policy would become effective on delivery of the policy to the named insured. The application also contained a provision for coverage prior to delivery of the policy called the conditional receipt. Under that provision, Brill would have been required to pass a medical examination conducted on behalf of Guardian in order to be considered "acceptable as a standard risk." In addition, Brill would have been required to pay one-sixth of the annual premium upon signing the application. Coverage under the conditional receipt would have existed for sixty days from the date of Guardian's medical examination and would have 1) provided $500,000 in life insurance, 2) protected against any change in health requirement, and 3) guaranteed that a standard policy, rather than a rated policy, would be issued in the amount of $750,000. Gould never advised Brill of this coverage option. Moreover, Gould recorded the incorrect answer to Question 6(b) in the application, making Brill ineligible for a conditional receipt.

On July 21, 1989, Guardian issued a $750,000 standard life-insurance policy with Brill as the named insured. Brill's wife, Robin, was the primary beneficiary. The policy was forwarded to Gould who was to deliver it to Brill. On July 24, 1989, prior to delivery of Guardian's policy, Brill underwent surgery and was diagnosed with colon cancer and metastatic carcinoma of the liver. On August 25, 1989, Gould delivered the Guardian policy to Brill and collected the first premium. Brill did not tell Gould about his recent diagnosis and Gould did not ask Brill whether there was any change in Brill's health since the time of the application. On June 29, 1990. Brill died as a result of the cancer. Shortly thereafter, Gould, on behalf of Robin Brill, submitted a claim for the proceeds of the life insurance policy. Guardian denied the claim on the ground that Brill's policy was "null and void as of its effective date" because of Brill's "change in health" that occurred between the date of application and receipt of the policy on August 25, 1989.

Robin Brill instituted suit to compel the payment of the face value of the policy. She alleged breach of contract, bad faith, and breach of fiduciary duty against Guardian. She also alleged negligence and breach of fiduciary duty against KRA and Gould, individually, contending that Gould was negligent because he failed to record the correct answer to Question 6(b) and failed to inform Brill of the conditional receipt option.

On May 28, 1993, the trial court granted summary judgment in favor of Guardian, concluding that, as a matter of law, the policy was null and void because Brill had failed to advise Guardian of a significant change in his health that occurred between the date of his application and the date of delivery of the policy. The trial court also granted Robin Brill's motion for summary judgment against Gould and KRA in the amount of $750,000. The court found that Gould incorrectly recorded the answer to Question 6(b) on Brill's application, causing Brill to become ineligible for the conditional-receipt coverage that would have rendered moot the change-in-health feature of the policy, and that Gould failed to tell Brill of the conditional-receipt option.

KRA and Gould appealed. The Appellate Division affirmed the grant of summary judgment substantially for the reasons articulated by the trial court. The Supreme Court granted KRA's and Gould's petition for certification.

HELD: When deciding a motion for summary judgment under Rule 4:46-2,the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion Judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the nonmoving party. This assessment of the evidence is to be conducted in the same manner as that required under Rule 4:37-2(b).

1. Under Rule 4:46-2, a court should deny a summary judgment motion only where the party opposing the motion has come forward with evidence that creates a "genuine issue as to any material fact challenged." A non-moving party cannot defeat a motion for summary judgment merely by pointing to any fact in dispute; if the disputed issues of fact are of an insubstantial nature, summary judgment is proper. Matsushita, Liberty Lobby and Celotex, recent federal cases, have adopted a standard that requires the motion Judge to engage in an analytical process essentially the same as that necessary to rule on a motion for a directed verdict: whether the evidence presents sufficient disagreement to require submission to a jury or whether it was so one-sided that one party must prevail as a matter of law. That weighing process requires the court to be guided by the same evidentiary standard of proof that would apply at the trial on the merits when deciding whether there exists a "genuine issue" of material fact. (pp. 9-18)

2. The only distinction between directed verdicts pursuant to Rules 4:37-2(b), 4:40-1,and 4:40-2 and summary judgment that allows a Rule 4:37-2(b) weighing of the evidence to determine if a genuine issue of material fact exists, is that summary judgment motions are generally decided on documentary-evidential materials while directed verdicts are based on evidence presented during trial. However, the essence of the inquiry in each is the same: whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law. (pp. 18-22).

3. A subcommittee of the Civil Practice Committee assigned to study summary judgment practice believes that incorporating the Liberty Lobby-Celotex rule into our summary judgment rule might be helpful. That proposed change has been approved by the Committee as of May 24th for inclusion in its next report. The Court adopts the following standard: under Rule 4:46-2, when deciding a summary judgment motion, trial courts are required to engage in the same type of evaluation, analysis or sifting of evidential materials as required by Rule 4:37-2(b) in light of the burden of persuasion that applies if the matter goes to trial. Accordingly, the Civil Practice Committee is to recommend appropriate rule changes, on an expedited basis, that are necessary to implement this standard. (pp. 22-27)

4. The trial court properly concluded that the evidence presented by KRA and Gould did not create a "genuine issue" of material fact under Rule 4:46-2. The competent evidential material presented leaves no doubt that Gould failed to advise Brill of the availability of a conditional receipt. As a matter of law, that failure constituted a breach of the duty Gould owed to Brill. Further, the record amply demonstrates that Gould's negligence was a proximate cause of damages to Robin Brill in the amount of $750,000. (pp. 27-32)

5. The rule adopted today shall apply to this case and all cases pending in the trial and appellate courts involving unresolved issues concerning summary judgment, including those cases in which summary judgment was denied previously. (p. 33)

Judgment of the Appellate Division is AFFIRMED.

CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI and STEIN join in JUSTICE COLEMAN'S opinion.

The opinion of the Court was delivered by COLEMAN, J.

This appeal involves a claim of negligence against a life-insurance broker and his agency for failing to advise a prospective insured of the possibility of securing immediate, temporary coverage upon completion of the application process. The trial court granted summary judgment holding the broker and his agency liable for the face value of the policy. The important question raised is whether the trial court incorrectly granted a summary judgment motion in favor of the insured. A subset of that question is whether the trial court engaged in an impermissible weighing of evidence to determine whether a genuine issue of material fact existed.

We hold that when deciding a motion for summary judgment under Rule 4:46-2, the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion Judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party. This assessment of the evidence is to be conducted in the same manner as that required under Rule 4:37-2(b).

I

Because the case was disposed of in a summary judgment proceeding, our statement of the facts is based on our consideration of the evidence in the light most favorable to the parties opposing summary judgment. Dairy Stores, Inc. v. Sentinel Publishing Co., Inc., 104 N.J. 125, 135, 516 A.2d 220 (1986); Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75, 110 A.2d 24 (1954).

In June 1989, Robert Brill, thirty-seven years old at the time with a wife and two minor children, decided his $10,000 in life insurance with Prudential was inadequate. He contacted his broker, Charles Gould, of the KRA Insurance Agency, Inc. (KRA), to purchase an additional $750,000 in term-life insurance.

Gould met with Brill on June 15, 1989, at Brill's office. Brill told Gould that he wanted a $750,000 term policy as soon as possible. Gould explained that a three-step process had to be completed before securing a policy: 1) completing and signing an application, 2) undergoing a medical examination and 3) giving a "binder check." Gould explained that the process would require about four to six weeks to complete an underwriting review before a policy would be issued by Guardian Life Insurance Co. (Guardian).

Gould read the application questions to Brill and recorded Brill's responses. Brill informed Gould that he had been treated for chronic stomach problems that were believed to have been caused by an ulcer. Brill expressed some concern that Guardian would issue him a rated policy (one surcharged with an additional premium). Gould's response was that Guardian would conduct its own medical investigation into Brill's health, and if a rated policy was issued "we'll deal with it then." Brill signed the application after Gould recorded the information.

At or about the time of completion of the application, Gould asked for a deposit. Brill, however, was unwilling to give money to the insurance company before he knew a standard policy would be issued.

The application stated that Brill's policy would become effective upon delivery of the policy to the named insured. The application also contained a provision for coverage prior to delivery of the policy. Paragraph Eleven of the application provided:

I . . . further agree that no insurance shall take effect (except as provided in the Conditional Receipt if an advance payment has been made and acknowledged above and such Receipt issued) unless and until the Policy has been delivered to and accepted by me . . . and the first premium paid during the lifetime and prior to any change in health of the Proposed Insured as described in this Application.

However, Gould never advised Brill that he could obtain coverage virtually immediately in the form of a conditional receipt. Under the conditional-receipt concept, Brill would have been required to pass a medical examination conducted on behalf of Guardian. Passing the medical examination would have satisfied the requirement of being "acceptable as a standard risk." In addition, Brill would have been required to pay one-sixth of his annual premium for a standard policy, amounting to $141.87, upon signing the application.

Coverage under the conditional receipt would have existed for sixty days from the date of Guardian's medical examination. Conditional-receipt coverage would have (1) provided $500,000 in life insurance, (2) protected against any change in health requirement and (3) guaranteed that a standard policy, rather than a rated policy, would be issued in the amount of $750,000.

Gould also recorded the incorrect answer to a crucial question in the application that made Brill ineligible for a conditional receipt. Question 6(b) asked: "Have you, within the last 12 months . . . had an electrocardiogram because of chest pain or any other physical problem or taken medication for elevated blood pressure?" Gould answered "yes" to that question because Brill said that he had undergone an electrocardiogram in preparation for knee surgery that was performed in June 1988. Gould, however, failed to question Brill concerning the date and purpose of those procedures. Had he done so, he would have learned that the electrocardiogram was performed on May 31, 1988, and the surgery on June 6, 1988. Because both procedures were more than twelve months before the date of the application, and because the electrocardiogram was not related to chest pain, the answer to Question 6(b) should have been "no."

On June 19, 1989, four days after Brill completed his application, Dr. Mary Mazzarella performed a medical examination of Brill on behalf of Guardian. Dr. Mazzarella did not discover any health problems.

On June 28, 1989, Gould mailed Brill's completed application to Guardian's general agent. The agent then forwarded the application to Guardian for processing. As a supplement to Dr. Mazzarella's report, Guardian obtained a statement from Brill's personal physician, Dr. Jonathon Shapiro. Guardian's records reflect that Dr. Shapiro saw Brill in May 1989 for abdominal pain and bowel spasms, and that Dr. Shapiro made "no findings" at that time.

On July 21, 1989, Guardian issued a $750,000 standard life-insurance policy with Brill as the named insured. Brill's wife, plaintiff Robin Brill, was the primary beneficiary. After Guardian issued the policy, it was forwarded to Gould who was to deliver it to Brill. However, when Gould called Brill's office to set up a time for delivery, he was told that Brill was out of the office and would not return until August 20.

The parties agree that if Brill had obtained a conditional receipt, any change in Brill's health after June 19, 1989, the date Dr. Mazzarella examined him, would have been immaterial to ...


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