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HARTFORD LIFE & ACCIDENT INS. CO. v. NITTOLO

January 24, 1997

HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, Plaintiff,
v.
JOHN J. NITTOLO, Defendant, Third-Party Plaintiff, v. PAUL COLEMAN GARBER, Third-Party Defendant.



The opinion of the court was delivered by: SIMANDLE

 SIMANDLE, District Judge:

 Presently before the court are the motions for summary judgment of plaintiff Hartford Life and Accident Insurance Company ("Hartford") and third party defendant Paul Coleman Garber ("Garber") pursuant to Fed. R. Civ. P. 56. For the reasons stated below, both motions will be granted.

 I. Background

 Defendant John J. Nittolo applied for and was issued a disability income insurance policy from plaintiff Hartford which became effective on December 14, 1992. On July 6, 1994, Nittolo filed for benefits under his policy for the disability of hepatitis. Hartford initiated this litigation, seeking a judgment of rescission of the policy on the grounds of material misrepresentation, a declaratory judgment that the policy is null and void, and a declaratory judgment that Nittolo's disability claim is not covered by the policy or its benefit increase rider. Hartford claims that Nittolo misrepresented his income, occupational duties, insurance history, and family and personal medical history on his application for the policy. Nittolo has filed a counterclaim against Hartford to enforce the policy and a third-party complaint against his insurance agent, Garber, for negligence in completing the application for insurance. Hartford and Garber have filed cross-claims against each other for contribution and indemnification.

 II. Discussion

 A. Summary Judgment Standard

 A court may grant summary judgment when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In deciding whether there is a disputed issue of material fact the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party. See Aman v. Cort Furniture Rental Corp., 85 F.3d 1074, 1080-81 (3d Cir. 1996); Kowalski v. L & F Products, 82 F.3d 1283, 1288 (3d Cir. 1996); Meyer v. Riegel Products Corp., 720 F.2d 303, 307 n.2 (3d Cir. 1983), cert. denied, 465 U.S. 1091, 79 L. Ed. 2d 910, 104 S. Ct. 2144 (1984). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).

 Supreme Court decisions mandate that: "when the nonmoving party bears the burden of persuasion at trial, the moving party may meet its burden on summary judgment by showing that the nonmoving party's evidence is insufficient to carry its burden of persuasion at trial." Brewer v. Quaker State Oil Refining Corp., 72 F.3d 326, 329-330 (3d Cir. 1995) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1987)). However, "the nonmoving party creates a genuine issue of material fact if it provides sufficient evidence to allow a reasonable jury to find for him at trial." Brewer, 72 F.3d at 330 (citing Anderson v. Liberty Lobby, 477 U.S. 242 at 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505). Once the moving party has carried its burden of establishing the absence of a genuine issue of material fact, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). Thus, if the non-movant's evidence is merely "colorable" or is "not significantly probative," the court may grant summary judgment. Anderson, 477 U.S. at 249-50.

 B. Motion of plaintiff Hartford

 Hartford argues that several misrepresentations made by Mr. Nittolo on his application and during his independent paramedical exam permit a rescission of the policy. Under New Jersey law, an insurer may rescind a policy for equitable fraud on the grounds of false statements in the application which materially affect the acceptance of the risk or the hazard assumed by the insurer. N.J.S.A. 17B:24-3(d); Massachusetts Mutual Life Ins. Co. v. Manzo, 122 N.J. 104, 584 A.2d 190 (1991). To prove equitable fraud, the insurer need not prove that the applicant had an intent to defraud. Even innocent misrepresentation justifies rescission of the policy. Ledley v. William Penn Life Ins. Co., 138 N.J. 627, 651 A.2d 92 (1985); see also Paul Revere Life Ins. Co. v. Haas, 137 N.J. 190, 644 A.2d 1098 (1994) (holding that insured has absolute duty to tell the truth about all material items on an application).

 Hartford has presented a laundry list of misrepresentations made by Mr. Nittolo. As evidence of their materiality, Hartford has produced the Certification of Individual Disability Insurance Underwriter, Rebecca Govoni, (Ex. "F" to Pl. 12G Statement) which states that if Nittolo had accurately represented his income, health, occupational duties, or declinations by other insurance companies, the policy would not have been issued as written.

 Mr. Nittolo responds with two arguments: (1) that the misrepresentations in the application were not material and (2) that any errors in the application were caused by the negligence of his insurance agent, Paul Garber, in failing to accurately record information, failing to ask all of the questions on the application, and refusing to allow Mr. Nittolo an opportunity to review his answers before signing.

 a. Income - The application for disability insurance asks for the applicant's net earned income as reportable for federal income tax purposes. (Ex. "C" to Pl. 12G Statement). Hartford argues that since a disability income insurance policy naturally depends upon an applicant's income, a misrepresentation of income is material. Mr. Nittolo applied for a policy which would pay a disability benefit of $ 2,500 per month, or $ 30,000 per year. On the application, for both 1991 and 1992, Nittolo's net earned income is listed as $ 61,500, with $ 54,000 in wages. In reality, his tax returns reflect wages of $ 17,600 and $ 29,755 for 1991 and 1992 respectively. It is only logical, as demonstrated by Govoni's uncontradicted affidavit, that Hartford would not have issued a policy with benefits of $ 2,500 a month had it been given accurate income information, since a disability benefit of $ 2,500 per month, tax free, would be a substantial increase in this applicant's income if he became disabled.

 b. Occupational Duties - The application also requests the applicant to name his occupation and exact daily duties. Hartford claims that Nittolo misrepresented the nature of his job as a ticket broker. The application states that his exact daily duties were to "administrate [sic] the office only. Office Duties." (Id.). At his deposition, however, Nittolo revealed that in fact, his duties include carrying large amounts of cash to purchase tickets and "running crews," which entails putting people in ticket lines at all hours of the night and handling problems his crews encounter in line, such as altercations with police and physical confrontations. Again, Hartford ...


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