MALONE v. NORTH ATLANTIC LIFE INSURANCE COMPANY OF AMERICA

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Supreme Court, Appellate Division, Fourth Department, New York.

Yvonne E. MALONE, Appellant, v. NORTH ATLANTIC LIFE INSURANCE COMPANY OF AMERICA, Respondent.

Decided: December 31, 1998

Present:  DENMAN, P.J., GREEN, PINE, HAYES and BOEHM, JJ. Sullivan & Metcalf by John Sullivan, Jr., Oswego, for plaintiff-appellant. Thomas R. Maher, New York City, for defendant-respondent.

Plaintiff appeals from an order of Supreme Court that granted defendant's motion for partial summary judgment on the issue of the commencement date of the two-year contestability period of a life insurance policy and denied plaintiff's cross motion for summary judgment.   Plaintiff's husband (decedent) applied for a $50,000 life insurance policy with defendant on May 7, 1990 and, on that day, tendered the first month's premium and received a “Conditional Premium Receipt” (Receipt).   The policy was issued on June 1, 1990.   Decedent died from leukemia on May 18, 1992.   Plaintiff commenced this action seeking the proceeds of the insurance policy.   Defendant answered and asserted an affirmative defense that decedent had concealed the fact that, shortly before applying for the insurance policy, he was diagnosed with leukemia.   Defendant further asserted that, had it known of the condition, it would not have issued the policy.

 The policy contains a standard two-year incontestability provision.   The issue is whether the two years began to run from May 7, 1990, when decedent received the Receipt upon tender of the first month's premium, or whether it began to run on June 1, 1990, the effective date of the policy.   We conclude that the court properly granted defendant's motion for partial summary judgment on the issue of the commencement date and denied plaintiff's cross motion for summary judgment on that same issue.   Plaintiff's reliance on the Receipt is misplaced.   A conditional receipt is simply a binder that provides for temporary or preliminary insurance, covering the applicant until the insurance company's investigation of insurability is completed (see, 1 Couch on Insurance 3d, § 13:1, at 13-2 to 13-4;  see also, Kitchen & Bath Creations v. Guardian Life Ins. Co. of Am., 234 A.D.2d 157, 651 N.Y.S.2d 466).   Plaintiff attempts to bootstrap the Receipt onto the policy itself.   The policy, however, does not incorporate by reference the Receipt, and thus defendant is entitled to rely on the effective date of the policy (June 1, 1990) as the commencement of the two-year contestability period (cf., LaTorre v. Connecticut Mut. Life Ins. Co., 11th Cir., 38 F.3d 538;  see also, American Natl. Ins. Co. v. Motta, 5th Cir., 404 F.2d 167).

Order affirmed without costs.

I respectfully dissent.   As the designated beneficiary under decedent's policy, plaintiff made a claim for the life insurance benefits after decedent's death on May 18, 1992.   Defendant waited until that time to contest the policy based on an alleged material misrepresentation made by decedent in the application for insurance.   Supreme Court erred in granting partial summary judgment to defendant on the issue of the commencement date of the two-year incontestability provision.

Contrary to the majority, I conclude that the “Conditional Premium Receipt” (Receipt) was not a separate contract of insurance.   Indeed, the Receipt could not be construed as a separate contract for life insurance because it did not comply with the statutorily required terms for contracts of life insurance (see, Insurance Law §§ 3203, 3204;  Schozer v. William Penn Life Ins. Co. of N.Y., 232 A.D.2d 623, 648 N.Y.S.2d 709, lv. denied 89 N.Y.2d 810, 656 N.Y.S.2d 738, 678 N.E.2d 1354).   Furthermore, the Receipt stated that it did “NOT PROVIDE TEMPORARY OR IMMEDIATE INSURANCE COVERAGE”.   Instead, it provided that, as long as five conditions were fulfilled, insurance coverage commenced on the “effective date”.   According to the terms of the Receipt, the “effective date” of insurance was the latest of the date of the application, the date of the medical examination, or the date of issue requested in the application.   There is no evidence of a medical examination or a date of issue requested in the application.   Thus, the insurance coverage became effective on May 7, 1990, the date of the application.   The Receipt made coverage under the insurance policy effective prior to delivery of that policy.   Instead of coverage beginning June 1, 1990, therefore, decedent was covered under the insurance policy as of May 7, 1990.   At the time of his death, decedent had continuous insurance coverage for over two years.

I conclude that, because the Receipt provided the commencement date for coverage under the insurance policy, the Receipt and the policy must be read together in determining the commencement date of the incontestability provision.   The Receipt provided that, as long as the insured met the conditions listed in the Receipt, “then insurance, as provided by the terms and conditions of the policy applied for * * * will become effective as of [May 7, 1990]”.   Thus, one of the terms of the policy, the incontestability provision, was made effective by the Receipt as of May 7, 1990.   Because the policy itself provided for a different starting date for the incontestability provision, June 1, 1990, an ambiguity was created (see, LaTorre v. Connecticut Mut. Life Ins. Co., 38 F.3d 538, 541-542;  Travelers Ins. Co. v. Summers, 11th Cir., 696 F.2d 1311;  American Natl. Ins. Co. v. Motta, 404 F.2d 167, 169 [“ ‘[T]aking together the application, conditional receipt, and policy with the references to one another and their various terms, there exists an ambiguity’ ”] ).   That ambiguity must be construed against defendant (see, Guardian Life Ins. Co. of Am. v. Schaefer, 70 N.Y.2d 888, 890, 524 N.Y.S.2d 377, 519 N.E.2d 288).   Thus, defendant's opportunity to void the policy on the ground of a material misrepresentation ended on May 6, 1992.

MEMORANDUM: