Summary
holding that an insurance policy was justifiably rescinded where the insured did not comply with his "duty to review the entire application and to correct any incorrect or incomplete answers"
Summary of this case from Moslem v. Parietti McGuire Insurance AgencyOpinion
July 2, 1990
Appeal from the Supreme Court, Nassau County (Morrison, J.).
Ordered that the order is reversed, on the law, with costs, the appellant's motions for summary judgment are granted, life insurance policy No. 176961 is rescinded, and, upon searching the record, the complaint in action No. 2 is dismissed.
On May 30, 1985, the respondent's decedent, Hyman Katz (hereinafter the decedent), submitted an application for a $1,000,000 life insurance policy to the North Atlantic Life Insurance Company of America (hereinafter North Atlantic). In "Part Two" of the application form, containing pertinent medical information, the decedent truthfully acknowledged, inter alia, that he had been treated for lymphoma in the early 1970's. The $1,000,000 policy was issued on June 25, 1985. Shortly thereafter the decedent experienced a recurrence of lymphoma necessitating, inter alia, chemotherapy treatment. In early July 1985, North Atlantic solicited the decedent's application for a second life insurance policy (No. 176961). Because the decedent had so recently completed the "Part Two" medical information section of the application for the first policy, he was not required to complete "Part Two" in submitting his application for the second policy. The decedent did not disclose the recurrence of the lymphoma to North Atlantic in connection with his application for the latter policy. Instead, the decedent permitted his insurance agent to rely upon the information provided by him in "Part Two" of the first application in completing the second application on the decedent's behalf. In addition, in completing the first part of the application the decedent provided a negative response to the question: "Has any person proposed for insurance * * * ever had life or health insurance declined, modified, rated or cancelled?" However, after issuing the second policy North Atlantic discovered that the decedent had obtained a $1,000,000 substandard or "rated" life insurance policy from Unity Mutual Life Insurance Company which carried higher premiums than those required for a standard policy.
An insured cannot remain silent while cognizant that his insurance application contains misleading or incorrect information (see, Axelroad v. Metropolitan Life Ins. Co., 267 N.Y. 437; Wageman v. Metropolitan Life Ins. Co., 24 A.D.2d 67, affd 18 N.Y.2d 777). In particular, he must notify his insurance company of nonapparent medical conditions which the company probably would consider relevant when deciding whether to issue a policy (see, Insurance Law § 3105; Geer v. Union Mut. Life Ins. Co., 273 N.Y. 261, 269; cf., Vebeliunas v. American Natl. Fire Ins. Co., 156 A.D.2d 555). Since the second insurance policy incorporated the application form, including "Part Two", from the first application, by including it as an attachment (see, Insurance Law § 3204), the decedent had a duty to review the entire application and to correct any incorrect or incomplete answers (see, Minsker v. Hancock Mut. Life Ins. Co., 254 N.Y. 333, 338; see also, Zachary Trading v. Northwest Mut. Life Ins. Co., 668 F. Supp. 343, 346 [SD NY]). In short, the decedent's failure to inform North Atlantic that he was suffering from a recurrence of lymphoma when he applied for the second policy constituted a material misrepresentation. The misrepresentation was material as a matter of law since it induced North Atlantic to accept an application which it might otherwise have refused (see, Leamy v Berkshire Life Ins. Co., 39 N.Y.2d 271, 274). In this regard, we note that Denise P. Powers, North Atlantic's second vice-president in charge of underwriting and policy issue, asserted that had the company known about the recurrence of the decedent's lymphoma, or that the decedent had been refused a standard policy by another insurance company, it would not have issued the contested life insurance policy. Accordingly, North Atlantic's motion for summary judgment rescinding the policy is granted. Brown, J.P., Lawrence, Kooper and O'Brien, JJ., concur.