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SELMA SIMPSON v. PHOENIX MUTUAL INSURANCE COMPANY (06/25/68)

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT 1968.NY.42284 <http://www.versuslaw.com>; 291 N.Y.S.2d 532; 30 A.D.2d 265 June 25, 1968 SELMA SIMPSON, APPELLANT,v.PHOENIX MUTUAL INSURANCE COMPANY, RESPONDENT Appeal from an order of the Supreme Court at Special Term (Frederick Backer, J.), entered July 25, 1967 in New York County, which denied plaintiff's motion for summary judgment. Joseph L. Fishman of counsel (Moses & Singer, attorneys), for appellant. Edward T. Post of counsel (Rowland H. Long with him on the brief; Friend, Kinnan, Post & Friend, attorneys), for respondent. Eager, J. P. Capozzoli, McGivern and Rabin, JJ., concur with Eager, J. P.; Steuer, J., dissents in opinion. Author: Eager


Appeal from an order of the Supreme Court at Special Term (Frederick Backer, J.), entered July 25, 1967 in New York County, which denied plaintiff's motion for summary judgment.

Eager, J. P. Capozzoli, McGivern and Rabin, JJ., concur with Eager, J. P.; Steuer, J., dissents in opinion.

Author: Eager

 Plaintiff appeals from an order denying her motion for summary judgment. The action was brought by her, as the named beneficiary of a deceased certificate holder, to recover life insurance and accidental death benefits allegedly payable under the terms of a group life insurance policy.

The plaintiff alleges that her husband, a New York lawyer, was insured under a group policy issued by the defendant as of January 1, 1963 to cover the employees of several funeral homes and cemetery associations, including the Lebanon Cemetery Association of Queens, Inc. Concededly, the decedent (Simpson) was an officer-employee of such association, to wit, its secretary, at the time of the issuance of the policy, and continued to be so employed until the time of his death on June 17, 1964 when, as a victim of a robbery, he was shot and killed at his apartment building.

The defendant denies coverage upon the ground that Simpson was not an "eligible employee" within the terms of the policy. Plaintiff, however, contends that, irrespective of the limiting terms of the group policy, the defendant agreed to insure Simpson as an employee of Lebanon and issued to him a certificate (of insurance) evidencing such insurance. Furthermore, plaintiff contends that an incontestability clause in the policy bars defendant's defense that Simpson was not eligible for the insurance evidenced by the certificate issued to him.

It appears that prior to the issuance of the subject group insurance policy, the employees of certain cemetery associations, including Lebanon, were covered by a policy issued by the Prudential Insurance Company. There were negotiations with the defendant for the taking over of the insurance and, in this connection, there is evidence that the defendant was furnished with a list of officers and employees of the several cemetery associations covered by the existing group policy, including Simpson as secretary of Lebanon. A preliminary written application was made to the defendant for the issuance of the insurance. This application set forth the total number of employees, including Simpson, to be covered by the insurance. In connection with the application, the employees to be covered were required to fill out and sign enrollment cards. Simpson did prepare and subscribe such a card which was submitted to the defendant together with the enrollment cards for the other employees to be insured.

In September 1962, defendant delivered its group policy effective as of August 1, 1962, covering employees of Lebanon and of other specified associations, but this policy was replaced by an industry-wide group policy issued effective January 1, 1963. Pursuant to the latter policy, the defendant delivered insurance certificates in the name of each of the insured employees of Lebanon and the other participating employers. The certificate delivered to Simpson purported to certify that the defendant had issued and delivered the particular group policy covering employees of Lebanon and set forth a table indicating the amount of life insurance and accidental death benefits provided for Simpson.

Included within the pertinent provisions set forth in the certificate and contained in the group policy, were those limiting the coverage of the insurance to "eligible employees" and, in this connection, providing: "The term 'employee' as used herein shall mean each of the Employer Member's full-time employees regularly working at least 30 hours per week at the Employer Member's usual place of business".

The plaintiff concedes that her husband (Simpson) at no time devoted "at least 30 hours per week at [Lebanon's] usual place of business". It is clear, however, that the parties, at the time of the issuance of the group policy, assumed that Simpson, as an officer-employee of Lebanon, was eligible for the insurance provided by the policy. Implicit in the filing of the enrollment card by him and the submission of the same by his employer, Lebanon, to the defendant, was the representation by Simpson and Lebanon that he was so eligible. On this basis, the defendant insurer issued to Simpson the certificate of insurance in the usual form and accepted premiums on the basis of insurance as provided therein.

Although the insurance certificate stated that it was not a contract and referred to the group policy for the determination of the holder's rights, the delivery of the certificate to Simpson had the effect of conferring upon him the benefit of applicable provisions of the group policy. Included within such provisions was an incontestability clause as follows: "Incontestability: The validity of this policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from the date of issue. No statement made by any insured employee relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such employee's lifetime nor unless such statement is contained in a written instrument signed by him. No written statement made by any insured employee shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such employee or to his beneficiary."

Certainly, the incontestable clause, as a provision specified by the Legislature to be inserted in group life insurance policies, is a provision required for the protection of the individual certificate holders. (See Insurance Law, § 161.) It is the legislative objective to obtain for policy holders the benefit of incontestability clauses favorable to them. (See Allick v. Columbian Protective Assn., 269 App. Div. 281, 286, affd. 295 N. Y. 603.)

The certificate issued by defendant to Simpson, in accordance with a table therein referred to, stated that the insurance carried for him under the group policy was $20,000 life insurance and $20,000 accidental death benefit. The premiums for such insurance were paid to defendant and accepted by it on the basis that Simpson was an "eligible employee". Upwards of two years did elapse prior to the contesting by defendant of the validity or efficacy of such insurance for Simpson. (See Kocak v. Metropolitan Life Ins. Co., 263 N. Y. 518; Killian v. Metropolitan Life Ins. Co., 251 N. Y. 44.) Therefore, the proper application of the incontestability clause bars the defendant from defending this action by the beneficiary of such insurance to recover the amount thereof (Eagon v. Union Labor Life Ins. Co., 2 A.D.2d 843, affd. 3 N.Y.2d 785).

We conclude that the Eagon decision is controlling. Firstly, it is noted that Mr. Justice Valente's dissent in this court was directed solely to the contention that the incontestable clause did not apply. It also appears that the brief of the defendant in the Court of Appeals takes such position, arguing that the incontestability clause was inapplicable in that a question of coverage and not of validity of the insurance was involved. Inasmuch as the majority of this court rendered no opinion and the Court of Appeals affirmed without opinion, it reasonably follows that both courts considered and rejected the contention and argument presented by Mr. Justice Valente's dissent. Secondly, the Eagon decision may not properly be distinguished on the ground that this court and the Court of Appeals may have affirmed the plaintiff's judgment therein on the basis of waiver or estoppel independent of that arising by virtue of the terms of the incontestable clause. It may not be assumed that the courts affirmed the Eagon recovery on such a basis for it is settled law that waiver or estoppel may not be invoked to create insurance coverage where none exists under the policy as written (see Insurance Law, § 142; Draper v. Oswego Co. Fire Relief Assn., 190 N. Y. 12; Miller v. American Eagle Fire Ins. Co., 253 N. Y. 64; Horrmann v. Prudential Ins. Co., 192 Misc. 758, 763; Ann. 1 ALR 3d 1139).

Furthermore, as a matter of fact, the contest here is not, as defendant argues, a challenge directed solely as to coverage under the group policy (cf. Matter of Metropolitan Life Ins. Co. v. Conway, 252 N. Y. 449). This contest with the beneficiary of a certificate holder, consisting of an attack against the status of such holder as a qualified insured, is in effect a contest directed to the validity of the insurance which is represented by such certificate and for which premiums were paid and accepted. The defendant is asserting that Simpson never had any rights; that there never was a valid contract of insurance as to him; and that under no circumstances would the ...


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