The opinion of the court was delivered by: CHARLES P. SIFTON
This is a diversity action brought by an insurer for rescission of an insurance contract based on alleged misrepresentation by the insured. Defendant has moved for summary judgment, and plaintiff has opposed this action and filed a cross-motion to amend its complaint to add a new claim for relief. For the reasons set forth below, both motions are granted.
This case involves a disability insurance policy purchased by defendant Thomas Morgan III ("Morgan") from plaintiff Massachusetts Casualty Insurance Company ("Massachusetts Casualty"). The following facts are taken from the initial complaint, from the affidavits of counsel, and from the various Rule 3(g) statements filed in this matter and are essentially undisputed as they bear on these motions.
In April 1988 defendant Morgan tested positive for HIV infection. He was diagnosed with Acquired Immune Deficiency Syndrome ("AIDS") in August 1990 and has been treated with AZT since August 1991.
On May 27, 1988, Morgan applied for individual disability income insurance from Massachusetts Casualty. In the application, Morgan indicated that he had recently been seen by a physician but did not explain the purpose of the visit or disclose the positive test for HIV infection. In July of 1988, Massachusetts Casualty issued the policy.
On October 22, 1992, Morgan's policy lapsed for nonpayment. Massachusetts Casualty required Morgan to file an application for reinstatement, which Morgan returned with payment on December 17, 1992. As part of the application for reinstatement, Morgan signed a declaration that (1) he was in the same status or condition of health as indicated in his original application and (2) since the date of the issuance of the policy he had suffered no injuries, ailments or illnesses and had not been sick from any cause, had not been consulted or been prescribed for or attended by a physician or practitioner for any cause and had not been hospitalized.
Massachusetts Casualty thereafter reinstated the policy.
On July 22, 1994, defendant submitted a claim for benefits under the policy, claiming disability due to AIDS. Morgan claimed that as of July 1994 his illness rendered him unable to continue to work. In the course of evaluating Morgan's claim, Massachusetts Casualty learned about Morgan's August 1990 AIDS diagnosis and subsequent treatment. While its investigation and evaluation were pending, Massachusetts Casualty made an initial payment of $ 3,000 under the policy.
On October 20, 1994, Massachusetts Casualty informed Morgan that it was investigating the possibility that he had made misrepresentations in his reinstatement application and that it was withholding further benefits while it continued its investigation. Shortly thereafter, on October 26, 1994, Morgan, through his attorney, requested a copy of the reinstatement application. Plaintiff did not provide this requested copy until February 10, 1995, in its opposition to the instant motion. On November 15, 1994, Massachusetts Casualty sent a letter to defendant reserving its rights to rescind the contract and returned all premiums paid since the reinstatement date. On December 21, 1994, plaintiff commenced this action to rescind the contract on the ground that the reinstatement was based on false representations by the defendant.
Defendant now moves for summary judgment in his favor, arguing that plaintiff's alleged failure to comply with New York Insurance Law § 3204(e) compels judgment in his favor.
Section 3204(e) provides as follows:
If any policy of life, accident and health insurance delivered or issued for delivery in this state is reinstated or renewed ... and the insured or the beneficiary or assignee of such policy makes written request to the insurer for a copy of the application, if any, for such reinstatement or renewal,... the insurer shall, within fifteen days after the receipt of such request at its home office or any branch office of the insurer, deliver or mail to the person making such request, a copy of such application or notice. If such copy is not delivered or mailed, the insurer shall be precluded from introducing such application or notice as evidence in any action or proceeding based upon or involving such policy or its reinstatement, renewal or change.
It is undisputed that Massachusetts Casualty did not provide the reinstatement application within fifteen days of defendant's request. Massachusetts Casualty, however, contends that this statute does not apply after an insurer has given notice of its intent to investigate a claim. Additionally, the insurer ...