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Security Mutual Life Insurance Company of New York v. Rodriguez

May 26, 2009

SECURITY MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, PLAINTIFF-RESPONDENT,
v.
LUCY RODRIGUEZ, ET AL., DEFENDANTS-APPELLANTS.



Defendants appeal from an order of the Supreme Court, New York County (Charles E. Ramos, J.), entered December 7, 2007, which denied their motion to dismiss the complaint.

The opinion of the court was delivered by: McGUIRE, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Luis A. Gonzalez, P.J., James M. McGuire, Karla Moskowitz, Leland G. DeGrasse and Helen E. Freedman, JJ.

Index 603545/05

In October 2003 defendants Lucy Rodriguez and Esmail Mobarak, Rodriguez's son, purchased three life insurance policies with an aggregate benefit of $20 million from agents of plaintiff Security Mutual Life Insurance Company. The policies were issued on Rodriguez's life and Mobarak is the beneficiary under each policy. Each policy contains an incontestability clause that precludes plaintiff from challenging the policy "after it has been in force, during the Insured's lifetime, for two years from the earlier of its Policy Date or Issue Date." The parties agree that, the earlier of these dates, the Policy Date, is October 1, 2003.

In July 2004 the New York County District Attorney's Office commenced a civil forfeiture proceeding against the agents of Security from whom defendants purchased the policies. The District Attorney alleged that the agents had engaged in fraudulent conduct relating to the issuance of life insurance policies by another carrier, Prudential Financial Company. In September 2004 Security notified defendants that the agents were no longer authorized to conduct business on behalf of plaintiff or take any action concerning policies issued by plaintiff. The agents pleaded guilty in May 2005 to insurance fraud crimes with respect to the issuance of life insurance policies by Prudential.

On Monday October 3, 2005, plaintiff commenced this action against defendants seeking rescission of the policies and damages for fraud. Plaintiff alleged that defendants, in conjunction with the agents, fraudulently procured the policies by providing false and misleading financial and medical information about Rodriguez to plaintiff. Defendants moved to dismiss the complaint on the ground that the incontestability clause barred the action because the policies became incontestable after Saturday October 1, 2005 and the action was not commenced until two days later. Alternatively, defendants sought dismissal of the rescission claim on the ground that plaintiff waived its right to rescind the policies because it accepted premium payments after commencing the action, and dismissal of the fraud claims on the ground that plaintiff failed to plead the alleged fraud with sufficient detail. Plaintiff opposed the motion, arguing that because the date on which the policies became incontestable fell on a Saturday, the action was commenced in a timely fashion on the next business day; it did not waive its rescission claim by accepting premium payments; and its fraud claims were pled with sufficient detail. Supreme Court denied defendants' motion, and this appeal ensued.

Defendants argue that the policies became incontestable after October 1, 2005; the statutory provision dealing with certain contractual deadlines falling on weekends and public holidays, General Construction Law § 25, does not apply so as to extend plaintiff's time to contest the policies; and plaintiff's action, commenced on October 3, thus is barred by the incontestability clause. Plaintiff counters that because Insurance Law § 3203(a)(3) requires the inclusion of the incontestability provision in the policies,*fn1 General Construction Law § 25-a, which governs statutory deadlines falling on weekends and public holidays, extended its time to contest the policies to Monday October 3. Alternatively, plaintiff argues that even if General Construction Law § 25-a does not apply, § 25 applies in any event. General Construction Law § 25, entitled "Public holiday, Saturday or Sunday in contractual obligations; extension of time where performance of act authorized or required by contract is due on Saturday, Sunday or public holiday," states, in relevant part, that:

"Where a contract by its terms authorizes or requires ... the performance of a condition on a Saturday, Sunday or a public holiday, or authorizes or requires ... the performance of a condition within or before or after a period of time computed from a certain day, and such period of time ends on a Saturday, Sunday or a public holiday, unless the contract expressly or impliedly indicates a different intent, such ... condition [may be] performed on the next succeeding business day ... with the same force and effect as if made or performed in accordance with the terms of the contract."*fn2

General Construction Law § 25-a, entitled "Public holidays, Saturday or Sunday in statutes; extension of time where performance of act is due on Saturday, Sunday or public holiday," states that:

"When any period of time, computed from a certain day, within which or after which or before which an act is authorized or required to be done, ends on a Saturday, Sunday or a public holiday, such act may be done on the next succeeding business day ..., except that where a period of time specified by contract ends on a Saturday, Sunday or a public holiday, the extension of such period is governed by section twenty-five of this chapter."

At first blush, the statutes appear to be unproblematic and to govern two distinct situations. General Construction Law § 25-a extends to the next succeeding business day a party's time to perform any act authorized or required to be performed before a particular period of time where that period ends on a Saturday, Sunday or public holiday, unless the period of time is specified in a contract. Thus, § 25-a provides that "where a period of time specified by contract ends on a Saturday, Sunday or a public holiday, the extension of such period is governed by section twenty-five of this chapter." General Construction Law § 25,*fn3 in turn, extends to the next succeeding business day a party's time to perform a contractual "condition" when the period in which performance is due ends on a weekend or public holiday. Thus, § 25-a broadly allows for an extension of "any period of time ... within which or after which or before which an act is authorized or required to be done" when that period ends on a weekend or a public holiday. By contrast, albeit implicitly, § 25 permits an extension of time only where the party seeking the extension was authorized or required to perform a "condition" of a contract and the last day of the period of time to perform that condition ends on a weekend or public holiday*fn4.

Here, the relevant period of time is recited in the policies, so General Construction Law § 25 would seem to apply and an extension would be available only if the commencement of an action contesting the policies was a "condition" under the policies. But the incontestability clause in the policies is mandated by a statute, Insurance Law § 3203(a)(3); if plaintiff had omitted the clause from the policies it would be deemed part of the policies as though written into them (see Trizzano v Allstate Ins. Co., 7 AD3d 783, 785 [2004], lv denied in part and dismissed in part, 3 NY3d 696 [2004]; 2 Couch on Insurance 3d § 19:1 ["Existing and valid statutory provisions enter into and form a part of all contracts of insurance to which they are applicable, and, together with settled judicial constructions thereof, become a part of the contract as much as if they were actually incorporated therein"] [internal footnotes omitted]). Thus, if General Construction Law § 25 governs, an anomalous result would ...


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