Massachusetts Mutual Life Insurance v. Lord

Stevens, J. On December 16, 1958, plaintiff issued a life insurance policy to one Benjamin Lord, in which Lord’s wife, Kathryn, was named beneficiary. Because of Lord’s impaired [70] health the rating under which the policy was issued set forth an annual special class premium of $5,512. Lord transferred ownership of the policy to his wife, the defendant. About one year later defendant made application for removal of the special rating and adjustment of the premium. Defendant and the assured executed and submitted the necessary papers, parts 1 and 2, in which certain representations were made concerning the health of the assured. Defendant agreed to be bound by such representations. Belying on the statements in the application, plaintiff reduced the rate to the standard rate of $4,438, and attached its indorsement to the policy. The papers applying for the adjustment were not so attached, though copies of the assured’s initial application for insurance had been attached to the policy at the time of delivery and are not in issue here. Plaintiff alleges the representations concerning the assured’s health are false, and seeks to rescind the adjustment of rating indorsement and restore the special rate. No issue of cancellation of the policy is involved. The first affirmative defense pleads noncompliance with subdivision 1 of section 142 of the Insurance Law, in that neither a copy of part 1 or part 2 of the written application for adjustment and removal of the special rating was indorsed upon or attached to the policy. The plaintiff brings this appeal from an order entered December 4,1961, which denied its motion to strike the first affirmative defense for insufficiency. The single question is whether subdivision 1 of section 142 of the Insurance Law requires that an adjustment of rating indorsement contain a copy of the application upon which such adjustment is made, and does failure to do so bar the introduction into evidence of the application which allegedly contains the material misrepresentations. Subdivision 1 of section 142 of the Insurance Law provides: ‘ ‘ 1. Every policy of life, accident or health insurance, or contract of annuity, delivered or issued for delivery in this state shall contain the entire contract between the parties, and nothing shall be incorporated therein by reference to any constitution, by-laws, rules, application, or other writings, unless a copy thereof is endorsed upon or attached to the policy or contract when issued. No application for the issuance of any such policy or contract shall be admissible in evidence unless a true copy of such application was attached to such policy when issued.” The policy proper has been in effect since December 16, 1958, and is not now under attack. Only a question of the amount of the premium payment is involved. Unless there has been a lapse [71] or some period of policy ineffectiveness, a simple rate modification within the policy should not constitute an issuance or delivery of the policy within the meaning of subdivision 1 of section 142 of the Insurance Law. The application for insurance, the policy proper and any supplemental rider are to be read together and construed as a single instrument (Berkshire Life Ins. Co. v. Weinig, 290 N. Y. 6, 10). The rate adjustment indorsement did not vary the coverage. The purpose of section 142, requiring the whole contract to be stated in the policy was for the protection of the insured and of beneficiaries (Bible v. John Hancock Mut. Life Ins. Co., 256 N. Y. 458, 464, referring to former section 58, upon which subdivision 1 of section 142 is based). The requirement is made so that “ when the assured receives a policy of life insurance he may be able to read, in the policy itself, every provision of the contract the insurance company has made and every material representation which he may have made to induce the company to issue the policy ” (Abbott v. Prudential Ins. Co., 281 N. Y. 375, 383). By its language the statute refers to issuance or delivery at the inception of coverage, or when there is a modification or change in coverage which, in legal effect, becomes a new contract. The section was not intended to permit fraud in the payment of premiums, nor to apply to a mere internal modification (cf. New York Life Ins. Co. v. Rosen, 227 App. Div. 79, affd. 255 N. Y. 567; Axelroad v. Metropolitan Life Ins. Co., 267 N. Y. 437). To permit the defense to stand or to prohibit admission of parts 1 and 2 into evidence, is to compel a knowing violation by plaintiff of section 209 of the Insurance Law, which prohibits ‘ ‘ unfair discrimination between individuals of the same class and of equal expectation of life, in the amount or payment or return of premiums, or rates charged by it for policies of life insurance ” etc. The construction argued for by defendant would render ineffective the prohibition of subdivision 1 of section 209. This danger is avoided and the statute harmonized by construing “issued” or “delivered” as above set forth (see McKinney’s Cons. Laws of N. Y., Book 1, Statutes, §§ 143, 144, 231). The order appealed from should be reversed on the law and the motion to strike granted, with costs.