Brill v. Guardian Life Ins. Co. of America

Decision Date24 October 1995
Citation142 N.J. 520,666 A.2d 146
PartiesRobin BRILL, Plaintiff-Respondent, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a corporation of the State of New York, Defendant, and KRA Insurance Agency, Inc., a corporation of the State of New Jersey, and Charles R. Gould, Defendants-Appellants.
CourtNew Jersey Supreme Court

Marc L. Dembling, Morristown, for appellants (Berlin, Kaplan, Dembling & Burke, attorneys).

Robert Novack, Short Hills, for respondent (Budd Larner Gross Rosenbaum Greenberg & Sade, attorneys; Mr. Novack and Mary L. Moore, on the brief).

The opinion of the Court was delivered by


This appeal involves a claim of negligence against a life-insurance broker and his agency for failing to advise a prospective insured of the possibility of securing immediate, temporary coverage upon completion of the application process. The trial court granted summary judgment holding the broker and his agency liable for the face value of the policy. The important question raised is whether the trial court incorrectly granted a summary judgment motion in favor of the insured. A subset of that question is whether the trial court engaged in an impermissible weighing of evidence to determine whether a genuine issue of material fact existed.

We hold that when deciding a motion for summary judgment under Rule 4:46-2, the determination whether there exists a genuine issue with respect to a material fact challenged requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party in consideration of the applicable evidentiary standard, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party. This assessment of the evidence is to be conducted in the same manner as that required under Rule 4:37-2(b).


Because the case was disposed of in a summary judgment proceeding, our statement of the facts is based on our consideration of the evidence in the light most favorable to the parties opposing summary judgment. Dairy Stores, Inc. v. Sentinel Publishing Co., Inc., 104 N.J. 125, 135, 516 A.2d 220 (1986); Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 75, 110 A.2d 24 (1954).

In June 1989, Robert Brill, thirty-seven years old at the time with a wife and two minor children, decided his $10,000 in life insurance with Prudential was inadequate. He contacted his broker, Charles Gould, of the KRA Insurance Agency, Inc. (KRA), to purchase an additional $750,000 in term-life insurance.

Gould met with Brill on June 15, 1989, at Brill's office. Brill told Gould that he wanted a $750,000 term policy as soon as possible. Gould explained that a three-step process had to be completed before securing a policy: 1) completing and signing an application, 2) undergoing a medical examination and 3) giving a "binder check." Gould explained that the process would require about four to six weeks to complete an underwriting review before a policy would be issued by Guardian Life Insurance Co. (Guardian).

Gould read the application questions to Brill and recorded Brill's responses. Brill informed Gould that he had been treated for chronic stomach problems that were believed to have been caused by an ulcer. Brill expressed some concern that Guardian would issue him a rated policy (one surcharged with an additional premium). Gould's response was that Guardian would conduct its own medical investigation into Brill's health, and if a rated policy was issued "we'll deal with it then." Brill signed the application after Gould recorded the information.

At or about the time of completion of the application, Gould asked for a deposit. Brill, however, was unwilling to give money to the insurance company before he knew a standard policy would be issued.

The application stated that Brill's policy would become effective upon delivery of the policy to the named insured. The application also contained a provision for coverage prior to delivery of the policy. Paragraph Eleven of the application provided I ... further agree that no insurance shall take effect (except as provided in the Conditional Receipt if an advance payment has been made and acknowledged above and such Receipt issued) unless and until the Policy has been delivered to and accepted by me ... and the first premium paid during the lifetime and prior to any change in health of the Proposed Insured as described in this Application.

However, Gould never advised Brill that he could obtain coverage virtually immediately in the form of a conditional receipt. Under the conditional-receipt concept, Brill would have been required to pass a medical examination conducted on behalf of Guardian. Passing the medical examination would have satisfied the requirement of being "acceptable as a standard risk." In addition, Brill would have been required to pay one-sixth of his annual premium for a standard policy, amounting to $141.87, upon signing the application.

Coverage under the conditional receipt would have existed for sixty days from the date of Guardian's medical examination. Conditional-receipt coverage would have (1) provided $500,000 in life insurance, (2) protected against any change in health requirement and (3) guaranteed that a standard policy, rather than a rated policy, would be issued in the amount of $750,000.

Gould also recorded the incorrect answer to a crucial question in the application that made Brill ineligible for a conditional receipt. Question 6(b) asked: "Have you, within the last 12 months ... had an electrocardiogram because of chest pain or any other physical problem or taken medication for elevated blood pressure?" Gould answered "yes" to that question because Brill said that he had undergone an electrocardiogram in preparation for knee surgery that was performed in June 1988. Gould, however, failed to question Brill concerning the date and purpose of those procedures. Had he done so, he would have learned that the electrocardiogram was performed on May 31, 1988, and the surgery on June 6, 1988. Because both procedures were more than twelve months before the date of the application, and because the electrocardiogram was not related to chest pain, the answer to Question 6(b) should have been "no."

On June 19, 1989, four days after Brill completed his application, Dr. Mary Mazzarella performed a medical examination of Brill on behalf of Guardian. Dr. Mazzarella did not discover any health problems.

On June 28, 1989, Gould mailed Brill's completed application to Guardian's general agent. The agent then forwarded the application to Guardian for processing. As a supplement to Dr. Mazzarella's report, Guardian obtained a statement from Brill's personal physician, Dr. Jonathon Shapiro. Guardian's records reflect that Dr. Shapiro saw Brill in May 1989 for abdominal pain and bowel spasms, and that Dr. Shapiro made "no findings" at that time.

On July 21, 1989, Guardian issued a $750,000 standard life-insurance policy with Brill as the named insured. Brill's wife, plaintiff Robin Brill, was the primary beneficiary. After Guardian issued the policy, it was forwarded to Gould who was to deliver it to Brill. However, when Gould called Brill's office to set up a time for delivery, he was told that Brill was out of the office and would not return until August 20.

The parties agree that if Brill had obtained a conditional receipt, any change in Brill's health after June 19, 1989, the date Dr. Mazzarella examined him, would have been immaterial to the question of coverage under the standard policy.

On July 24, 1989, prior to delivery of Guardian's policy, Brill underwent a transverse colon resection and a liver biopsy. Brill was diagnosed post-operatively with colon cancer and "metastatic poorly differentiated carcinoma" of the liver.

On August 25, 1989, Gould delivered the Guardian policy to Brill and collected the first premium. Brill did not advise Gould that he had been diagnosed with and treated for cancer. Nor did Gould ask Brill whether he had undergone any change in health since the time of his June 15, 1989, application.

On June 29, 1990, Brill died of metastatic cancer of the liver and carcinoma of the colon. Shortly thereafter, Gould notified Guardian's general agent of Brill's death and submitted a claim on behalf of plaintiff. Guardian denied the claim on the grounds that Brill's policy was "null and void as of its effective date" because of the "change in health" experienced by Brill between the date of his application and receipt of the policy on August 25, 1989.

Following the denial of the claim for payment under the policy, plaintiff instituted the present litigation to compel payment of the face value of the policy. She alleged breach of contract, bad faith and breach of fiduciary duty against Guardian. She also alleged negligence and breach of fiduciary duty against KRA, Guardian's authorized agent, and Gould individually as agent for KRA. The theory of negligence against Gould was based on his failure to record the correct answer to Question 6(b) and the failure to discuss a conditional receipt with Brill.

On May 28, 1993, the trial court granted summary judgment in favor of Guardian. The court reasoned that as a matter of law, the policy was null and void because Brill had failed to advise Guardian of an "egregious and monumental" change in his health that occurred between the date of his application and the date of delivery of the policy.

On the same date, the trial court also granted plaintiff's motion for summary judgment against Gould and KRA in the amount of $750,000. The court reasoned that it was "beyond dispute" that Gould incorrectly recorded the answer to Question 6(b) on Brill's application, thereby causing Brill to become ineligible for the conditional-receipt coverage that would have rendered moot the change-in-health feature...

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