Fleet Messenger Service v. Life Insurance Co. of No. Amer.

• Decision Date: 04 April 1963
• Docket Number: Docket 27800.,No. 292,292
• Citation: 315 F.2d 593
• Parties: FLEET MESSENGER SERVICE, INC., Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Appellee.
• Court: U.S. Court of Appeals — Second Circuit

315 F.2d 593 (1963)

FLEET MESSENGER SERVICE, INC., Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Appellee.

No. 292, Docket 27800.

United States Court of Appeals Second Circuit.

Argued March 21, 1963.

Decided April 4, 1963.

Jacob Imberman, New York City (David I. Goldblatt, Proskauer, Rose, Goetz & Mendelsohn, New York City, on the brief), for appellant.

Edward T. Post, New York City (Tanner, Friend, Kinnan & Post, New York City, on the brief), for appellee.

Before LUMBARD, Chief Judge, and CLARK and MARSHALL, Circuit Judges.

LUMBARD, Chief Judge.

This is an appeal from a judgment for the defendant in the United States District Court for the Southern District of New York. Following a trial before a jury, which returned a verdict for the plaintiff, Judge Levet granted the defendant's motion for judgment notwithstanding the verdict and, in the alternative, granted the defendant's motion for a new trial. His opinion was filed on July 10, 1962. An order granting judgment for the defendant was filed on August 15, 1962. We affirm.

The plaintiff, Fleet Messenger Service, Inc., was the beneficiary of a "key-man" insurance policy issued on September 12, 1958, on the life of its president, Nicholas R. Chase,¹ by the defendant, Life Insurance Company of North America. Chase died on April 18, 1959. The plaintiff brought this action when the defendant refused to pay the amount of the policy, basing its refusal on the ground that the insured had made material misrepresentations concerning his health in the application for the policy.

The plaintiff applied for the policy on August 20, 1958. In one part of the application, the proposed insured, Chase, was required to give information about his health. In response to questions put to him by the defendant's examining physician, Chase denied that he had or had ever experienced "disease of heart, blood or blood vessels" or "coronary disease, chest pain or discomfort." He stated that he had had "operations; X-rays, electrocardiograms; hospitalization," expanding this answer by the following: "Annual checkup & E.c.g. X-rays & blood studies and Physical Exams. Dr. Paley 865 5th Ave. N. Y. C." He stated that he had not had "other illness or injury in the past 5 years" or "other examination or treatment by any physician or practitioner, hospital or institution within the past 5 years." He provided the name and address of his personal physician, Dr. Fallis.

The examining physician, Dr. Ritota was a specialist in internal medicine and heart disease. He made a thorough physical examination, including a cardiac examination, chest X-ray, and electrocardiogram. The examination results were normal. The defendant also sent form letters to Dr. Fallis and Dr. Paley, named by Chase in the application for insurance; the letters requested "a report from your records including any significant symptoms, positive findings on physical examination; the results of X-ray, laboratory or other diagnostic studies; your diagnosis, any treatment and the response." The letter to Dr. Fallis requested also a summary of Chase's medical history. Both letters included an authorization from Chase. The reply of Dr. Fallis noted, in addition to references to a sore throat, a sprained ankle, and a vaccination, the following:

                                                     Physical
                                                     Findings
                                                    Laboratory                         Treatment
                  "Date of                         Tests, X-ray,                          and
                  Consultations  Symptoms      and Electrocardiograms  Diagnosis        Results
                  3/20/56        Vague chest   Px negative             No definite      Improved
                                 & epigastric  EKG by another          diagnosis made
                                 pains         M. D. negative
                         *      *      *      *      *      *      *      *      *      *
                  11/29/57         Received report from Dr. David H. Paley N. Y. C. 21
                                   Suggest you refer to him for lab work & EKG and
                                   complete Px he performed."
                

Dr. Paley's reply stated: "Mr. Ciasca Chase presented himself for routine physical examination. He was last seen on May 8, 1958, at which time I found him in excellent condition. A chest film was negative and ECG, a copy of which is enclosed * * *, showed no significant abnormalities." Doctors on the defendant's medical staff made reports on the electrocardiogram taken by Dr. Paley and the electrocardiogram and X-ray taken by Dr. Ritota.

On the basis of all this information, on September 12, 1958, the defendant issued a life insurance policy in the amount of $100,000. Seven months later Chase was dead. An autopsy showed the cause of death to be "advanced occlusive coronary atherosclerosis with myocardial fibrosis." The defendant investigated further and turned up the following information. The office records of Dr. Fallis indicated that Chase had had an "anginal syndrome" on March 20, 1956, and that Dr. Fallis had noted "cardio-evidence coronary sclerosis." On November 29, 1957, Dr. Paley wrote a letter to Dr. Fallis, at Chase's suggestion, which said among other things that Chase had come to see him on August 30, 1957, for a general checkup and that Chase's complaints were "rather characteristic of an angina of effort" and that Dr. Paley thought Chase "had arterio-sclerotic heart disease and anginal syndrome."

Dr. Fallis was not available at the trial, having predeceased Chase. Dr. Paley testified that when Chase first came to him on August 30, 1957, Chase said that he had had a checkup about a year before and had been advised of a heart strain and an elevation of his cholesterol. He complained of chest pain on effort over the previous three or four years. As Dr. Paley later reported to Dr. Fallis, he made a tentative diagnosis, based largely on the history of chest pain, of arteriosclerotic heart disease and anginal syndrome. He prescribed nitroglycerine, which dilates the blood vessels, and cautioned Chase to avoid overexertion and excitement and to take various hygienic measures. Dr. Paley testified that he had explained Chase's condition to him, using lay terminology. Dr. Paley saw Chase again on May 8, 1958, at which time the same symptoms were noted and the same diagnosis made. On another visit, after the insurance policy had been issued, the diagnosis was unchanged.

Another witness at the trial was Dr. Shankman, who treated Chase on May 6, 1958, for bursitis. Before prescribing treatment, Dr. Shankman asked Chase for his medical history. On the basis of Chase's remarks, Dr. Shankman noted on his records that Chase had "known angina pectoris." Dr. Shankman testified, in effect, that he did not recall precisely what Chase had told him but that he would not have recorded "known angina pectoris" unless Chase had mentioned chest pains and relieving them with nitroglycerine.

It is clear from the above that Chase misrepresented his physical condition and medical history in the application for insurance. Contrary to his answers, he had, or had experienced, "disease of heart, blood or blood vessels"; he had experienced chest pain; he had been treated, not merely given a checkup, by Dr. Paley; and he had been treated by Dr. Shankman.

The substantive questions presented on this appeal are (1) whether, under the applicable law, Chase's misrepresentations avoid the defendant's liability on the insurance policy; and (2) if so, whether the defendant had notice of the misrepresentations such that a defense based on them was waived.

In conformity with a pre-trial order, consented to by the parties, Judge Levet made a pre-trial determination that New York law controlled. We agree. A federal district court sitting in New York must use the choice-of-law rules of New York to determine the law which is applicable in an action grounded on state law. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). In Auten v. Auten, 308 N.Y. 155, 124 N.E.2d 99, 50 A.L.R.2d 246 (1954), New York adopted the "center of gravity" or "grouping of contacts" approach for choice-of-law problems in contract situations having elements connected with more than one jurisdiction. Under that approach, the governing law is that of the jurisdiction "which has the most significant contacts with the matter in dispute". Id. at 160, 124 N.E.2d at 102; Rubin v. Irving Trust Co., 305 N.Y. 288, 305, 113 N.E.2d 424 (1953). The plaintiff questions the applicability of Auten to insurance contracts, relying on New Amsterdam Casualty Co. v. Stecker, 3 N.Y.2d 1, 163 N.Y. S.2d 626, 143 N.E.2d 357 (1957), in which ambiguous language of the New York Court of Appeals might be construed to indicate a withdrawal from the Auten rationale. But Auten is cited as authority for the decision in New Amsterdam, 3 N.Y.2d at 5, 163 N.Y.S.2d at 628, 143 N.E.2d at 358, and as we have stated in another case, Zogg v. Penn Mutual Life Ins. Co., 276 F.2d 861, 864 n. 6 (2 Cir., 1960), we do not understand New Amsterdam to be a departure from the rule laid down in Auten.

Applying the "center of gravity" test, we believe that New York is the state having the most significant contacts with this controversy. Both the beneficiary and the insured were New York residents. Opposed to this are the facts that the insurer is a Pennsylvania corporation, not licensed to do business in New York; that the policy was issued, thereby becoming effective, at the insurer's home office in Pennsylvania; and that the policy's provisions for notice to the insurer by the insured required that notice be given at the Pennsylvania home office. There were also some contacts with New Jersey; the application for the policy was executed in that state, and the first premium was tendered to one of the defendant's...