Katz v. Am. Mayflower Ins. Co.

• Citation: 788 N.Y.S.2d 15,2004 NY Slip Op 09719,14 A.D.3d 195
• Decision Date: 28 December 2004
• Docket Number: 3370.
• Parties: MICHAEL KATZ, Appellant, v. AMERICAN MAYFLOWER LIFE INSURANCE COMPANY OF NEW YORK, Respondent.
• Court: New York Supreme Court Appellate Division

14 A.D.3d 195

788 N.Y.S.2d 15

2004 NY Slip Op 09719

MICHAEL KATZ, Appellant, v. AMERICAN MAYFLOWER LIFE INSURANCE COMPANY OF NEW YORK, Respondent.

3370.

Appellate Division of the Supreme Court of the State of New York, First Department.

December 28, 2004.

Appeal from an order of the Supreme Court, New York County (Herman Cahn, J.), entered January 30, 2003. The order granted defendant's motion to dismiss the complaint.

Wechsler Harwood LLP, New York City (William R. Weinstein and Robert I. Harwood of counsel), for appellant.

Sonnenschein Nath & Rosenthal, LLP, New York City (Reid L. Ashinoff, Sandra D. Hauser and Michael S. Gugig of counsel), for respondent.

OPINION OF THE COURT

SULLIVAN, J.

On or about July 11, 1997, plaintiff, a real estate attorney, signed an application for a $1 million term life insurance policy, premiums to be paid on a quarterly basis, with defendant American Mayflower Life Insurance Company of New York. As plaintiff must concede, the application, which is explicitly made part and parcel of the policy, expressly provides that coverage would commence when the policy is delivered and his initial premium paid by stating immediately above the signature line:

"[E]xcept as provided in the Conditional Receipt, if issued, with the same number as this application, no insurance will take effect unless: (a) the policy is delivered to the Owner; (b) the first modal premium is paid; and (c) there has been no change since the date of this application in the insurability of all persons proposed for insurance or in any of the answers to the questions on this application."

Plaintiff had two payment options for the purchase of his life insurance policy: to pay the initial premium due upon delivery of the policy, the so-called "C.O.D." payment option, or to pay the initial premium due with the submission of his application and receive temporary coverage under a conditional receipt. Plaintiff chose the C.O.D. payment option and now alleges that as a result of choosing to pay upon delivery of the policy, American Mayflower charged him a premium for a period of time before he was covered. It is undisputed that although plaintiff's policy had a "Policy Date" and "Date of Issue" of September 2, 1997, coverage did not become effective until on or about September 24, 1997.

The policy specifically informed plaintiff when subsequent premiums would become due and owing. The "Policy Date" section of the policy states, in relevant part "Policy Date: Policy anniversaries, policy years, policy months, and Premium Due Dates are measured from the Policy Date. The first policy year begins on the Policy Date. Subsequent policy years begin on the same date each year thereafter. A policy anniversary occurs at the beginning of each policy year after the first policy year."

Thus, the policy explicitly provided that the due date for premiums after the first is determined solely by reference to the policy date set forth in the policy, not the date of policy delivery or first premium payment. Since plaintiff chose to pay his premiums on a quarterly basis, the policy also sets forth the due dates for subsequent quarterly premium payments, which dates are based on the policy's September 2, 1997 policy date.

The policy's cover page also advised plaintiff that he was not compelled to keep the policy after it was delivered; it expressly provided a 20-day "free look" period during which he could have returned the policy for any or no reason at all and received a full refund of premiums paid:

"The Owner may return this Policy within 20 days after its delivery by taking it or mailing it to the Company or to any agent of the Company. Immediately upon delivery or mailing, this Policy will be deemed void from the beginning. Any premium paid will be returned."

Plaintiff elected to keep the policy and paid premiums for more than four years before commencing this putative class action in Supreme Court, asserting claims of breach of contract and unjust enrichment. The essence of the complaint is that defendant breached the life insurance policy by failing to provide a year's worth of coverage in exchange for an "annual premium." Thus, his entire claim is essentially that American Mayflower set different dates for the commencement of coverage and the premium due dates.

American Mayflower moved, pre-answer, to dismiss the complaint pursuant to CPLR 3211 (a) (1) and (7). While the motion was sub judice, a motion to dismiss a virtually identical case, Franco v Guardian Life Ins. Co. of Am. (2003 NY Slip Op 50024[U] [Sup Ct, NY County, Jan. 28, 2003, Cahn, J., Index No. 604302/2001]), was granted. In the instant matter, the motion court found that the issues were substantially similar to those raised in Franco and dismissed the complaint "for the reasons set forth in [Franco]." After examining the policy language, the Franco court held, "[T]he language of the policy, including the application, which is incorporated therein, is not ambiguous, since the various payment options are described in detail." (Franco at *6.) The court further held that, in the context of the policy, the phrase "annual," as used in conjunction with premium, "describes the length of time between premium payments." (Id.) The court in Franco dismissed the unjust enrichment claim because "the parties' rights and liabilities are governed by the terms of an express contract." (Id. at *7.)

Plaintiff's breach of contract claim fails. The first year period of coverage is determined by the policyholder's choice to pay upon application or to pay upon delivery of the policy. Plaintiff's American Mayflower life insurance application, expressly made part of the policy, plainly states that coverage will not become effective unless "the policy is delivered to the Owner [and] the first modal premium is paid." It is undisputed that coverage has continued since delivery of the policy and payment of the first premium. Nothing in the application or the policy ultimately delivered stated or suggested that, having chosen the C.O.D. payment option, plaintiff would have coverage between the policy date and the delivery and payment date. Thus, since plaintiff is receiving all of the policy benefits he purchased, Supreme Court properly dismissed his breach of contract claim. While the dissent accords great weight to the fact that the policyholder would not be aware until after the policy was delivered that American Mayflower was affording less than one year's coverage for the first annual premium, the "free look" period entitling the policyholder to a full refund of any premium paid renders this fact insignificant. Plaintiff has not, and cannot, identify any contractual provision that has been breached.

That, due to plaintiff's selection of the C.O.D. payment option, American Mayflower set different dates for the commencement of coverage and the premium due dates does not constitute a breach of contract since they are, as plaintiff concedes, part of the contract. Thus, any claim that plaintiff paid a premium for a period of time before coverage commenced is contradicted by the express terms of the contract.

The argument that plaintiff did not appreciate that the first premium would purchase less than 365 days of coverage necessarily fails as a matter of law. It is a well-settled principle of law in this state that an insured has an obligation to read his or her policy and is presumed to have consented to its terms (Minsker v John Hancock Mut. Life Ins. Co., 254 NY 333, 338 [1930]; Ciaramella v State Farm Ins. Co., 273 AD2d 831, 832 [2000]; British W. Indies Guar. Trust Co., Ltd. v Banque Internationale A Luxembourg, 172 AD2d 234 [1991]). Recognizing the clear language of his application and the policy, and the import of recent directly applicable New York appellate decisions, Dougherty v William Penn Life Ins. Co. of N.Y. (3 AD3d 469 [2d Dept 2004], lv denied 2 N.Y.3d 704 [2004]) and Randazzo v Gerber Life Ins. Co. (3 AD3d 485 [2d Dept 2004], lv denied 2 N.Y.3d 704 [2004]), decided together, which rejected the same argument as is made here, holding that "the policy clearly states when coverage is to begin and when premiums are due" (id. at 486), plaintiff has departed from the allegations of his complaint and now hinges his breach of contract claim on a purported ambiguity between the clear contract provision governing the commencement of coverage and the policy's use of the term "annual premium." This is the position the dissent advances.

The argument is without merit. Plaintiff's claim of ambiguity is belied by the policy's clear distinction between the "initial premium," which, when paid, triggers coverage in the first instance, and "subsequent current annual and maximum annual premiums," that, according to the policy, are due on September 2 of each following year, the anniversary of the "Policy Date" of September 2, 1997. Specifically, the policy clearly and unambiguously provides that the quarterly "Total Initial Premium" is $447.20, that coverage does not commence until payment of the total initial premium, that, given plaintiff's election to pay the annual premium on a quarterly basis, premiums were due on the 2nd of March, June, September and December and that due dates for subsequent quarterly premium payments were determined by reference to the "Policy Date" — September 2, 1997, not the date of delivery of the policy. Significantly, the policy's general provisions explicitly provide, "Policy anniversaries, policy years, policy months and Premium Due Dates are measured from the Policy Date."

Plaintiff paid his premium upon the policy's delivery. As he expressly agreed, coverage did not commence until the policy was delivered and the quarterly initial premium paid. The policy clearly described when all subsequent quarterly premium payments were due, including the due date, December 2, 1997, of his next quarterly premium. While it is true that plaintiff's initial premium...