Martinez v. John Hancock Mut. Life Ins. Co.

• Decision Date: 06 December 1976
• Citation: 367 A.2d 904,145 N.J.Super. 301
• Parties: Luis M. MARTINEZ, Plaintiff-Respondent and Cross-Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts insurance corporation, Defendant-Appellant and Cross-Respondent.
• Court: New Jersey Superior Court — Appellate Division

Page 301

145 N.J.Super. 301

367 A.2d 904

Luis M. MARTINEZ, Plaintiff-Respondent and Cross-Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, a Massachusetts insurance corporation, Defendant-Appellant and Cross-Respondent.

Superior Court of New Jersey Appellate Division.

Argued Nov. 1, 1976.

Decided Dec. 6, 1976.

John L. McGoldrick, Newark, for defendant-appellant (McCarter & English, Newark, attorneys, John L. McGoldrick and George T. Hill, Newark, on the brief).

Joseph A. Dambach, Fords, for plaintiff-respondent (G. Richard Malgran, Jr., Elizabeth, on the brief).

Before Judges BISCHOFF, MORGAN and COLLESTER.

The opinion of the court was delivered by

MORGAN, J.A.D.

At issue in this appeal is the sum of $100,000 representing accidental death benefits (hereinafter ADB) ¹ under a policy of life insurance admittedly not affording coverage therefor and for which no premium had ever been paid. The trial judge, sitting as the trier of the facts, awarded plaintiff the claimed ADB with simple interest at 6% Calculated from July 15, 1971. Defendant John Hancock Mutual Life Insurance Company appeals and plaintiff cross-appeals with respect to those issues concerning the rate and type of interest and denial of his application for counsel fees.

Many of the essential facts are disputed. In 1968 plaintiff Luis M. Martinez, a native Cuban and United States resident since 1965, and Joseph Gallagher formed a partnership in a small fence company. Martinez ran the company's Edison office; Gallagher operated out of the partnership's Pennsauken office.

Early in the history of the partnership a buy-sell agreement was entered into whereby at the death of one of them the surviving partner would purchase the deceased partner's share for $45,000. The agreement was funded by life insurance policies on the partners' lives, each partner being the beneficiary of the policy of the other's life. The $45,000 policies were issued by defendant and neither contained ADB. They had been purchased through one of defendant's agents, who had subsequently left its employ.

In the spring of 1970 Joseph Gallagher, realizing that the existing buy-sell agreement no longer reflected the increased value of the business, and that the $45,000 policies were similarly inadequate, suggested to plaintiff that new agreements be executed increasing the purchase price of their shares and additional coverage be procured to fund this new agreement. Plaintiff agreed and left it to Gallagher to arrange for the insurance.

Accordingly, Gallagher consulted Muller, the agent who obtained the prior policies, erroneously assuming that he still represented defendant insurance company. Muller, failing to dispel this incorrect assumption, submitted to his new employer, Intercontinental Life Insurance Company, applications for life insurance which did not request ADB. While these applications were being processed Gallaher, through Thomas F. Mullen, became aware that the applications were being made to a company other than defendant. Mullen did represent defendant, and when Gallagher realized this, and desiring to do business only with defendant, he apparently withdrew his application to Intercontinental, and a meeting was arranged with Mullen and plaintiff for the execution by the partners of applications to defendant for the new life insurance policies.

The meeting at Gallagher's home was held on July 7, 1970. It was Mullen who suggested that the applications include a request for ADB; both partners agreed and the applications were drawn, each requesting $100,000 term life insurance, ADB and a waiver of premium upon disability. A check for the first premium, in the amount of $102.97, was delivered to Mullen the following day.

Upon receipt of the applications at defendant's home officer in Boston, the underwriting department rejected the request for ADB in accordance with their policy of refusing ADB in connection with policies procured to fund buy-sell agreements, the value of the business not being dependent upon the manner of the owner's death. Policies without ADB were issued, at a lower premium, with their corresponding applications attached thereto. Also attached, in duplicate, were defendant's Forms 174R, 'Amendment to Application,' for the purpose of obtaining the insureds' signed acknowledgment of the denial of the requested ADB. The original copy of the 'Amendment to Application' was to remain attached to the policy; the copy was to be returned to Boston.

In due course Mullen received the policies, without ADB, and with Forms 174R attached. He testified that on the outside of each policy appeared a slip of paper advising him, as agent, that the policies were not as applied for and that Forms 174R were attached for execution by the owners to acknowledge that fact, by amending their applications to eliminate the request for ADB.

Mullen testified that he arranged to meet with the partners at Gallagher's home to deliver the policies. Plaintiff failed to attend that meeting. According to Mullen, he explained to Gallagher that the policies did not afford ADB coverage and that the attached Forms 174R were to be signed by him and plaintiff in acknowledgment of that fact. Gallagher told Mullen to return the next day when he would have plaintiff's signature on the 174R form. Mullen returned, received from Gallagher the two forms, one purportedly bearing plaintiff's signature, the other Gallagher's and both were forwarded to defendant's home office where they were filed. It was stipulated at the trial that both signatures were forged.

Shortly after issuance of the policies the partnership received a refund from defendant in the amount of $11.78, representing that part of the premium attributable to the rejected ADB coverage. The checks, however, did not specify their attribution, but merely stated that they were for 'over-payment in premium.' Routinely thereafter premiums in the reduced amount were automatically deducted from the partnership checking account.

In March 1972 Gallagher died from stab wounds inflicted during an altercation; his manner of death would have constituted a valid claim for ADB had coverage therefor been supplied. Defendant, however, paid the face amount of the policy covering Gallagher's life, $100,000, and rejected the claim for double indemnity for the accidental manner of his demise. The present action ensued. Following a nonjury trial the trial judge, in an oral opinion, found as a fact that Mullen had forged both names to the 174R form and failed to inform Gallagher, and hence Martinez, of defendant's rejection of ADB coverage. He found that Martinez had never read the policy in his possession but concluded that his failure to read, in the given circumstances, was excusable and no bar to recovery. According to the trial judge, plaintiff was entitled to assume, without express notice from defendant or its agent to the contrary, that all coverage applied for had been granted. Since defendant failed to provide notification of the rejection of ADB coverage, plaintiff was entitled to its benefit, with the premiums for it being deducted from his recovery. Defendant appeals.

Defendant's challenge to the trial judge's finding that Mullen forged the signatures of Gallagher and Martinez to the 'Amendment to Application' form and failed to inform either of them that the requested ADB had been rejected, as being evidentially unsupported, is without merit. Although direct evidence of such conduct was lacking, sufficient and substantial circumstantial evidence provided the needed support. Since both signatures were forged, it was reasonable for the trial judge to conclude that neither Martinez nor Gallagher was the party responsible; neither would have forged his own signature. Moreover, neither the insureds nor their spouses had an apparent motive for such conduct. The only person with any motive to forge and to conceal the rejection of ADB was Mullen; he might have feared loss of a substantial commission on $200,000 worth of life insurance by advising the insureds of the rejection of ADB coverage. The availability of proof on this issue was necessarily limited because only Mullen and Gallagher had direct knowledge of what occurred at the crucial meeting when the policies were delivered, and Gallagher was dead. If Mullen was, in fact, the forger and did attempt to conceal rejection of the request for ADB, then he had an additional motive to be less than candid in his trial testimony--concealment of fraud; and the trial judge apparently took the view that his testimony was lacking in some measure of credibility. Hence, although the evidence concerning this issue was not strong, there is enough in the record, by way of circumstantial proof, to support the finding.

It by no means follows, however, that defendant is liable in excess of the coverage provided by the policy because of its agent's conduct. The critical issue concerning plaintiff's right to recover on coverage never written or paid for depends primarily, in this case, upon a determination as to whether plaintiff was under a duty to read the policy itself upon its delivery to him and the extent to which he is bound by what the policy would have disclosed to an average reader.

The policy in question is a relatively brief and uncomplicated one, unencumbered by the usual fine print and multiple hanging endorsements. It consists of but eight pages of printed matter on letter-size paper, on only one page of which typewritten matter personalizing the otherwise generalized and printed form appears. The typewritten information appears on a page entitled, in boldface type, 'POLICY SPECIFICATIONS.' The reader is referred to this page from the first page of the policy in which he is invited to read 'policy specifications on page 3.' The average lay reader would learn from the 'POLICY SPECIFICATIONS' page that the life being insured was that of Joseph Gallagher, age 31, and that...