U.S. Fid. & Guar. Co. v. Fridrich

• Decision Date: 12 April 1938
• Citation: 123 N.J.Eq. 437,198 A. 378
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. FRIDRICH.
• Court: New Jersey Court of Chancery

198 A. 378

123 N.J.Eq. 437

UNITED STATES FIDELITY & GUARANTY CO.

v. FRIDRICH.

Court of Chancery of New Jersey.

April 12, 1938.

Syllabus by the Court.

An insurance company issued to dentists two classes of liability insurance policies: (a) To those who were not members of a state dental society; (b) to those who were such members. The premiums charged for class A policies were in excess of the charges for class B. The applicant for a class B policy "represented" that he was a member in good standing of the state dental society. This representation was made a part of the contract of insurance and was recited as being a part of the consideration for the issuance thereof. The policy was renewed from time to time without requiring a new application for the renewals. The renewal vouchers were issued subject to all of the policy "terms, limits and conditions." Held, that in the absence of a new application showing a different intention, the renewals of the policy were on the basis that the insured was a member in good standing at the time of such renewals.

Suit by the United States Fidelity & Guaranty Company against Nathaniel E. Fridrich to cancel a dentist's liability policy.

Decree for complainant.

Carroll & Taylor, of Camden, for complainant. Harry Grossman, of Camden, for defendant.

SOOY, Vice Chancellor.

Complainant seeks to cancel a "dentist's liability policy" on the ground that the defendant, at the time of the issuance to him of a renewal of an outstanding policy, falsely represented and warranted that he was a member "in good standing" of the New Jersey State Dental Society when, as a matter of fact, he was not such a member.

The facts adduced at the final hearing disclosed that the original policy was to cover for the term September 20, 1934, to September 20, 1935; that thereafter two renewal vouchers were issued to defendant, the first to cover from September 20, 1935, to September 20, 1936, the second from September 20, 1936, to September 20, 1937.

In November of 1936 defendant extracted a tooth for a patient and on December 31, 1936, defendant was notified of a claim for damages arising out of that operation. Thereafter suit was brought against the defendant. Complainant undertook a defense and in connection with its investigation ascertained that at the time of the alleged malpractice defendant was not a member "in good standing" of the State Dental Society. Upon that discovery the bill was filed.

The renewals aforesaid were issued as a matter of course, i. e., no new application was required therefor and complainant delivered "renewal vouchers," the defendant paying for them, and neither party was required to solicit the other, in fact, the policy provides that the policy "may be renewed upon delivery by the Company of a renewal voucher."

The renewal vouchers provided that "in consideration of the premium" insurer "agrees to continue in force * * * policy, subject to all of its terms, limits and conditions."

It appears that complainant sells liability insurance under two classes of policies, one to dentists who are not members of dental societies and the other to those who are members of the New Jersey State Dental Society, and that a slightly higher annual premium is charged for the nonmember policy. Defendant had carried a nonmember policy prior to the issuance of the one in suit and the latter policy was issued in pursuance of a letter to complainant from the defendant advising the insurance company that defendant was "affiliated" with dental societies. The difference in premium was approximately $3.

The policy in suit was issued "in consideration of the statements and agreements in the application for this policy and which are made a part hereof, and the payment of the annual premium."

The form of the policy is designated, as "special dentist's liability policy for members of the New Jersey State Dental Society." The "representations" made by the defendant at the time of the issuance of the policy in suit were, inter alia: (a) "I agree that this policy applied for shall be based upon the following statements and agreements." (b) "I am a member in good standing of the New Jersey State Dental Society."

The evidence discloses that at the time of the renewal issued under date of August 10, 1936, for a period of twelve months from September 20, 1936, defendant was not a member in good standing of the State Dental Society, he having failed to pay his annual dues for the year 1936. The court so holds because under the laws of the dental societies, when a member fails to pay his dues in any year within 45 days from January 1st, or not later than February 15th of any year, he is, under the laws of said society, automatically "considered in poor standing and will not be entitled to vote," and is "automatically suspended." He is, however, privileged to pay his dues at any time up until December 31st of any year and upon payment "automatically" becomes a member in good standing, but on failure to pay by December 31st as aforesaid, he is dropped from membership, so that even during the period when dues are unpaid, and until December 31st of that year, membership continues but it is a suspended membership. The fact in this case is that defendant failed to pay his dues at any time during the year 1936 and at the end thereof lost his membership for that reason.

Taking up the form of the policy as originally issued on September 20, 1934, we find that: (a) It is captioned as being "special dentist's liability policy for members of the New Jersey State Dental Society"; (b) it recites the consideration as being, in part, "the statements and agreements in the application for this policy, and which are made a part hereof"; (c) that the applicant's statement in the application was: "I am a member in good standing of the New Jersey State Dental Society."

The reverse side of the policy contains a certificate headed "Special Dentists' Liability Insurance for Members of the New Jersey State Dental Society," wherein the company certifies "that it has insured Nathaniel E. Fridrich * * * a member of the New Jersey State Dental Society, under dental liability policy, in accordance with the terms of the policy on the reverse side," and further certifies that "this policy is issued in consideration of the representations made in the application and the payment of premium."

It is contended by the defendant that the representation made by him that he was a member of the New Jersey State Dental Society must be considered as referring to his status at the time of the making of the application and not as to the time of any renewal or renewals of the original policy.

Whether the representation as to "good standing" is to be considered as a statement relating to conditions as they existed at the time they were made, and not as a representation that such condition continued to exist during the life of the policy or any renewal thereof, depends upon the construction of the entire policy and a consideration of complainant's undertaking under the policy.

A contract of liability insurance such as this is limited to members of the State Dental Society. It is sold at a less premium than a like policy to nonmembers The insurer believes dentists who are members of the State Dental Society are a better class of risk than nonmembers. The evidence tends...