Opinion
600231/02.
Decided November 3, 2004.
In this action seeking proceeds under a life insurance policy and related relief, defendants Metropolitan Life Insurance Company ("Met Life") and its former agent, Miroslawa Skowronska ("Skowronska") move for an order (1) extending the deadline in which to file a motion for summary judgment, (2) dismissing the amended complaint in its entirety, and (3) granting summary judgment on defendants' counterclaim seeking a declaration that the relevant life insurance policy is void ab initio. Plaintiffs oppose the motion.
This action arises out plaintiffs' efforts to recover proceeds from a $100,000 term life insurance policy issued in or about September 1998 to Acko Koloski, the late husband of plaintiff Lila Koloski and the father of plaintiffs Julianna and Metodia Koloski. After Mr. Koloski died of liver cancer in August 2000, plaintiffs submitted required proofs and requested payment of insurance proceeds. By letter dated October 20, 2000, Met Life disclaimed liability due to alleged non-disclosures in Mr. Koloski's application. Specifically, Met Life maintains that Mr. Koloski failed to disclose a seizure disorder for which he had received prior medical attention and treatment, and abnormal test results which revealed a fatty liver and enlarged spleen.
Plaintiffs commenced this action on January 17, 2002, seeking (i) a declaration that Met Life was required to "cover and indemnify plaintiffs . . . [and] pay plaintiffs insurance proceeds in connection with [the Insured'] death, (ii) compensatory damages due to Met Life's breach of contract, and (iii) damages due to Met Life's bad faith denial of subject claim.
Plaintiffs subsequently sought to amend their complaint to add a cause of action under General Business Law section based on, inter alia, allegations that Met Life engaged in a deceptive business practice by inducing Mr. Koloski, whose primary language is Macedonian, to buy a standard life insurance policy without providing him with a translator. The court also granted, without opposition, plaintiffs' request to add Skowronska as a party defendant, and to include a cause of action against her for negligence and malpractice.
Request to Extend Time to File Motion
After discovery was completed, plaintiffs filed their note of issue on July 28, 2003. The preliminary conference order entered into on November 21, 2002, required that any summary judgment motion be filed within 60 days of filing the note of issue.
This motion was made on November 25, 2003, which was 120 days from the date that the note of issue was filed. Defendants seeks to extend the deadline, noting that its current counsel, which was substituted for prior counsel in December 2002, did not enter into the preliminary conference order containing the 60 day deadline was therefore unaware of it. In response, plaintiffs argue that the motion should not be considered as defendants have not provided any "good cause" for their failure to timely file the motion. See, CPLR 3212(a).
CPLR 3212(a) provides, in relevant part, that on a motion for summary judgment "the court may set a date after which no such motion may be made, such date being no earlier than thirty days after the filing of note of issue. If no such date is set by the court, such motion shall be made no later than one hundred twenty days after the filing of the note of issue, except with leave of court on good cause shown." This statute was amended in 1996 (L. 1996, ch. 492), effective January 1, 1997, to "address the proliferation of eleventh hour motions, made when there is inadequate time for reply or proper court consideration, and to prevent trial delays which often prejudice litigants who have spent extensive time and money in trial preparation." Rossi v. Arnot Ogden Med. Ctr., 252 AD2d 778, 779 (3rd Dept 1998) (quotations and citations omitted).
While this motion was pending, the Court of Appeals clarified that "good cause" under CPLR 3212(a) "requires a showing of good cause for the delay in making the motion a satisfactory explanation for untimeliness rather then simply permitting meritorious non-prejudicial filings, however tardy." See Brill v. City of New York, 2 NY3d 648, 652 (2004). In this case, defendants assert good cause based on their counsel's error in assuming that the motion would be timely if made within a 120 days of filing the note of issue. While the court, in its discretion, may require that a motion be made in less then the 120-day period ( see, Fainberg v. Dalton Kent Securities Group, Inc., 268 AD2d 247 (1st Dept 2000)), the error of defendants' attorneys under the circumstances here, when the delay was minimal, is sufficient to constitute good cause. Accordingly, defendants' request to extend the time for making this motion is granted.
Claims and Counterclaims Arising under the Insurance Policy
The primary issue with respect to the claims to recover under the insurance policy and the counterclaim to rescind it, is whether Mr. Koloski made material misrepresentations in his response to questions in the application for insurance regarding his health. The record indicates that the application was filled out by Met Life's agent, defendant Skowronska, who read the questions to Mr. Koloski in English.
There is no dispute that Mr. Koloski died within the two years of the contestable period such that Met Life would be entitled to rescind the policy based on material misrepresentations. See Insurance Law § 3203 (a)(5).
The alleged misrepresentations were made in response to Questions 10, and 11 of Part A of the application. Question 10, entitled, "Attending Physician" asked "(a) Name and address of personal physician, practitioner or health facility used by Proposed Insured; (b) Date of Last Consultation; and (c) Reason for consultation and diagnosis, treatment and advice." Mr. Koloski responded to sub-part (a) by providing the name, address and telephone number of his physician, Dr. Pando Josifovski, and to sub-part (b) by stating that his last consultation was in May 1998. In subpart (c), Mr. Koloski responded "check up-no health problems."
The application, by the express terms of the policy, is part of the contractual agreement between the parties.
On the application, Dr. Josifovski's name is spelled "Yosifofsky."
Question 11 contains six questions, sub-parts(a) through(f), which are to be answered yes or no, and states that "for any Yes answers give details below." Mr. Koloski answered no to each sub-part, although his alleged misrepresentations concern only Questions 11(a) and 11(f). Question 11(a) asks has any person proposed for insurance, "[i]n the last five years, been treated, examined, or advised by any physician, practitioner, or health facility (Do not include colds, minor viruses, or minor injuries which prevented normal activities for a period of less than 5 days)." Question 11 (e) asks if the person proposed for insurance "ever had any surgical operation not revealed in the previous questions or gone to a hospital, clinic, dispensary or sanatarium for observation, examination or treatment not revealed in previous questions."
Part A of the Application further provides, just above the signature line, that "I have read this application and agree that all statements and answers are true and complete to the best of my knowledge and belief." Mr. Koloski signed the application on August 7, 1998. On or about September 1, 1998, Met Life issued a 20 year modified term life insurance policy in the amount $100,000.
Defendants maintain that the response to questions 10 and 11(a) and (e) constituted material misrepresentations as a matter of law. In support of their position, defendants argue that the medical records obtained from Mr. Koloski's physician, Dr. Josifovski indicate that Mr. Koloski suffered from a seizure disorder since he was a young adult and that he had been continuously taking a medication for the disorder known as Dilantin, which can adversely affect the liver. In addition, defendants assert that the records reveal that Mr. Koloski had a seizure on August 31, 1997, or less than one year before he applied for life insurance.
Defendants also note that the records indicate that Mr. Koloski underwent regular blood tests to monitor the levels of Dilantin in his blood. They point out that Mr. Koloski underwent an ultrasound of on January 15, 1997 at Morningside Hospital, which revealed he had a fatty liver and splenomegaly (i.e. an enlarged spleen).
Defendants also point out that the medical records reveal that Mr. Koloski's last visit to Dr. Josifovski was in June 1998 and not in May 1998, as indicated on the application, although they fail to explain how this error is material.
Plaintiff Lila Koloski testified at deposition that her husband suffered from a epilepsy since he was a young man, took medication for the condition, and visited his physician at least twice a year, and perhaps as often as every three months. medication.
In opposition, plaintiffs argue that as Mr. Koloski did not speak English well, he should not be bound by the answers to the questions on the application.
Plaintiffs also contend that the questions in the application were ambiguous, and that Mr. Koloski did not make any material misrepresentations regarding his health. In support of their position, plaintiffs submit the affidavit of Dr. Josifovski, who states that Mr. Koloski was his patient between April 1982 and June 1999. According to Dr. Josifovski, "[o]ne of the purposes of [Mr. Koloski's] visits was for me to monitor his intake of Dilantin, which Mr. Koloski was taking to control his epilepsy and prevent seizures . . ." He also states that since "Dilantin may cause side effects such as liver damage . . . it was incumbent on me to monitor him and, if necessary, to adjust the medication." Thus, during Mr. Koloski's visits "routine 'blood work' was performed [and] lab tests were ordered as a matter of course to insure that patients [like Mr. Koloski who] are in good health."
Dr. Josifovski also states that all his visits with Mr. Koloski were scheduled and he never treated him on "an emergency basis." And, according to Dr. Josifovski, "[p]rior to August 1998, I did not give Mr. Koloski any reason to believe that he was in poor health."
As a preliminary matter, Mr. Koloski's alleged inability to understand English well does not provide a basis for excusing any misrepresentations he may have made on the application for insurance. Under New York law, "a claim of illiteracy in the English language is, by itself, insufficient to avoid the rule that 'a party who signs a contract without any valid excuse for failing to read it is 'conclusively bound' by its terms." Kenol v. Nelson, 181 AD2d 863, 866 (2nd Dept 1992) (citations omitted); see also, Sofio v. Hughes, 162 AD2d 518 (2nd Dept), appeal denied, 76 NY2d 712 (1990); see also, Shklovskiy v. Khan, 273 AD2d 371 (2nd Dept 2000) (persons illiterate in the English language are not automatically excused from complying with the terms of a contract which they sign simply because they could not read it. Such persons must make reasonable efforts to have the contract read to them).
While the record contains conflicting evidence regarding the extent of Mr. Koloski's fluency with the English language, it also indicates that he had a sufficient knowledge of the language to apply for union and social security benefits without the assistance of a translator. Thus, the facts here do not warrant and finding of fraud or overreaching. See generally, Metzger v. Aetna Ins. Co., 227 NY 411, 415-416 (1920).
Under section 3204 of the New York Insurance Law ("the Insurance Law"), statements made on an application for insurance by a prospective insured are deemed representations. Section 3105(a) defines a representation as "a statement as to past or present fact, made to the insurer by . . . the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof," and a misrepresentation as "a false representation. . . ." Insurance Law § 3105(b) provides that "no misrepresentation shall avoid any contract of insurance unless such misrepresentation is material," and that a misrepresentation is not material "unless knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such a contract."
Moreover, it is well settled when a misrepresentation is material as defined by Insurance Law § 3105,"it is no defense to an action for rescission that the misrepresentation was innocently made." Vella v. The Equitable Life Assurance Society of U.S., 887 F2d 388 (2d Cir. 1989), citing, Process Plants Corp. v. Beneficial Nat'l Ins. Co., 53 AD2d 214, 216 (1st Dept 1976).
As they are drafted by insurance companies, "New York law construes insurance contracts in favor of the insured and resolves all ambiguities against the insurer." Vella v. The Equitable Life Assurance Society of the U.S., 887 F2d at 391 (citations omitted); see also, U.S. Fidelity Guaranty Co. v. Annuziata, 67 NY2d 229, 232 (1986). This rule applies to questions in an insurance application, when an insurance company seeks to avoid liability by asserting that the prospective insured made material misrepresentations in responding to such questions. Vella v. The Equitable Life Assurance Society of the U.S., 887 F2d at 392. It has been held that "the questions 'must be so plain and intelligible that any applicant can readily comprehend them. If any ambiguity exists, the construction will obtain most favorable to the insured.'" Id., quoting, Dineen v. General Accident Ins. Co. of Philadelphia, 126 AD 167, 169 (4th Dept 1908). Furthermore, "an insured has no obligation to volunteer information not directly requested and . . . an answer to any ambiguous question cannot be the basis for a claim of misrepresentation against the insured." Nadel v. Manhattan Life Ins. Co. of New York, 211 AD2d 900, 901 (3rd Dept 1995); Fanger v. Manhattan Life Ins. Co. of New York, 273 AD2d 438 (2nd Dept 2000), lv dismissed 96 NY2d 754 (2001).
In this case, construing the questions at issue most favorably to Mr. Koloski, as the insured, the court finds that they are ambiguous such that defendants are not entitled to summary judgment. First, although defendants claim that Mr. Koloski misrepresented the facts by failing to inform Met Life about his seizure disorder, the questions regarding his health do not specifically inquire as to whether he had such a disorder. Notably, Part B of Met Life's application, which Mr. Koloski was not required to complete, directly asks whether an applicant has epilepsy. And, there are no questions in the application which inquire whether Mr. Koloski had a chronic condition. See Botway v. American Itern'l Assur. Co., 151 AD2d 288 (1st Dept 1989) (in view of the ambiguities of the policy, a jury might conclude that if illicit drug use is a crucial factor in determining whether to issue life insurance, the drafter should have specifically asked information regarding drug use).
Question 10, which inquires about the reason for "consultation and advice, treatment and diagnosis" with attending physician may have been reasonably interpreted to mean the overall purpose for an appointment with an attending physician thus eliciting the honest response of "a check-up," this is so notwithstanding the blood tests which, for Mr. Koloski, were routine. As for Mr. Koloski's statement that he "had no health problems," it cannot be said as a matter of law that such a statement constituted a misrepresentation as it was made in response to a question regarding the purpose of a visit to his regular physician. In fact, in his affidavit, Dr. Josifovski stated that, "[p]rior to August 1998, I did not give Mr. Koloski any reason to believe that he was in poor health."
Moreover, contrary to defendants' position, questions 11(a) and 11(e) do not unambiguously require Mr. Koloski to disclose his seizure disorder or that he received an ultrasound test for his liver conducted at a hospital in January 1997 for diagnostic purposes. Question 11(a) which inquires whether in the last five years, Mr. Koloski had been "treated, examined or advised by any physician, practitioner or health care facility", when read together with question 10 might be interpreted to mean a physician other than the one identified in question 10. Similarly, a reasonable person could conclude that since the question states the proposed insured should not include "colds, minor viruses, or minor injuries which prevented normal activities for a period of less than 5 days," that the question was not referring to an event which did not prevent normal activities for less then five days. Nor do the tests performed to monitor Mr. Koloski's liver, on their face, require an affirmative response as the question does not ask whether the proposed insured has undergone any tests.
Likewise, question 11(e) does not refer to any diagnostic tests. Instead, the question inquires about "any surgical operation not revealed in the previous questions" or a visit to a hospital or other health care facilities for "observation, examination or treatment." In addition, question 11(e) does not unambiguously require a proposed insured to disclose a chronic seizure disorder that did not require hospitalization or other intensive treatment.
In contrast, Met Life has submitted sufficient evidence to establish, as a matter of law, that assuming the statements were misrepresentations, that such misrepresentations were material. Under New York law, a misrepresentation in an insurance application is material if the "failure to furnish a true answer defeats or seriously interferes with the exercise of an insurance company's right to accept or to reject the application. The major question is whether the company has been induced to accept an application which it might have otherwise refused." Process Plants Corp. v. Beneficial Nat'l Ins. Co., 53 AD2d 214, 217 (1st Dept 1976), aff'd 42 NY2d 928 (1977) (citations omitted). In determining whether a misrepresentation is material to the risk, the "'[t]he question . . . is not whether the company might have issued the policy even if the information had been furnished; the question in each case is whether the company had been induced to accept an application which it might otherwise have refused.'" Aguillar v. U.S. Life Ins. Co., 162 AD2d 209, 210-211 (1st Dept 1990) (emphasis in original).
The issue of whether a misrepresentation regarding a proposed insured's medical condition is material is generally a question of fact for the jury. Id, at 210. However, "where evidence concerning materiality is clear and uncontradicted, it is for the court to decide as a matter of law." Id. In determining materiality, the court generally relies on "two categories of evidence, an affidavit from the insurer's underwriter and the insurer's underwriting manual." Kroski v. Long Island Savings Bank, FSB, 261 AD2d 136, 137 (1st Dept 1999).
Here, defendants rely on the affidavit of Richard Catozzi, the Director of Met Life's underwriting department, together with certain underwriting guidelines that were in effect when Mr. Koloski applied for his life insurance policy. Mr. Catozzi states that in accordance with Met Life's underwriting guidelines, when an applicant for life insurance has a seizure disorder and has had a seizure within two years of the time of the application, Met Life would not have issued the policy as written. In particular, he asserts that under the guidelines, the existence of such a disorder would have resulted in a mortality rating of 200 that would have resulted in a higher premium rating. Likewise, he states that since Mr. Koloski's medical records indicate a fatty liver and splenomegaly (an enlarged spleen), that the policy would have been postponed indefinitely until the cause of these conditions had been determined.
These statements, which are supported by Met Life's guidelines, are sufficient to warrant a determination that if misrepresentations were made, the misrepresentations were material. And, contrary to plaintiff's argument, the affidavit from the insurer's underwriter and the guidelines are adequate evidence of underwriting practices with respect to applicants with similar histories. See Cohen v. Mutual Benefit Ins. Co., 638 F.Supp 695, 698 (E.D. NY 1986).
Nonetheless, as there are triable issues of fact as to whether Mr. Koloski made misrepresentations with respect to questions regarding his health condition on the insurance application, defendants are not entitled to summary judgment dismissing plaintiffs' first and second causes of action or on their counterclaim for rescission. Claim Under General Business Law section 349
Plaintiffs have also argued that the medical records relied on by defendants are not competent evidence as they are uncertified. However, under the circumstances here, where there is no dispute that Mr. Koloski suffered from certain medical conditions, the lack of certification is a technical irregularity which can be disregarded. Borchardt v. New York Life Ins. Co., 102 AD2d 465 (1st Dept), aff'd 63 NY2d 1000 (1984).
Section 349(a) of the General Business Law makes it unlawful to perform "deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state." General Business Law § 349 was enacted in 1970 as part of General Business Law article 22-A for the purpose of giving the consumer "an honest market place where trust prevails between buyer and seller" Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank N.A., 85 NY2d 20, 25 (1995) (citation omitted).
For section 349 to apply, a plaintiff "must charge conduct of the defendant which is consumer-oriented" Oswego Laborers' Local 214 Pension Fund, supra at 25. A transaction is consumer-oriented when the complained of "acts and practices have a broader impact on consumers at large. Private contract disputes, unique to the parties, for example would not fall within the ambit of the statute" Id. However, "[c]onsumer-oriented conduct does not require a repetition or pattern of deceptive behavior." Id. Thus, a plaintiff "need not show that the defendant committed the complained-of-acts repeatedly either to the same plaintiff or to other consumers but instead must demonstrate that the acts or practices have a broader impact on consumers at large." Id.
In addition to showing consumer oriented conduct, to state a claim under GBL section 349, it must be shown that a defendant's allegedly wrongful conduct constitutes "an act or practice that is deceptive or misleading in a material way and that plaintiff has been injured by reason thereof." Oswego Laborers' Local 214 Pension Fund, supra at 25. Actionable conduct under GBL section 349 does not have to rise to the level of fraud ( Gaidon v. Guardian Life Ins., 96 NY2d 201, 209 (2001)), and a plaintiff does not have to establish intent to defraud or justifiable reliance. See Small v. Lorilland Tobacco Co., Inc., 94 NY2d 43, 55 (1999).
The cause of action under GBL section 349 was the subject of a motion to amend the complaint and the court permitted such an amendment based on allegations that Met Life engaged in a deceptive business practice by inducing Mr. Koloski to buy a standard life insurance policy without providing him with an English translator. However, after the completion of discovery, there is no evidence in the record that Ms. Skowronska, or any other representative of Met Life, took advantage of Mr. Koloski's alleged difficulties with English to induce him into entering into the contract of insurance. In fact, Ms. Koloski testified that Ms. Skowronska did not solicit Mr. Koloski to obtain life insurance but, instead, Mr. Koloski initiated the relationship for the purpose of obtaining automobile insurance from an insurance agency owned by Skowronska's husband. Moreover, Ms. Koloski admitted that she had no first-hand knowledge of the meeting between her husband and Skowronska, and testified that her husband never indicated to her that he had trouble understanding the questions on the application. In addition, there was no evidence adduced during discovery that the failure to provide a translator to Mr. Koloski was directed to the "consuming public at large" and was not unique to the parties in this action. See Goldblatt v. MetLife, Inc., 306 AD2d 217 (1st Dept 2003).
Additionally, plaintiffs' claims raised for the first time in its opposition papers, that defendants violated General Business Law § 349 through, inter alia, its underwriting practices and through the ambiguity of its questions regarding an applicant's health, are without merit.
Accordingly, defendants are entitled to summary judgment dismissing the third cause of action based on General Business Law § 349.
Breach of Duty of Good Faith
To demonstrate a breach of the insurer's duty of good faith, a plaintiff must "make the extraordinary showing of a disingenuous or dishonest failure by the defendant to carry out its contract." Herbert v. State Farm Mutual Automobile Ins. Co., 124 AD2d 958, 959 (1986) (citations omitted); see also, Scavo v. Allstate Ins. Co., 238 AD2d 571 (2nd Dept 1997). Once a showing of bad faith is made, a plaintiff can recover "consequential damages beyond the limits of the policy for the claimed breach of contract." Acquista v. New York Life Ins. Co., 285 AD2d at 81.
Here, the record contains insufficient facts to support a claim for breach of the duty of good faith. Specifically, contrary to plaintiffs' position, no claim for breach of the duty of good faith arises out of Met Life's practice of permitting its agents to fill in applications for insurance in the absence of evidence that this practice was intended to deny any recovery under the policy. In addition, as under New York law, Met Life is not required to verify medical history provided by an applicant for insurance ( Kroski v. Long Island Savings Bank, FSB, 261 AD2d at 137), evidence that Met Life did not seek further information from Mr. Koloski's physician before issuing the relevant policy does not provide sufficient evidence of lack of good faith.
Accordingly, the cause of action for breach of duty of good faith must be dismissed.
Equitable Estoppel
The claim for equitable estoppel is based on allegations that Mr. Koloski reasonably relied on Met Life's account representative, Skowronska, to fill out the application in good faith and that it would be unjust to deny coverage due to such reliance by Mr. Koloski. This claim is without merit. As indicated above, even if he had difficulties with English, Mr. Koloski was responsible for ensuring he understood the contract before he signed it ( Sofio v. Hughes, 162 AD2d 518 (2nd Dept 1990)), so that any reliance on Skowronska was not justifiable and cannot provide the basis for an equitable estoppel claim.
Negligence and Malpractice Claim Against Defendant Skowronska
The sixth cause of action, against Skowronska only, alleges that Skowronska owed Mr. Koloski a duty to obtain the insurance coverage he requested. It is also alleges that Skowronska was negligent in failing to "make certain that Mr. Koloski understood the application for life insurance and/or the questions that she posed to him."
In general, an insurance agent's duty to a customer is limited "to obtain[ing] coverage for [the] clients within a reasonable amount of time or inform the client of the inability to do so . . ." Murphy v. Kuhn, 90 NY2d 266, 270 (1997). Here, there is no question that Skowronska obtained coverage for Mr. Koloski, even though such coverage was later disclaimed.
Plaintiffs apparently argue, however, that since Skowronska read the application to Mr. Koloski, that the facts of this case constitute an "exceptional and particularized situation . . . in which [an] insurance agent through [her] conduct or by express or implied contract . . . assume[s] or acquire[s] duties in addition to those fixed by the common law." Id. This argument is without merit, as it was Mr. Koloski's duty to make certain that he understood the questions in the application before he signed it.
Accordingly, the negligence and malpractice claims against Skowronska must be dismissed.
Conclusion
In view of the above, it is
ORDERED that the motion for summary judgment is granted to the extent of dismissing and severing the third, fourth, fifth and sixth causes of action; and it is further
ORDERED that the action shall continue between plaintiffs and defendant Met Life with respect to the first and second causes of action and the counterclaim.