No. 149
Neil A. Goldman, &c.,
Appellant, v. Metropolitan Life Insurance
Company,
Respondent.
1 No. 150
Allen S. Franco, et al.,
Appellants, v. The Guardian Life Insurance
Company of America,
Respondent.
1 No. 151
Michael Katz,
Appellant, v. American Mayflower Life Insurance
Company of New York,
Respondent.
Case No. 149:
2005 NY Int. 139
November 21, 2005
This opinion is uncorrected and subject to revision before
publication in the New York Reports.
Ira A. Schochet, for appellant. Christopher Van Gundy, for respondent. Case No. 150:Ira A. Schochet, for appellants. Thomas J. Dougherty, for respondent. Case No. 151:William R. Weinstein, for appellant. Reid L. Ashinoff, for respondent.
G.B. SMITH, J.:
The primary issue in each of these cases is whether
there is a breach of an insurance contract when a policy date is
set prior to an effective date and the insured, in the first year
of the policy, must pay for days that are not covered. We hold
that the insurers' CPLR 3211(a) (1) and (7) motions to dismiss the
complaints were properly granted, and we affirm the orders of the
Appellate Division. Facts
Goldman v Metropolitan Life Ins. Co. On January 30, 2002, plaintiff "submitted an
application to MetLife for a yearly renewable term life insurance
policy in the amount of $250,000." On May 30, 2002, the policy
was delivered and plaintiff paid his annual premium. The insurer
set the policy date as May 6, 2002. The total annual premium
amount was $217.50. Goldman brought a putative class action alleging breach
of contract, breach of the implied covenant of good faith and
fair dealing, unjust enrichment and violations under General Business Law § 349. In the complaint and on this motion to
dismiss, plaintiff argues that since he was not covered for the
24 days between May 6 and May 30, 2002, yet was required to pay
for that period of time, there was a breach of contract. He
argues that the term "annual premium" is ambiguous because it
leads the average insured to believe that he or she will receive
365 days of coverage. In fact, based upon the delay from the
policy date until the date of payment and delivery of the policy,
there are fewer than 365 days of coverage in the first year of
the policy. Defendant counters that there is no breach, the policy
is not ambiguous and that the dates of coverage are in accordance
with the payment of the premiums. Defendant points to the
language of the application, which is incorporated into the
policy and states "no insurance will take effect until a policy
is delivered to the owner and the full first premium due is
paid." Further, plaintiff had the option of not accepting the
policy and receiving a refund of any premiums already paid.
According to defendant, the term "annual premium" never referred
to the days of coverage but rather to the "frequency of payment."
Supreme Court denied MetLife's motion to dismiss based
on ambiguity in the contract specifically related to payment for
days of coverage without actually receiving coverage. The
Appellate Division reversed, granted the insurer's motion and
dismissed the complaint, finding "that the terms of the subject
insurance policy, including the initial application, which was
incorporated therein, were not ambiguous and clearly set forth
when coverage was to begin and when the first and subsequent
annual premiums were to be paid by the C.O.D. policyholders."
The Appellate Division granted plaintiff's motion for leave to
appeal and certified the following question to this Court: “Was
the order of this Court, which reversed the order of Supreme
Court, properly made?"
Franco v Guardian Life Ins. Co. of America.
On June 13, 2000, the Francos signed an application for
a "modified premium whole life insurance policy in the amount of
two million dollars." On July 28, 2000, Guardian Life sent a
policy to the Francos. On the same day, the Francos completed a
second application in order to change the beneficiary from the
wife to a trust. The total initial annual premium of $2790 was
paid on August 2, 2000. On August 28, 2000, Guardian Life
reissued the policy to plaintiffs with the same policy date of
July 20, 2000. The policy became effective only after the policy
was delivered and accepted by the insured. Even though it was
permitted by the application, the Francos chose not to purchase
interim coverage and receive a conditional receipt for temporary
insurance to cover the dates between the date of application and
delivery of the policy. The Franco plaintiffs brought a putative class action
for breach of contract, unjust enrichment and violations of
General Business Law § 349. They argue that they were required
to pay for a period of time in which the insurance company
assumed no financial risk and, thus, unjustly collected monies
without providing coverage. In addition to the breach of
contract and unjust enrichment claims, the Francos argue that
Guardian engaged in deceptive business practices in violation of
General Business Law § 349. The Francos argue that the term
"annual" is ambiguous because it does not mean a calendar year
which is what the average insured would interpret the word to
mean. Defendant counters that the life insurance policy is
clear on its face, that the payment of the premiums is stated on
the policy and that the policy is not ambiguous. Also, defendant
argues that the date of delivery was July 28, 2000, not October
10, 2000 and that the premiums are due from the policy date, not
the date of delivery of the policy. Further, the Francos had an
option either to pay at the time of signing the application and
have coverage from the policy date or to pay at the time of
delivery which would give them the same policy date but no
coverage from the policy date until the date of payment. Katz v American Mayflower Life Ins. Co. of New YorkOn July 11, 1997, plaintiff signed an insurance
application with American Mayflower Life Insurance Company of New
York for a term life policy of one million dollars. The policy
was issued on September 2, 1997 and delivered on September 24,
1997. On the date of delivery, plaintiff sent in his initial
premium for $447.20. His annual premium, as stated on the
contract, was $1720, to be paid in quarterly installments. The
policy also stated when each subsequent premium was due until the
full premium was paid. Plaintiff brought a putative class action alleging
breach of contract and unjust enrichment. Like the Goldman and
Franco plaintiffs, Katz argues that the insurance contract was
breached and that the defendant was unjustly enriched.
Defendant denies that the policy is ambiguous and
instead points to the policy language as clearly stating the
dates of coverage and when the premiums are due. Defendant
argues that all premiums, after the initial premium, were due
based on the policy date, not the delivery date and that
plaintiff continued to pay premiums under this policy for four
years prior to filing a complaint. In fact, the premium schedule
which governed defendant's policy stated that the premiums would
be due on the 2nd of March, June, September and December. While the Goldman and Franco policies provide for a 10-
day “free look” period, the Katz policy allows for a 20-day "free
look" period in which the insured can reject the policy and be
refunded any previously paid premiums. The policy states that
the premiums must be paid in advance of coverage and that the
total initial premium must be paid as "shown in the Schedule on
or before policy delivery."
Supreme Court granted the motion to dismiss brought by
Guardian Life against the Francos. On the same date, the Supreme
Court granted American Mayflower's motion to dismiss the Katz
complaint for the reasons stated in its Franco decision. The
Appellate Division affirmed Supreme Court in Katz, and, based
upon its Katz decision, affirmed Supreme Court's determination in
Franco v Guardian Life. In Katz, the Appellate Division wrote:
"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 [which] 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."
In Franco and Katz, the Appellate Division granted plaintiffs'
motion for leave to appeal to this Court and certified the
following question: “Was the order of this Court, which affirmed
the order of the Supreme Court, properly made?”
DiscussionWhen determining a motion to dismiss, the court must
"accept facts as alleged in the complaint as true, accord
plaintiffs the benefit of every possible favorable inference, and
determine only whether the facts as alleged fit within a
cognizable legal theory" ( see Arnav v Brown, Raysman, Millstein,
Felder & Steiner, , 96 NY2d 300, 303 [2001]; Leon v Wilfredo-
Martinez, , 84 NY2d 83, 87-88 [1994]). A CPLR 3211 dismissal "may
be granted where documentary evidence submitted conclusively
establishes a defense to the asserted claims as a matter of law"
( Held v Kaufman, , 91 NY2d 425, 430-431 [citation omitted] [1998]).
Breach of ContractThere were two options for payment in each of the
insurance agreements. Plaintiffs could pay at the time the
application was submitted and receive temporary coverage until
the delivery of the policy, or pay at the time of delivery of the
policy and have coverage become effective upon receipt of the
first initial premium and delivery of the policy. The second
option was the cash on delivery (C.O.D.) option. In all three
cases, plaintiffs chose the second option.Goldman, Katz and Franco all argue that their insurance
contracts were breached. The basic issue is whether an insurance
contract using the word “annual” to describe premium payments is
ambiguous as to coverage because the insured, in the first year,
receives less than 365 days of coverage. The insureds argue that
the policy is ambiguous because it is the average insured's
understanding that an annual premium purchases a full year of
coverage. However, "mere assertion by one that contract language
means something to him, where it is otherwise clear, unequivocal
and understandable when read in connection with the whole
contract, is not in and of itself enough to raise a triable issue
of fact" ( see Bethlehem Steel Co. v Turner Const. Co., , 2 NY2d 456, 460 [1957]). In each case, the Appellate Division properly held that
the contracts could be interpreted only in one manner and granted
the CPLR 3211 motions to dismiss.
There is no evidence that MetLife was not bargaining in
good faith and fair dealing with the insured ( see Kirke La Shelle
Co. v Paul Armstrong Co., 263 NY 79, 85 [1933]). The application
clearly states the terms and conditions of the insurance policy.
Further, the policy also states when coverage will begin.
Plaintiff argues that the period in the contract which allows the
insured to return the policy and receive a refund of any paid
premiums is misleading. Plaintiff cites several lower court
cases from foreign jurisdictions that have rejected premiums
based on a policy date versus a coverage date ( see Semler v
Guardian Life Ins. Co., Case No. 990637 [Cal. Sup. Ct., 2002];
Semler v First Colony Life Ins. Co., Case No. 984902,
[Cal. Super., 1999]; Braustein v General Life Ins. Co., Case No.
01-985-CIV, Slip Op. [US Dist Ct, S.D. Fla, 2002]). Those cases
were based on the law of their respective states ( see Semler v
Guardian Life Ins. Co., supra). In other states, courts have
permitted premiums that are based upon a policy date rather than
a coverage date ( Life Ins. Co. Of the Southwest v Overstreet,
580 SW2d 929 [Texas Court of Civil Appeals 1980]; Travelers Ins.
Co. v Castro, 341 F2d 882 [1st Cir 1965]). Plaintiffs have cited no case law in New York State
holding that the "Risk Free" period is misleading. The fact that
the insured can return the contract does not mean that the
contract period would otherwise be covered even without a
payment. There is nothing in the "Risk Free" period suggesting
that the coverage will start from the policy date without the
payment of a premium. Unjust EnrichmentPlaintiffs in each case make a claim for unjust
enrichment. The theory of unjust enrichment lies as a quasi-
contract claim. It is an obligation the law creates in the
absence of any agreement ( see State of NY v Barclays Bank of NY,
, 76 NY2d 533, 540 [1990]). Here, in each case, there was no
unjust enrichment because the matter is controlled by contract
( see Clark-Fitzpatrick, Inc. v Long Island Railroad Co., , 70 NY2d 382, 388 [1987] ["the existence of a valid and enforceable
written contract governing a particular subject matter ordinarily
precludes recovery in quasi contract for events arising out of
the same subject matter"]). Given that the disputed terms and
conditions fall entirely within the insurance contract, there is
no valid claim for unjust enrichment. General Business Law § 349The Francos' claim that General Business Law § 349 was
breached should also be rejected.[1]
That section makes unlawful
“deceptive acts or practices in the conduct of any business,
trade or commerce or in the furnishing of any service in this
state.” Plaintiffs have not properly alleged any deceptive
practices. Accordingly, in each case, the order of the Appellate
Division should be affirmed, with costs, and the certified
question not answered as unnecessary.
