Tannenbaum v. Provident Mutual Life Insurance of Philadelphia
41 N.Y. 1087
NY
1977
Check Treatment

Lead Opinion

Memorandum. We have concluded that there is sufficient evidence in the record for the jury to find that the defendant should be estopped from relying on the misstatements in the insured’s application in order to void the policy. The defendant’s agent misrepresented the comparative benefits and disadvantages of the policies and also failed to inform Guardian Insurance Company of the contemplated replacement of the existing policies it had issued, as was then required by Insur*1089anee Department regulation (11 NYCRR 48.5), thus foreclosing the most obvious source of more balancing information. As noted by the Appellate Division these misrepresentations of the defendant’s agent led to the surrender of the insured’s existing policies with Ghardian which brought the insured no gain and cost him the loss of the full reach of the incontestability clause including its provision covering suicide.

We recognize that the insured was not, or may not have been, completely faultless, assuming his mental condition did not affect his judgment, but what was done here was not only an individual wrong, it was also inconsistent with public policy. It has been noted that "[e]ven when the contracting parties are in pari delicto, the courts may interfere from motives of public policy. Whenever public policy is considered as advanced by allowing either party to sue for relief against the transaction, then relief is given to him” (3 Pomeroy’s Equity Jurisprudence, § 941, pp 733-734 [5th ed]; see, also, Ford v Harrington, 16 NY 285, 291).

The order of the Appellate Division should be affirmed.





Dissenting Opinion

Jasen, J. (dissenting).

I dissent and vote to reverse the order of the Appellate Division for the reasons stated in the dissenting opinion by Mr. Justice Myles J. Lane at the Appellate Division. (53 AD2d 86, 106.) I would add only a brief comment. As the majority of my colleagues put it, "the insured was not, or may not have been, completely faultless, assuming that his mental condition did not affect his judgment”. In fact, the insured, a medical doctor, concealed from the insurance company the knowledge that, only four months prior to his application for life insurance, he had been confined to a hospital for treatment of a severe mental condition, described in the hospital record as "acute schizophrenic reaction-paranoid type”. Despite his deteriorating mental condition and his simultaneous treatment for diabetes, the insured stated, in his insurance application, that he was in "good health” and had not been treated by a physician for a period of three years.

In my view, the insured committed a fundamental fraud on the insurance company, in the absence of which the $200,000 policy at issue here would never have been accepted. The undisputed misrepresentations are material as a matter of law. (E.g., Leamy v Berkshire Life Ins. Co., 39 NY2d 271, 274.) The fraud committed by the insured went to the very heart of the policy. The asserted misrepresentations by the insurance *1090company’s agent related to the effect that the new policy would have on existing policies and become quite beside the point when it is considered thát, without the insured’s fraudulent conduct, the new policy would not have been issued at all. It is disingenuous for the respondent to argue, as she does, that the insurer misrepresented the effect of the policy when the insured committed a primary and overriding fraud which, if it had been known, would have precluded any negotiations over the effect of the policy whatsoever, simply because without the fraud there would have been no policy.

As for the public policy argument advanced by the majority in this court, it is sufficient to say that one of the most basic of all public policies is the policy against permitting unscrupulous persons from profiting from their own wrong. (E.g., Riggs v Palmer, 115 NY 506, 511-512.) I cannot subscribe to a decision which authorizes the wife of an insured to collect $200,000 in life insurance, notwithstanding that the insured took his own life as a consequence of the very mental disease that the insured skillfully hid from the insurance company. In this instance, neither law, nor equity, nor public policy, authorize, much less favor, the enforcement of a policy obtained only through the exercise of the grossest type of fraud. The insured died within the contestability period and estoppel, which is an equitable doctrine, should not be invoked to enforce a fraud.

Chief Judge Breitel and Judges Gabrielli, Jones, Wachtler, Fuchsberg and Cooke concur; Judge Jasen dissents and votes to reverse in a separate opinion.

Order affirmed, with costs, in a memorandum.