Blumenberg v Aviva Life & Annuity Co. of N.Y.

[*1] Blumenberg v Aviva Life & Annuity Co. of N.Y. 2013 NY Slip Op 51612(U) Decided on October 1, 2013 Supreme Court, Kings County Schmidt, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on October 1, 2013
Supreme Court, Kings County

Benzion Blumenberg and Hersh M. Herskovitz, as trustees of the Bnei Elimelich Irrevocable Life Insurance Trust, Plaintiffs,

against

Aviva Life and Annuity Company of New York, Defendant.



500568/13



Plaintiff Attorney: Ira P. Lipsius, Esq., Cheryl Lipsius, Esq., 80-02 Kew Gardens Road, Suite 1030, Kew Gardens, NY 11415

Defendant Attorney: Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 200 Campus Drive, Florham Park, NJ 07932

David I. Schmidt, J.

Upon the foregoing papers, defendant Aviva Life and Annuity Company of New York (Aviva) moves for an order, pursuant to CPLR 3211(a)(7), dismissing plaintiffs' claims against Aviva.

Defendant's motion is denied.

In this action, plaintiffs Benzion Blumenberg and Hersh M. Herskowitz, as trustees of the Benei Elimelich Irrevocable Life Insurance Trust (Trust), allege that defendant breached the terms of an insurance policy insuring the life of Jeanette Blumenberg by failing to pay the policy's death benefit to the Trust, the policy's beneficiary. In the complaint, plaintiffs allege that defendant declined to pay the death benefit to the trust because defendant asserted that the policy lapsed prior to Jeanette Blumenberg's death on April 24, 2011. Plaintiffs, however, contend that defendant failed to comply with the terms of the policy and with the requirements of Insurance Law § 3211 in sending a lapse notice to plaintiffs in that: (1) the notice failed to state the payment necessary to keep the policy in force; (2) payment due date of February 20, 2011 was an incorrect due date; and (3) that the notice was not sent within the proper time period. Because of these alleged defects with the lapse notice, plaintiffs assert that defendant's attempt to cancel the policy was unlawful, and that the policy was thus in full force at the time of Jeanette Blumenber's death.

In moving, Phoenix contends that it is entitled to dismissal of the complaint because it complied with the statutory requirements for terminating a policy for non-payment of premiums. Defendant has attached a copy of the Life Insurance Policy (Policy) at issue to its motion papers. This Policy was a flexible premium policy that required the payment of an annual planned premium of $8,521 (or 710.08 monthly), allowed the payment of additional premiums, but, depending on whether the face amount was changed, a policy loan or partial withdrawal was made, or defendant adjusted the interest rates, the Policy provided that additional premiums could be required to keep the policy in force (Policy at page 3 and 7). The fourth paragraph of the premiums section of the policy provided, as is relevant here, that, [t]his policy will remain in-force as long as the surrender value is large enough to cover the monthly deduction" (Policy at page 7). The policy also provided that: "There is a grace period of 61 days. This means if the policy does not meet the conditions set forth in th fourth paragraph of the Premiums Provision above, this policy and any attached [*2]riders will continue in force for 61 days.[FN1] "If you (the named insured) die during the grace period, any monthly deduction owed will be deducted from the benefits payable."We (defendant) will mail a notice at least 15 days but no more than 45 days before the date the policy will end, to the Owner's (Trust) last known address and to that of any assignee of record. If enough premium to cover the monthly deduction is not received by us before the end of the grace period, this policy will end without value" (Policy at page 8).

Defendant also attached a copy of a letter, dated January 5, 2011, (lapse notice) which provided, as relevant here, that: "This letter is to inform you that your policy with Aviva Life and Annuity Company of New York is in its grace period and in danger of lapsing. To keep this policy inforce (sic), please remit $3,054.69 by February 20, 2011.[FN2] "The $3,054.69 being requested will only provide you coverage for 2 months beyond February 20, 2011. If you are unable to pay the amount requested, please contact us immediately to obtain the minimum payment to avoid a lapse in coverage at this time. If the payment is not made on or before the due date or within the grace period, and the net cash surrender value on the monthly anniversary day is insufficient to pay the monthly deduction, the policy will terminate except as to the right to any cash surrender value of non-forfeiture benefit."

Finally, defendant has attached a copy of a letter dated February 21, 2011 stating that the Policy was terminated based on the non-payment of premiums, a copy of a check, dated February 12, 2011, made out to defendant by plaintiff Meilech Herskovitz in the amount of [*3]$3,100 and a copy of a check in the amount of $3,100 made out to the Trust by defendant.

In considering a motion to dismiss for failing to state a cause of action under CPLR 3211(a)(7), the pleading is to be afforded a liberal construction (CPLR 3026), and the court should accept as true the facts alleged in the complaint, accord plaintiff the benefit of every possible inference, and only determine whether the facts, as alleged, fit within any cognizable legal theory (see Hurrell-Harring v State of New York, 15 NY3d 8, 20 [2010]; Leon v Martinez, 84 NY2d 83, 87-88 [1995]). Although evidentiary material may be considered in determining the viability of a complaint, the complaint should not be dismissed unless defendant has established "that a material fact alleged by the plaintiff is not a fact at all and that no significant dispute exists regarding it" (Stewart v New York City Tr. Auth., 50 AD3d 1013, 1014 [2d Dept 2008][internal quotation marks and citations omitted]; see also Lawrence v Miller, 11 NY3d 588, 595 [2008]; Nunez v Mohamed, 104 AD3d 921, 922 [2d Dept 2013]). To the extent that defendant's motion may also be deemed a motion to dismiss pursuant to CPLR 3211 (a) (1), such a motion may be granted "only where the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 [2002]; Harris v Barbera, 96 AD3d 904, 905 [2d Dept 2010]). To qualify as documentary evidence, printed materials "must be unambiguous and of undisputed authenticity" (Fontanetta v John Doe 1, 73 AD3d 78, 86 [2d Dept 2010]; see Flushing Sav. Bank, FSB v Siunykalimi, 94 AD3d 807, 808 [2d Dept 2012]).

The viability of the complaint here turns on whether defendant has shown its compliance with the notice requirements of Insurance Law § 3211. Section 3211 (a) (1), provides that an insurer may not terminate a policy for non-payment of premiums within a year of a default in the payment of premiums if the insurer has failed to comply with section 3211's notice requirements (Salzman v Prudential Ins. Co. of America, 296 NY 273, 277 [1947][addressing former version of statute]; Pinkof v Mutual Life Ins. Co. of NY, 49 AD2d 452, 454-455 [2d Dept 1975][addressing former version of statute], affd on the opinion below 40 NY2d 1003 [1976]; Liensny v Metropolitan Life Ins. Co., 166 App Div 625, 629 [4th Dept 1915][addressing former version of statute]; see also McDougall v Provident Sav. Life Assur. Socy. of NY, 135 NY 551, 556 [1892][addressing a predecessor of the current statute]). As is relevant here, section 3211 (a) (1) requires that notices for variable premium polices be sent, "no earlier than and within thirty days after the day when the insurer determines that the net cash surrender value under the policy is insufficient to pay the total charges that are necessary to keep the policy in force." Insurance Law § 3211 (b) (2) provides that the notice shall: "state the amount of such payment, the date when due, the place where and the person to whom it is payable; and shall also state that unless such payment is made on or before the date when due or within the specified grace period thereafter, the policy shall terminate or lapse except as to the right to any cash surrender [*4]value or nonforfeiture benefit."

Where an insurer alleges that it has terminated a policy for non-payment, the insurer bears the burden of pleading and proving compliance with these statutory notice requirements (see Salzman , 296 NY at 277; Maloney v John Hancock Mut. Life Ins. Co., 271 F2d 609, 613 [2d Cir 1959]).

Based on the documents noted above,[FN3] defendant asserts that it has complied with terms of the policy and the requirements of Insurance Law § 3211 for providing notice of lapse and that it thus properly terminated the Policy. However, the documents submitted do not address issues necessary to prove a defense under Insurance Law § 3211. In this regard, a key fact not contained in the pleadings or alleged in the complaint is the date when the Policy's surrender value was not large enough to cover the monthly deduction. This date determines the end date of the Policy's 61 day lapse period and is relevant to whether the lapse notice was timely mailed pursuant to Insurance Law § 3211 (a) (1). The assertion by defendant's counsel, contained in the memorandum of law in support of the motion, that the surrender value was insufficient to cover the monthly deduction as of the December 21, 2010 monthly deduction carries no evidentiary weight. Similarly, although it appears from the complaint that the Trust received the lapse notice, the date when defendant actually mailed the lapse notice is likewise not contained in the complaint or any of the documentary proof before the court. The dates on the notices and the fact that the notices were actually received by the Trust do not constitute proof that they were timely mailed (Phelan v Northwestern Mut. Life Ins. Co., 113 NY 147, 151 [1889]).[FN4] As such, defendant has not proven these facts through unquestioned documentary proof (CPLR 3211 [a] [1]) or otherwise demonstrated that a fact pled in the complaint (i.e. that defendant failed to comply with the lapse notice requirements of Insurance Law §3211), is not a fact at all (see Stewart, 50 AD3d at 1014).

In addressing the notice itself, plaintiffs assert that the amount due listed on the lapse notice, $3,054.69, does not state the correct amount needed to be paid to avoid a lapse. Implicit in the notice requirements of Insurance Law § 3211 (b) (1) is that the lapse notice [*5]correctly state the amount of premium necessary to be paid avoid a lapse (Zeligfeld v Phoenix Life Ins. Co., 39 Misc 3d 1213 [A], 2013 NY Slip Op 50605 * 4-5 [Sup Ct, Kings County 2013]; Turner v OM Financial Life Ins. Co., 822 F Supp2d 633, 637-638 [WD La 2011]; Estate of Blakely v Federal Kemper Life Ass. Co., 267 IllApp3d 100, 110-111, 640 NE 961, 969 [Ill App Ct 1994], app denied 159 Ill2d 566, 647 NE2d 1008 [1995]; Stilen v Cavalier Ins. Co., 194 Neb 824, 828, 236 NW2d 178, 180-181 [1975]; cf. Swayze v Mutual Life Ins. Co. of NY, 32 F2d 784, 787 [DC Kan 1929][In addressing a notice under Kansas' notice statute, the court stated, "It was apparent to the most obtuse that (the error) was a typographical error"]; Branch v Farmers' Life Ins. Co., 270 F 863, 865 [DC Kan 1919][addressing Kansas' notice statute]). Given the statutory scheme, the premium required to be paid should be consistent with the grace period requirements of Insurance Law § 3203 (a) (1), which provides that a lapse may be avoided if a premium sufficient to keep the policy in force for three months from the date of the insufficiency is paid on or before the end of the grace period.[FN5]

Here, the notice, by stating that the payment of $3,054.69 would keep the policy in force for two months beyond the end of the grace period, appears to ask for a premium that would keep the policy in force for four months after the alleged insufficiency date, a month more than the three months allowed by Insurance Law § 3203 (a) (1). The lapse notice, on its face, thus apparently overstates the amount of premium required to be paid to avoid a lapse under the statute. This overstatement may be ameliorated by the sentence in the lapse notice providing that, "If you are unable to pay the amount requested, please contact us immediately to obtain the minimum payment to avoid a lapse in coverage at this time." Nevertheless, despite the possible amelioration of the overstatement of the required premium payment, the apparent overstatement of the premium amount due demonstrates, at the very least, a factual issue as to whether defendant's lapse notice complies with Insurance Law § 3211 (b) (1).

There are also issues as to whether the lapse notice properly indicates that the policy would lapse or terminate if no payment was made by February 20, 2011.[FN6] Although, in the [*6]first paragraph of the lapse notice's body, defendant informs the Trust that the policy is in danger of lapsing and that a payment must be made to keep the policy "inforce," the last sentence of the second paragraph states, that "If the payment is not made on or before the due date or within the grace period, and the net cash surrender value on the monthly anniversary day is insufficient to pay the monthly deduction, the policy will terminate except as to the right to any cash surrender value of non-forfeiture benefit." This latter sentence is confusing since it leaves open the possibility that the policy would not lapse if the net surrender value was sufficient to pay the monthly deduction. If the policy was truly already in lapse, the net surrender value was already insufficient to pay the monthly deduction. In light of this language, plaintiffs could reasonably argue that the notice does not unequivocally inform the Trust that the policy was already in its grace period and that it would be terminated if payment is not timely received (Flint v Provident Life & Trust Co. of Phila., 215 NY 254, 257-258 [1915]; Phelan, 113 NY at 151-152).[FN7]

In sum, defendant has failed to demonstrate that it is entitled to dismissal of the complaint pursuant to CPLR 3211(a) (7) and/or CPLR 3211 (a) (1).

This constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1: This grace period is the same as that required by Insurance Law § 3203 (a) (1) for policies in which the amount and frequency of premiums may vary.

Footnote 2: In a heading above the body of the letter, the letter identified the "policy lapse date" as "February 20, 2011" and the insured as "Jeanette Blumberg."

Footnote 3: For purposes of deciding the motion, the court assumes, without deciding, that the documents submitted by defendant, such as the copy of the Policy and the lapse notice letter dated January 5, 2011, may be considered despite the absence of an affidavit from a person able to authenticate the documents because they are documents referred to in the complaint and plaintiffs have raised no objection to the authenticity (see Sondik v Kimmel, 33 Misc 3d 1237 [A], 2011 NY Slip Op 52262 * 3 n 3 [U] [Sup Ct, Kings County 2011], Deer Consumer Products, Inc. v Little, 32 Misc 3d 1243 [A], 2011 NY Slip Op 51691 * 4 [U] [Sup Ct, New York County 2011]).

Footnote 4: Although defendant's counsel refers to a "Lesko Certification" as supporting these factual assertions, no such certification is attached to the copy of the motion papers submitted to the court or to the motion papers electronically filed with E-File (NYSCEF, Supreme Court Kings County).

Footnote 5: Insurance Law § 3203 (a) (1) provides, as relevant here, "that, for policies in which the amount and frequency of premiums may vary, after payment of the first premium, the policyholder is entitled to a sixty-one day grace period, beginning on the day when the insurer determines that the policy's net cash surrender value is insufficient to pay the total charges necessary to keep the policy in force for one month from that day, within which to pay sufficient premium to keep the policy in force for three months from the date the insufficiency was determined."

Footnote 6: The court, however, rejects plaintiffs' assertion that the notice is defective because February 20, 2011 was a Sunday and defendant did not account for the extension granted by General Construction Law § 25 (1) in calculating the due date. Section 25(1) merely provides that where payment required by contract is due on a Saturday, Sunday or public holiday, the payment may be made on the next business. While Section 25 (1) would apply to the payment here (see Eachus v New York Life Ins. Co., 193 Misc 945, 947-948 [Sup Ct, New York County 1949]; cf. Graham v Wade, 53 Misc 2d 822, 822-823 [Sup Ct, Kings County 1967]), its provisions work by operation of law, and nothing in its language suggests that a payment notice must account for the statutory extension in calculated a payment due date.

Footnote 7: Although plaintiffs did not specifically raise this issue in their opposition papers, the possible defect with the notice is readily apparent from the notice's language.