Zeligfeld v Phoenix Life Ins. Co.

[*1] Zeligfeld v Phoenix Life Ins. Co. 2014 NY Slip Op 50195(U) Decided on February 11, 2014 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 11, 2014
Supreme Court, Kings County

Samuel Zeligfeld and Toby Weber, as Trustees of the CZ Shelter and Guarantee Trust, Plaintiffs,

against

Phoenix Life Insurance Company, Defendant.



502791/12

David I. Schmidt, J.

The following papers numbered 1 to 6 read herein:

Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1-2, 3, 4

Opposing Affidavits (Affirmations)5, 6

Reply Affidavits (Affirmations)

Affidavit (Affirmation)

Other Papers [*2]

Upon the foregoing papers, plaintiffs Samuel Zeligfeld and Toby Weber, as Trustees of the CZ Shelter and Guarantee Trust (Trust), move for an order, pursuant to CPLR 3212 in favor of the Trust against defendant Phoenix Life Insurance Company (Phoenix). Phoenix moves for an order, pursuant to CPLR 3224 and 3126: (1) directing the Trust to respond to Phoenix's discovery demands and produce documents by a date certain and/or face sanctions; and (2) and awarding Phoenix its costs and attorneys' fees in connection with its motion.

The Trust's motion is denied. Phoenix's motion is granted to the extent that the Trust is directed to respond to Phoenix's First Set of Interrogatories to Plaintiff, dated June 25, 2013 and First Set of Requests for Production of Documents, dated June 26, 2013, on or before March 21, 2014 and otherwise denied.

In this declaratory judgment action, the Trust alleges that Phoenix's lapse notices failed to comply with the requirements of Insurance Law §3211(a) and (b) and that they are thus entitled to a judgment declaring that two life insurance policies issued to the Trust by Phoenix are in full force and effect. It is undisputed that in 2007 Phoenix issued two life insurance policies (policy number 97304778 [Policy 778] and policy number 97304705 [Policy 705]) to the Trust insuring the life of Zeligfeld and Weber's mother, Chana Zeligfeld.

With respect to Policy 705, Phoenix thereafter mailed the Trust a lapse notice dated August 5, 2011 that, at the top of the notice, listed the entities "Phoenix Life Insurance Company," "PHL Variable Insurance Company," and "Phoenix Life and Annuity Company" above a post office box address. Under these companies and the post-office box address, the notice listed the Trust's address, and to the right of the Trust's address, the notice listed "Simkowitz & Company Inc., 268 Willoughby Ave., Brooklyn NY 11205." This notice identified a due date of August 8, 2011 and an amount due of $37,478.42, and stated: "Did you forget something very important to you? Our records indicate that you did not make the scheduled premium payments on this premium policy as you planned. The cash value of your policy has been depleted, and is no longer sufficient to support the monthly charges and consequently the policy entered its 61 day grace period at that time."At a minimum, $37,478.42 must be received by us on or before 10/5/2011 in order to prevent a lapse."In accordance with our electronic draft provision, if you are currently participating, this notice serves as a 30 day notification, at which time you may be removed from the monthly Check-O-Matic service."We urge you to prevent the loss of this valuable coverage by [*3]sending your payment today. If you have any questions or if we may be of any assistance, please contact your agent or you may call us at 800-541-0171."

For Policy 705, Phoenix also mailed the Trust a "Notice to Prevent Lapse REMINDER,"dated September 6, 2011, and which listed only "Phoenix Life Insurance Company" above the same post office box address present on the lapse notice. The lapse notice reminder, however, still lists "Simkowitz & Company Inc." with an address to the the right of the Trust's address. In addition, this lapse notice reminder identifies the due date as August 5, 2011 and the amount due as $37,478.42 and states: "Your universal life insurance policy is in danger of lapsing without value."We urge you to take this opportunity to pay your planned premiums to date. If you have already mailed your payment, please disregard this letter."In addition to the amount due to avoid immediate lapse, regular premium payments are recommended. If you are interested in setting up a pre-authorized checking payment schedule, please contact your advisor, visit our website www.phoenixwm.com, call our customer service center at 1-800-541-0171 or write to us at:"PhoenixVariable Products Mail OperationPO Box 8027Boston MA 02266-8027"

With respect to Policy 778, Phoenix mailed a lapse notice and lapse notice reminder that, except for the dates and the amount due, contain the exact same wording as the lapse notice and reminder notice for Policy 705.

After the Trust commenced this action, Phoenix moved to dismiss based on documentary evidence (CPLR 3211[a][1]) and for failure to state a cause of action (CPLR 3211[a][7]). In opposition to Phoenix's motion, the Trust argued, among other things, that the lapse notices violated the Insurance Law § 3211(b)(2) because the notices do not clearly identify the place where and to whom the premium is payable. The court, in addressing this argument, stated, in its April 17, 2013 decision, that: "As described above, the initial notice listed Phoenix and two other entities at the top of the page above a post office box [*4]address. In addition, the notice had the address for "Simkowitz & Company" listed to the right of the address of the Trust. Given that the body of the notice states that the payment of "$37,478.42 must be received by us," without identifying who "us" is, there is at least some facial ambiguity with the notice, which may be sufficient to deem it defective with respect to the statutory requirement that the notice state to whom and where payment is to be made (see Flint v Provident Life & Trust Co., 78 Misc 673, 677 [Sup Ct, Albany County 1912], affd 157 App Div 885 [3d Dept 1913], affd 215 NY 254 [1915]) As the Trust identifies at least one statutory defect with the notice, the Trust has a cause of action that may be encompassed within the third and fourth causes of action."[FN1]

While the court found that Phoenix had failed to demonstrate that it was entitled to dismissal of the complaint based in part on the possible failure of the lapse notice to clearly identify the place where and to whom the premium is payable, the court rejected the Trust's assertion that the it should search the record and grant the Trust summary judgment in the Trust's favor based on the alleged defects with the notices. After noting that Phoenix's motion had not been converted to one for summary judgment pursuant to CPLR 3211 (c), the court stated that, in any event, "the record itself does not show the absence of factual issues with respect to the sufficiency of the notices."

The Trust now moves for an order, pursuant to CPLR 3212 granting it summary judgment in its favor. In support of its argument, the Trust asserts that this court, in its April 17, 2013 decision, already held that Phoenix's notices failed to comply with Insurance Law § 3211 (b) (2) "in that the notice did not clearly identify the place where and to whom the premium is payable," asserts that this finding of a defect with the notice constitutes the law of the case, and asserts that, given that the notice was defective under Insurance Law § 3211 (b) (2), Phoenix could not validly cancel the policy within a year of the lapse under Insurance Law § 3211 (a) (1). In addition, in light of the Trust's tender of the premiums due by way of a wire transfer of $70,000 to Phoenix on October 24, 2011, which was returned to the trust [*5]by Phoenix,[FN2] and the offer, through a letter from the Trust's attorney dated December 18, 2011, to make payment to restore the policy, the Trust asserts that it cannot be deemed to be in default of its obligations under the policies and that the policies have not lapsed.

Initially, contrary to the assertion of the Trust, this court's finding in the April 17, 2013 decision that the Trust had stated a cause of action as to whether the notice complied with the statutory mandate to state where and to whom payment should be made does not constitute the law of the case for purposes of a the Trust's summary judgment motion. Generally, a finding made in the context of denying a CPLR 3211 motion to dismiss does not constitute the law of the case for purposes of a CPLR 3212 motion for summary judgment "as the scope of review applicable to each motion is distinct" (Bernard v Grenci, 48 AD3d 722, 724 [2d Dept 2008]; see also Moses v Savedoff, 96 AD3d 466, 468 [1st Dept 2012]; Riddick v City of New York, 4 AD3d 242, 245 [1st Dept 2004]). In any event, by stating that "there is at least some facial ambiguity with the notice, which may be sufficient to deem it defective with respect to the statutory requirement that the notice state to whom and where payment is to be made," the court clearly did not make a finding that the notice was defective as a matter of law. Such a conclusion is buttressed by the court's finding that, even if it deemed Phoenix's motion to dismiss a summary judgment motion and searched the record on behalf of the trust, factual issues would preclude the grant of summary judgment.

Assuming the argument that the issue regarding the ambiguity in the lapse notices relating to where and to whom payment should be made noted by the court in its April 17, 2013 decision is properly before the court in the instant motion,[FN3] the court turns to whether the ambiguity would entitle the Trust to obtain summary judgment in its favor. The notice requirements for the cancellation of life insurance policies are currently embodied in Insurance Law § 3211 (see McDougall v Provident Sav. Life Assur. Socy. of NY, 135 NY 551, 556 [1892][addressing a predecessor of the current statute]).[FN4] Under the statute, an [*6]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 (see 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]). With respect to the contents of the notice, Insurance Law § 3211 (b) (2) requires 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 value or nonforfeiture benefit."

The Court of Appeals does not require strict compliance with Insurance Law § 3211(b)(2) (McDougall, 135 NY at 556 [while intended to protect the insured, the statute is not meant to operate harshly on the insurer]). Rather, in cases addressing the language of notices, courts have held that the notice need not follow the exact wording of the statute as long as the information intended to be provided is conveyed (McDougall, 135 NY at 556-557; see also Flint v Provident Life & Trust Co. of Phila., 215 NY 254, 257-258 [1915]). Courts have reached similar conclusions in addressing notice statutes relating to other forms of insurance (see Matter of New York Cent. Mut. Fire Ins. Co. v Jordan, 248 AD2d 387, 387 [2d Dept 1998]; Pardo v Central Coop. Ins. Co., 223 AD2d 832, 833 [3d Dept 1996]; Matter of Liberty Mut. Ins. Co. (Rapaport), 201 AD2d 287, 288 [1st Dept 1994]; Matter of State Farm Mut. Auto. Ins. Co. (Ramos), 104 AD2d 495, 496 [2d Dept 1984]; cf. Barile v [*7]Kavanaugh, 67 NY2d 392, 399 [1986] [addressing certain statutory requirements for the cancellation of motor vehicle insurance]; Nassau Ins. Co. v Hernandez, 65 AD2d 551, 552 [2d Dept 1978] [type face requirement for motor vehicle insurance]).

Here, in moving for summary judgment, the trust relies solely on the facial ambiguities with the notice noted by the court in the motion to dismiss. In opposing the motion, Phoenix has submitted an affidavit from Susan Zophy, an assistant vice-president, who states that she is familiar with Phoenix's corporate structure and business and record keeping practices, and who asserts, among other things, that PHL Variable Insurance Company and Phoenix Life and Annuity Company, the other entities listed above the post office box on the lapse notices, are subsidiaries of a Phoenix subsidiary. According to Zophy, these subsidiaries are corporate affiliates that share office space and claims and policy administration. Zophy also asserts that any premium payment sent to the Phoenix companies at the post office box listed on the lapse notices or any company address would be accepted by Phoenix and applied to the appropriate life insurance policy. Specifically with respect to the Trust, Zophy has provided: (1) the application form for the Trust's policies in which the Trust identified its broker as "Simkowitz & Company, Inc."; (2) copies of previous checks showing that the Trust had made previous premium payments, and copies of lapse notices and checks showing that the Trust had made payments during previous grace periods apparently in response to identically worded lapse notices; and (3) copies of checks from the Trust, dated September 30, 2011 and October 1, 2011, apparently in response to the lapse notices and/or lapse notice reminders, that were returned for insufficient funds.

Assuming, without deciding, that the facial ambiguity with the lapse notices would be sufficient to demonstrate the Trust's prima facie burden, the court finds that Zophy's affidavit and the other material submitted by Phoenix are sufficient to demonstrate the existence of factual issues with respect to the adequacy of the notice in informing the insured where and to whom payment should be made. Notably, given that Simkowitz Company, Inc., was the Trust's insurance agent, it is reasonable to presume that the Trust would have known that the lapse notices' reference to "us" as the person to whom payment should be made was one of the Phoenix entities identified above the post office box at the top of the notice, and that it would have understood that payment could be made to the post office box listed in the letterhead. If, as represented by Zophy, a premium payment sent to a Phoenix entity at that post office box would have been credited to the respective policy, the Trust would not have truly been confused by the form, or in any way prejudiced by any confusion created by the information and layout of Phoenix's form.[FN5] In other words, if the facts are those as [*8]represented by Zophy, the Trust was presented with no real ambiguity, and the notice provided the required information relating to where and to whom payment should be made.[FN6]

In reply, the trust argues that the issue of whether the trust was actually confused by the notice is irrelevant. The court agrees that, in some instances, the failure to comply with statutory notice requirements will bar a court from looking beyond the face of the form and render irrelevant an insured's actual knowledge. Indeed, courts have expressly so held with respect to compliance with statutory mandated type face size requirements, finding that they are absolute statutory requirements that apply regardless of whether the insured understood the notice (see e.g. Nassau Ins. Co., 65 AD2d at 552; see also Barile, 67 NY2d at 399 [notice of financial security requirements for automobile policies]).[FN7] Other statutory mandates, however, are not so strictly construed (see Pardo, 223 AD2d at 833; Matter of State Farm Mut. Auto. Ins. Co. [Ramos], 104 AD2d at 496) and courts will look to extrinsic facts in considering the adequacy of the notice (see Pardo, 223 AD2d at 833 [proof of actual receipt of notice rendered failure to include insured's box number irrelevant]; Matter of Liberty Mut. Ins. Co. [Rapaport], 201 AD2d at 288 [out of date address for review committee did not render notice ineffective in the face of outside evidence showed that forwarding address of review committee was on file with post office and that the insured never sought review in any event]). This court concludes that the adequacy of the notice here falls in the latter category, and need not be considered in an absolute vacuum, at least here, where the essential information is provided on Phoenix's lapse notice, albeit not with absolute clarity.[FN8]

With respect to Phoenix's motion to compel, which is unopposed by the Trust, [*9]Phoenix is certainly entitled to replies to its discovery demands and interrogatories. However, at this time in the proceeding, Phoenix has not demonstrated any willful or contumacious disobedience on the part of the Trust that would mandate the imposition of costs or any conditional preclusion language in this order.

This constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1: Having found court found that there were at least factual issues with respect to whether the notice complied with Insurance Law § 3211 (b) (2)'s requirement that the notice identify where and to whom a payment should be made, except for the Trust's argument that the lapse notices listed the wrong amount due, the court did not address the Trust's arguments with respect to other alleged defects with the notice.

Footnote 2: In its opposition papers, Phoenix concedes that it received the wire transfer, but rejected it on the ground that the policies had already lapsed. The lapse notices stated that the Trust owed $37,478.42 for Policy 705 and $31,721.77 for Policy 778. As such, the total amount owed for both policies was $69,200.19.

Footnote 3: The Trust, in its memorandum of law in support of its motion, only raises the argument that the finding in the April 17, 2013 decision constitutes the law of the case. The Trust only really addresses the sufficiency of the notice in its reply papers. On the other hand, Phoenix, in its opposition papers, did address the issue of the sufficiency of the notice to apprise the Trust of where and to whom payment should be made and thus would not be prejudiced by the court determining that issue.

Footnote 4: Insurance Law § 3211(a)(1), provides that:

"No policy of life insurance or non-cancellable disability insurance delivered or issued for delivery in this state, and no life insurance certificate delivered or issued for delivery in this state by a fraternal benefit society, shall terminate or lapse by reason of default in payment of any premium, installment, or interest on any policy loan in less than one year after such default, unless, for scheduled premium policies, a notice shall have been duly mailed at least fifteen and not more than forty-five days prior to the day when such payment becomes due, or for life insurance policies in which the amount and frequency of premiums may vary, 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. A separate notice shall not be required for insurance that is supplemental to a policy of life insurance."

Footnote 5: Although this court has found factual issues with respect to the sufficiency of the notice relating to where and to whom payment should be made and thus saved Phoenix from the grant of summary judgment, the court questions why Phoenix has been using such a poorly worded and poorly designed form. The provisions of Insurance Law § 3211 have existed essentially unchanged in various statutory incarnations for over 130 years (see Phelan v Northwestern Mut. Life Ins. Co., 113 NY 147, 149 [1889]). Nearly 100 years ago the Court of Appeals asked why insurance companies persisted in failing to follow the statutory language (see Flint, 215 NY2d at 257-258) and now, in 2014, there does not appear to be any good reason why a court must address this issue anew.

Footnote 6: In light of Phoenix's concession that the Trust did attempt to tender payment, it would appear that if the notice is found defective, that the tender of payment within the year would be sufficient to save the policy (see Salzman, 296 NY at 277; Davis v Northwestern Mut. Life Ins. Co., 98 Misc 456, 460-461 [Sup Ct, Erie County 1917], affd 179 App Div 960 [4th Dept 1917]). The issue need not be determined at this time, however, in light of these factual issues relating to the adequacy of lapse notices.

Footnote 7: The court notes that the cancellation of motor vehicle insurance policies implicates public policy concerns broader than the fairness of the cancellation with respect to the individual insured.

Footnote 8: Given that the court has found that Phoenix's papers are sufficient to demonstrate the existence of a factual issue, the court has not addressed Phoenix's additional argument that summary judgment is premature under CPLR 3212 (f).