Court Opinion

ID: 5680317
Source: CourtListenerOpinion
Date Created: 2022-01-12 14:55:15.488568+00
Date Added: 2024-06-11T08:39:52.963401
License: Public Domain

Tom, J.,
dissents in a memorandum as follows: Based upon the reasoning I set forth in Katz v American Mayflower Life Ins. Co. (14 AD3d 195, 202 [2004]), I respectfully dissent and would affirm the order denying summary judgment dismissing the complaint.
At issue on this appeal is whether defendant’s life insurance contract is unambiguous so as to warrant dismissal of this putative class action seeking to recover unearned premiums for such period of time during the initial policy year that no coverage has been provided. Defendant contends that, when read as a whole, its policy reflects that the first “annual” premium purchases less than a full year of coverage. Plaintiff s position is *291that an “annual” premium implies the amount charged for a year of coverage and that defendant’s practice of setting premiums on an “annual” basis is inherently inconsistent with its use of the delivery date to shorten the period during which coverage is afforded in the first policy year.
The policy contains a “schedule of annual premiums” that lists the “first year” premium as $217.50, the same amount as the premium for each of the succeeding 19 years. It contains a “policy date” (not defined) of May 6, 2002. The policy was physically delivered to plaintiff on May 30, 2002, at which time he paid the first “annual” premium.
While the insurance application states that coverage does not begin until the policy is delivered and “the full first premium due is paid,” it does not disclose that the insured will be charged for a period prior to the effective date of coverage. It is necessary to compare the policy date and table of premiums with the policy’s “payment” provision and the “amount and frequency” provision to deduce that the annual premium purchases less than a year’s coverage during the initial policy year.
As a consequence of the disparity in bargaining power between the insurer and the insured, defendant is subject to the doctrine of contra proferentum (see Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321, 326-327 [1996]). To be accorded the meaning of “annual premium” that the insurer advocates, it must demonstrate that its interpretation of the words “is the only construction which may fairly be placed on them” (Lachs v Fidelity & Cas. Co., 306 NY 357, 365 [1954]; see Bronx Sav. Bank v Weigandt, 1 NY2d 545, 551 [1956]).
While contending that the term “annual” refers “unambiguously” to the frequency of payment rather than the period of coverage, defendant points to no other area of insurance where an annual premium purchases less than a year of coverage. Defendant fails to demonstrate that its unusual and specialized use of the term was accepted by the insured (see Frigaliment Importing Co. v B.N.S. Intl. Sales Corp., 190 F Supp 116, 121 [SD NY 1960]), in place of the generally accepted usage (see Hartol Prods. Corp. v Prudential Ins. Co., 290 NY 44, 50 [1943]). In any event, Supreme Court properly decided that the necessity to peruse two documents and “piece together from the various parts of the policy the fact that the policyholder is not receiving coverage for the full year, although paying a premium for that full year, is enough to withstand the motion to dismiss.” As remarked by the Ohio Court of Appeals, “[Requiring an insured to read four distinct sections, contained in two separate documents comprising an insurance contract, to gain an *292understanding of something as basic as the length of the initial coverage term renders this contract ambiguous” (Margulies v Guardian Life Ins. Co., 2003 WL 1903437, *3, 2003 Ohio App LEXIS 1870, *9 [2003], appeal denied 99 Ohio St 3d 1545 [2003]).