Court Opinion

ID: 9705157
Source: CourtListenerOpinion
Date Created: 2023-08-26 00:58:17.635933+00
Date Added: 2024-06-11T18:22:08.358211
License: Public Domain

PORTER, Justice
(dissenting).
I would hold that defendant insurer was under a duty to explicitly inform Grandpre that he had no life insurance coverage until such time in the future as insurer, at its home office, might approve issuance of the policy applied for. “While insurance policies and binders are contractual in nature, they are not ordinary contracts but are ‘contracts of adhesion’ between parties not equally situated [citations omitted].” Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 305, 208 A.2d 638, 644 (1965).
When the insurer’s representatives solicited Grandpre they could readily have taken his application without any advance premium. Instead, for reasons important to the company and to its financial advantage, they sought and obtained from Grandpre the sum of $43.71 and in return gave him a premium deposit receipt. Appendixes A and B. Unless otherwise informed by insurer, a reasonable man in the position of Grandpre could understand that collection of this initial premium afforded him interim or temporary coverage until the insurer at some time in the future issued or declined to issue the policy. The principle of honoring reasonable expectations properly applies under these circumstances. Keeton, Insurance Law § 6.3(a) (1971). “It is important to note, however, that the principle of honoring reasonable expectations does not deny the insurer the opportunity to make an explicit qualification effective by calling it to the attention of a policyholder at the time of contracting, thereby negating surprise to him.” Keeton, supra, at 352.
If the premium were not collected with the application, Grandpre could not reasonably understand that he was afforded interim coverage. Since it was collected, the insurer was left with the obligation to express to Grandpre the fact of his non-coverage in a manner it could reasonably expect a layman to understand. The medium chosen by insurer — its premium deposit re*814ceipt — would not be readily understood by most laymen. (Reference to the reverse side of the receipt might cause many lawyers to consider the preceding sentence an understatement.) The front side, Appendix A, is in larger type than the back side, Appendix B. The reasonable layman, observing on the front side, “IMPORTANT: This Receipt does not provide any insurance until after its conditions are met,” upon turning to the reverse side would likely be unable to gain any understanding, much less a clear or explicit understanding, from the fine print conditions there. Moreover, reference on the reverse side to “Part I” and “Part II” in effect required Grandpre to consult two additional documents not placed in his possession, the completed application (Part I) and the subsequently completed doctor report of examination (Part II).
The insurer prepared all the forms used and unilaterally dictated all steps of the transaction.- If under the procedure chosen by insurer, the objectively reasonable expectation of the lay applicant arising from that procedure is not to be met, the insurer should be chargeable. Thus, under the circumstances here, I would hold that insurer, as a matter of law, afforded coverage from the time of collection of the premium and delivery of the premium deposit receipt, Appendixes A and B.
I would also avoid the serious impracticalities which may well result from allowing retroactive coverage where the insurer’s home office decision may not infrequently be made with knowledge that an applicant has died. See Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 306, 208 A.2d 638, 645 (1965), and cases cited therein.
I concur in the dissenting opinion of Justice Zastrow as a further basis for reversal.