Court Opinion

ID: 5320842
Source: CourtListenerOpinion
Date Created: 2022-01-08 04:30:53.06493+00
Date Added: 2024-06-11T08:29:19.685082
License: Public Domain

Martin, J.
(dissenting). The information herein charges the defendants with violating the Insurance Law, as follows: “ The said defendants, on the 26th day of February, 1930, at The City of New York, in the County of New York, unlawfully did issue and circulate and cause to be issued and circulated an illustration and statement misrepresenting the terms of insurance policies No. 2754536 and No. 2754538 issued by the Mutual Life Insurance Company of New York upon the fife of one John J. Atwater and misrepresenting the benefits and advantages promised thereby, and did issue and circulate and cause to be issued and circulated a misleading estimate of the dividends and share of surplus to be *379received on said policies and also upon insurance policy No. 6926172 issued by the Prudential Insurance Company of America upon the life of said John J. Atwater and unlawfully did make misleading representations and an incomplete comparison of the above mentioned policies for the purpose of inducing the said John J. Atwater to lapse, forfeit and surrender his said insurance policies in the Mutual Life Insurance Company of New York.”
The scheme resorted to in order to obtain ten per cent of the surrender value of existing insurance policies is designated by the district attorney as “ twisting.” The practice was to induce the insured to cancel valuable insurance policies of long standing upon which there were substantial surrender values, and to procure for him, or assist him in procuring, new policies in other companies. This was accomplished by misrepresenting the accrued and surrender value of the existing policies.
The defendants usually agreed to accept ten per cent of the surrender value of the canceled policies for their services in bringing about this alleged saving to the insured and the agreement between the parties generally closed with an assurance of a substantial refund to the insured, otherwise no charge of any kind was to be made. The rates on the new policies would ordinarily be much larger because of the age of the insured, but this was avoided by inducing the insured to take out straight life policies in other companies so that the premiums would more nearly conform to those paid on the canceled policies which were twenty-payment life or endowment policies with high premiums.
The complaining witness, John J. Atwater, testified that in February, 1930, the defendant Stapler called at his office and advised him that all insurance companies had been overcharging on their policies and that a new law had been passed under which the insured could, upon application to the company, get a refund of all overpayments; that Stapler left with him a card which was apparently a contract to have Legg & Co. send an actuary to audit his insurance, and assuring him a profit of $1,000 and providing for the payment of a fee of ten per cent of the cash received, A short time after Stapler’s visit, the defendant Legg made an, appointment by telephone and thereafter called at his office where he examined the witness’ two Mutual Life Insurance Company policies; made certain notations; advised the witness that he could show him how to effect a saving on insurance costs while receiving the same protection by canceling the existing policies and taking new insurance under a different form and then told the witness that although he usually charged ten per cent of the saving for his services, in this case his fee would be but $250. '
*380Several days' after Legg’s visit, Anderson called on him at his office, said he was an insurance agent and that he wanted to write him up on a new Prudential three-year straight life contract of insurance; that after asking but one or two questions, Anderson filled out all the answers on an application blank which the witness signed and that Anderson then told the witness to report to a doctor of the Prudential Insurance Company for a medical examination.
Shortly thereafter Legg again called on Mr. Atwater and submitted to him a form letter and requested that it be sent to the Mutual Life Insurance Company; that the letter directed that company to cancel the witness’ present insurance; that Legg cautioned him not to send the letter until he received his new policy from the Prudential Insurance Company; that Legg also gave him a written audit of his insurance. Several days later, the witness testified, Anderson, the insurance agent, called at his office and delivered to him a $50,000 policy of insurance issued by the Prudential Life Insurance Company of America.
Joseph B. MacLean, a witness for the People, testified that he was associate actuary of the Mutual Life Insurance Company of New York and that an examination of the policies and the audit submitted by Legg disclosed a number of material misrepresentations which he proceeded to enumerate as follows:
1. That the statement that the policyholder receives “ none of the earnings from this Equity ” was untrue, in that the insured received all of the interest earnings from the equity of the policies, and received a part of it in cash as a dividend, and part of it as an increase in the cash value of the policies.
2. That the item in the report or audit that “ In case of death, this Equity $10,870 is a loss to your estate ” was not true. That the equity of a policy is not a loss in the event of death, since it forms a part of the amount of the insurance, and, in fact, was the whole basis of the level premium life insurance under which both the Prudential and the Mutual operate.
3. That the statement “ Less average dividends about $570 ” was a misrepresentation, in that the $570 was merely dividend for the current year, namely, 1930, and not an average dividend either for the past or future, and did not take into account any normal increase in dividends according to the company’s current schedule.
4. That the net annual cost as set forth in Exhibit “ B ” in the center of the page, as $422.30, was a misrepresentation. The net annual cost would depend “ on the earning of the year’s interest, which would not, of course, be available until one year later, so *381that the cost for the first year, the first premium to be paid on the new policy, would not have the benefit of that interest.”
5. That the statement made in Exhibit “ B,” last paragraph, “ In case of total disability prior to age 60, you pay no more premiums,” was a misrepresentation because the policy itself provides that the disability has to be not only total but permanent as well.
6. That there was a further misrepresentation in the statement that “ The dividend for this year will be $208.50,” which appears in the same paragraph of Exhibit “ B ” because no guaranty was given or could be given that “ there would be any dividend of any particular amount nor that the dividend would increase yearly thereafter, as the statement goes on to say, nor that there would be any dividend.”
7. That the statement under the heading “ Present Insurance Condition,” to the effect that “ Double Indemnity & Disability on $25,000 only” was a misrepresentation. As a matter of fact the Mutual policy contains a waiver of premiums such as would have to be paid in the Prudential policy, and the Mutual policy in addition, paid an income of %2,500 a year for life, which was neither mentioned nor referred to in the statement, and by inference was deliberately suppressed.
8. That the words “ Net Annual Cost ” on the right-hand side of the summary indicate that the payments are for the same period, when in fact the Mutual Life policy was payable for ten years more only, and the Prudential policy would be payable for the entire fife of the insured.
Several of the representations made by the defendants to induce the complaining witness to change his policies were of importance. The disability clause alone was shown to be of great advantage to Mr. Atwater, while the policy he was to obtain in the Prudential Life Insurance Company contained no such benefits or advantages. The important differences between the policies are so apparent, as set forth by the associate actuary of the Mutual Life Insurance Company, that it would not seem to require much argument to reach the conclusion that Mr. Atwater was being induced to take out a policy which would be much less advantageous to him than that which he held in the Mutual Life Insurance Company.
The witness MacLean also testified that in his opinion the comparison made between the Mutual Life Insurance Company policies and the Prudential Insurance Company policies by the defendant Legg was incomplete because no mention was made of the fact that the premiums on the Mutual Life Insurance policies would have to be paid for only ten more years and that the insured would *382then receive an annual dividend; that the Mutual Life Insurance Company policies were incontestable whereas the Prudential policies would not be incontestable until after a period of one year; that the Mutual Life policies were payable in case of death by suicide whereas the Prudential policy would not be payable until a period of one year had elapsed; that no mention was made of the difference in the terms and conditions of the policies with respect to the premium payments and cash values and the fact that a normal increase could be expected in the Mutual Life Insurance Company dividends.
The'appellant Legg failed to testify as a witness. The appellant Stapler testified that he had been employed for about six years as a representative of the appellant Legg. He admitted that he called upon the complainant Atwater in February, 1930, and after advising him of the saving his firm could effect in Atwater’s insurance left with him a proposed contract under which Legg & Co. agreed to audit Atwater’s insurance policies for a fee.
On this testimony, which fully established a violation of the provisions of the Insurance Law, the appellants were convicted and the defendant Anderson was acquitted. The appellant Legg was granted a certificate of reasonable doubt, the errors being certified as follows: “ The denial of the motion of said defendant that he be acquitted, made on the ground that the evidence adduced against him was insufficient to show a violation of section 60 of the Insurance Law; and the denial of such motion made on the ground that a violation of the acts prohibited by said section 60 of the Insurance Law is not a crime; and the denial of said motion on the ground that the prosecution had failed to make a case.”
The appellants contend that a violation of section 60 of the Insurance Law is not a crime, and particularly that there is no such crime when one does not act for one of the corporations or societies therein specified. It is also argued that there was no proof of misrepresentations.
A violation of section 60 of the Insurance Law is a crime. The section provides that the Superintendent of Insurance may also in his discretion revoke the certificate of any corporation, society or agent who violates the provisions of the section.
Section 53 of the Insurance Law provides: “Any corporation or person violating any provisions of this chapter, except where such violation constitutes a felony, shall, in addition to any penalty otherwise prescribed for such violation, be guilty of a misdemeanor.” Section 29 of the Penal Law provides: “ Where the performance of any act is prohibited by a statute, and no penalty for the violation of such statute is imposed in any statute, the doing such act is a misdemeanor.”
*383Section 60 of the Insurance Law expressly applies to the defendants for it provides as follows:
“ § 60. Estimates and misrepresentations prohibited. No life, health or casualty insurance corporation, including corporations operating on the co-operative or assessment plan, mutual insurance companies, and fraternal benefit societies operating on the subordinate lodge system, doing business in this State and no officer, director, representative, or agent therefor or thereof or any other person, co-partnership or corporation shall issue or circulate, or cause or permit to be issued or circulated, any illustration, circular or statement of any sort misrepresenting the terms of any policy issued by any such corporation. * * * ”
The appellants misrepresentated at least eight distinct phases of the Mutual Life Insurance Company policies. Some of these misrepresentations were not important, others were very important and material. The false representations were made for the express purpose of obtaining a fee by inducing the insured to surrender valuable policies which contained many advantages at the time, having been in force for several years, over ordinary life policies which had no such advantages.
The testimony and exhibits in this record warrant the conclusion that the appellants knowingly violated the Insurance Law by misrepresenting the facts, and the overwhelming evidence disclosed that defendants were endeavoring to defraud Mr. Atwater. The indirect method of approaching the subject indicated that they were not frank in presenting the proposition and that it was being carried out through fraud and deceit.
The attempt of these defendants to avoid each other while carrying out the details of the transaction and their failure to disclose their connection or identity, emphasize the fact that they knew they were attempting to carry out a scheme or transaction which was forbidden by the Insurance Law.
The judgment of conviction should be affirmed.
O’Malley, J., concurs.
Judgment reversed, the information dismissed and appellants discharged. Settle order on notice.