Michael Gugig Earns Second Circuit Victory on Behalf of Pruco Life Insurance Company of New Jersey
On March 19, 2013, Mike Gugig (a Saul Ewing Litigation Partner and Co-Chair of the Firm’s Insurance Practice Group) obtained unanimous ruling from the U.S. Court of Appeals for the Second Circuit on behalf of Pruco Life Insurance Company of New Jersey (“Pruco”) (a subsidiary of The Prudential Life Insurance Company of America). In its opinion, the Second Circuit affirmed a ruling of the U.S. District Court for the Eastern District of New York in Pruco’s favor (which Mike obtained after a bench trial). The primary issue in the case was the construction of N.Y. Insurance Law 3204(a)(2), which requires that a “true copy” of an application for life insurance be physically attached to the life insurance policy delivered to the insured if the carrier seeks to rely on a misrepresentation in the application to void the policy.
The plaintiff in Smith v. Pruco Life Ins. Co. of New Jersey, was the beneficiary under a $1 million life insurance policy issued by Pruco on the life of Michael Coops (the “Policy”). Mr. Coops had been diagnosed with Stage IV colon cancer after he applied for the Policy, but before the Policy was delivered to him and the first premium was paid. Mr. Coops’ insurance application made clear that no coverage would take effect unless three conditions were satisfied: a) the Policy was delivered to him; b) the first premium was paid; and c) Mr. Coops’ health condition remained as stated in his application. Although Mr. Coops learned of his cancer diagnosis after he applied for the Policy, he did not inform Pruco of the diagnosis prior to accepting delivery of the policy and paying his first premium. Mr. Coops died within the Policy’s two-year contestability period, after which Pruco learned of the pre-delivery Stage IV cancer diagnosis. Pruco rescinded the Policy based upon Mr. Coops’ failure to satisfy the “unchanged health” condition precedent to coverage.
The beneficiary sued Pruco seeking the $1 million death benefit – his primary argument was that the unsigned application physically appended to the Policy at the time of delivery was not a “true copy” of the signed application maintained in Pruco’s files, and thus could not be considered under N.Y. Insurance Law 3204(a)(2). At trial, Judge Wexler found that the unsigned application was, in fact, a true copy of the original, sustained Pruco’s rescission of Mr. Coops’ Policy, and dismissed the complaint with prejudice. On March 19, the Second Circuit affirmed Judge Wexler’s ruling in its entirety, again upholding the validity of Pruco’s position.