New Jersey Appellate Court Holds That Life Insurer is Not Equitably Estopped From Declining to Reinstate Policy When Policyholder Died Before Satisfying Policy Requirements for Reinstatement

In Nationwide Life Ins. Co. v. Thompson, the Superior Court of New Jersey, Appellate Division, considered a dispute over life insurance policy proceeds. The subject policy had been cancelled for non-payment of premium after two notices and the expiration of a sixty-one day grace period. Shortly after receiving notice of the cancellation, the policyholder contacted the insurer to request reinstatement. The policy language stated that the policy could be reinstated while the policyholder was alive if the policyholder applied for reinstatement within three years of cancellation, provided satisfactory evidence of insurability, and paid three months of premiums. The policyholder satisfied the insurer’s requirements that he undergo a physical examination and sign a form modifying the policy language. The insurer notified the policyholder that the policy had been approved for reinstatement, but did not advise of the premium payment due. Two days later, the policyholder died. The insurer learned of the death the following day, but nevertheless sent him a letter advising that the policy would be reinstated upon payment of the premium.

The policyholder’s beneficiary claimed that she contacted a representative of the insurer following the policyholder’s death, who advised her that she could reinstate the policy upon payment of the premium. However, a transcript of the conversation reflected that the representative was unsure how to resolve the situation, and advised the beneficiary that another representative of the insurer would contact her the following Monday. On the next day, the beneficiary sent a cashier’s check for the premium balance to the insurer. The insurer initially cashed and deposited the check, but subsequently informed her that it was denying the claim and sent her a refund of the premium check. The beneficiary filed suit, contending that the insurer was equitably estopped from denying that it reinstated the policy, and that the policy should be reinstated in accordance with the policyholder’s reasonable expectations. The trial court granted summary judgment in the insurer’s favor.

In affirming the trial court’s decision, the Appellate Division emphasized that before he died, the policyholder failed to comply with the policy requirement of paying three months of premiums. The Court determined that there was no evidence in the record that the insurer misled the policyholder into withholding a premium payment during his lifetime. The Court also noted that there was no record evidence that the beneficiary relied to her detriment on any statement by the insurer, emphasizing that the insurer never advised her that the policy would be reinstated. The Court therefore held that there was no evidence to support the plaintiff’s contention that the insurer was required to reinstate the policy.