Under New Jersey Law, Grace-Period Notices Need Not State the Amount Due; Customer-Service Assurances Do Not Estop Policy Lapse Absent Misrepresentation and Reasonable Reliance

Introduction

In Naftali Kunstlinger v. Lincoln Benefit Life Co., No. 25-1264 (3d Cir. Nov. 14, 2025) (not precedential), the Third Circuit affirmed summary judgment in favor of the insurer on breach of contract and equitable estoppel claims arising from the lapse of a $7.5 million flexible-premium universal life insurance policy owned by the Pinchas Stolper Insurance Trust 3/06/08. The case centers on two interrelated issues: (1) what a valid grace-period notice must contain under New Jersey law and the policy at issue, and (2) whether statements by a customer-service representative can estop an insurer from enforcing a lapse where written policy communications show a larger payment was required.

The trustee, Naftali Kunstlinger, had for years remitted approximately $20,000 monthly. After a December 2020 letter that the policy had entered its grace period, a February 2021 phone call with Lincoln led Kunstlinger to believe the policy was “not in a grace” status “as of now.” Within weeks, however, a March 15, 2021 grace notice warned that coverage would terminate unless a $150,657.27 payment was made by May 15, 2021. Kunstlinger continued his usual monthly payments and ignored the lump-sum demand; Lincoln declared a lapse in May 2021. When the insured died a year later, Lincoln denied the death claim. The district court granted Lincoln summary judgment, and the Third Circuit affirmed.

The opinion clarifies two points of practical significance to life insurers and policyholders in New Jersey:

A grace-period notice is valid if it complies with the policy’s plain terms and timing—even if it does not state the exact amount required to prevent lapse—because neither the policy language nor New Jersey law independently requires the notice to specify the dollar amount due.
Equitable estoppel will not bar an insurer from enforcing a lapse absent a knowing misrepresentation and justified, reasonable reliance; general customer-service assurances do not override policy language, annual statements, and subsequent written illustrations that put the policyholder on notice of the need for a large, immediate payment.

Summary of the Opinion

The Third Circuit (Judge Shwartz, joined by Judges Matey and Montgomery-Reeves) affirmed summary judgment for Lincoln Benefit, concluding:

Grace-Notice Validity: The March 15, 2021 grace notice satisfied the policy’s requirements because it was sent in writing at least 30 days before lapse and warned of termination absent payment. Neither the policy nor New Jersey law required the notice to include the specific amount due. Disputes about whether the stated amount ($150,657.27) precisely matched the minimum needed were immaterial to the legal sufficiency of the notice.
Equitable Estoppel: The February 2021 phone call contained no misrepresentation; the representative accurately stated the policy was not then in grace due to interim payments and promised to send an illustration. Even assuming arguendo a misstatement, reliance on continuing $19,996.50 monthly payments was not reasonable or justified in light of the policy’s flexible-premium terms, declining values shown in annual statements, a July 2020 warning that further payments were necessary, and a February 2021 illustration demanding an immediate $206,000 lump sum to keep coverage in force through the current year.

Having found the notice sufficient and estoppel inapplicable, the court affirmed the denial of the death benefit and entry of judgment for the insurer.

Analysis

Precedents and Authorities Cited

Voorhees v. Preferred Mutual Insurance Co., 607 A.2d 1255 (N.J. 1992): The court relied on the New Jersey principle that insurance policies are interpreted according to their plain and ordinary meaning. This guided the analysis of the policy’s grace-period provision, which required only written notice at least 30 days before lapse—nothing more.
N.J. Admin. Code § 11:4-41.3(b)(2): Cited to show that New Jersey regulations require policies to include a grace-period provision but do not mandate that grace notices state a dollar amount due. This regulatory backdrop supported treating the policy text as the governing source of content requirements for the notice.
Razak v. Uber Technologies, Inc., 951 F.3d 137 (3d Cir. 2020), amended, 979 F.3d 192 (3d Cir. 2020): Used for the proposition that factual disputes not material to the dispositive legal issues cannot preclude summary judgment. This underpinned the court’s conclusion that debates over the adequacy of the stated dollar amounts (or whether grace began in December 2020) were immaterial once the March 2021 notice met the policy’s procedural requirements and lapse ultimately resulted from ignoring that notice.
D’Agostino v. Maldonado, 78 A.3d 527 (N.J. 2013) (quoting McDade v. Siazon, 32 A.3d 1122 (N.J. 2011)): Established the contours of equitable estoppel in New Jersey—requiring conduct that reasonably misleads to another’s prejudice such that repudiation would be unjust.
O’Malley v. Department of Energy, 537 A.2d 647 (N.J. 1987): Cited for specific estoppel elements, including knowing and intentional misrepresentation and reliance by the party invoking estoppel. The court found neither element satisfied on this record.
Palatine I v. Planning Board, 628 A.2d 321 (N.J. 1993): Emphasized that only justified and reasonable reliance can ground equitable estoppel. This principle was decisive given the policy and written communications that contradicted any belief that ordinary monthly payments would suffice.

Legal Reasoning

1) What must a grace notice contain?

The policy promised a 61-day grace period and stated that Lincoln “will send a written notice to the [policyholder’s] most recent address … at least 30 days prior to the day coverage lapses.” The court read this language according to its ordinary meaning: the notice requirement is temporal and procedural. It does not impose any requirement to include the precise dollar amount necessary to avoid lapse. The court bolstered this reading by noting that New Jersey regulations likewise require a grace-period provision but do not prescribe specific content for a grace notice beyond the existence of the grace period.

Applying those principles, the March 15, 2021 letter satisfied the policy: it provided written notice that the policy had entered grace and would terminate at the end of 61 days unless payment was made by May 15, 2021—more than 30 days after the letter’s date. Although the letter included a dollar amount ($150,657.27), the court held it did not need to do so to be legally sufficient. Whether that amount perfectly represented the minimum payment to avoid lapse was therefore immaterial.

The court also rejected the argument that the policy’s entry into grace as early as December 15, 2020 (based on surrender value dynamics) undermined the later lapse. The reason is straightforward: the lapse resulted from Kunstlinger’s failure to heed the March 15, 2021 grace notice, not from the December 2020 letter. Under Razak, debates about the December grace trigger were not material to the dispositive issue.

2) Why equitable estoppel did not apply

The trustee argued that Lincoln should be estopped from enforcing the lapse because, during a February 2021 phone call, a representative minimized the import of the December 2020 letter and said the policy was not “in a grace” status “as of now.” The Third Circuit rejected this on two independent grounds:

No misrepresentation: The representative neither said the December notice was erroneous nor guaranteed that the prior monthly amount would keep the policy in force indefinitely. Instead, the representative explained that intervening payments had taken the policy out of grace “as of now” and promised an illustration so the trustee would “know what [the] minimum premium would need to be” going forward. On these facts, the court found no “knowing and intentional misrepresentation,” defeating estoppel at the threshold.
No justified or reasonable reliance: Even assuming a misstatement, reliance on continuing $19,996.50 monthly payments was neither justified nor reasonable in light of:
- the policy’s plain text that payments are flexible and that paying too little leads to lapse (subject to a grace period);
- annual statements (2017–2020) showing declining accumulated value despite steady monthly payments;
- a July 2020 warning that, under stated assumptions, the net cash surrender value would not sustain coverage through the next reporting period without further premium; and
- a February 2021 illustration explicitly calling for an immediate $206,000 lump-sum to carry coverage through the current year—an instruction Kunstlinger did not follow.
These materials, received both before and after the February call, corrected any contrary impression. Under Palatine I, reliance must be both justified and reasonable—standards the court found unmet.

Impact and Practical Implications

A. For insurers

Grace notice content: Carriers issuing flexible-premium universal life policies governed by New Jersey law may rely on policy language and regulatory baselines that do not require the grace notice to specify the exact amount due, so long as the notice is timely and warns of termination absent payment. Including an amount may be helpful for customer clarity, but omission of a precise figure does not invalidate the notice when the policy does not demand it.
Customer-service communications: General or conditional statements made by call-center personnel will not readily create estoppel if written policy materials and subsequent communications provide clear, contradictory information. Maintaining detailed call records and promptly providing written illustrations strengthens an insurer’s position.
Litigation posture: Where the insured’s death occurs post-lapse and a plaintiff challenges notice adequacy or invokes estoppel, insurers can focus on the policy’s plain terms, the timing of the last grace notice preceding lapse, and documentary evidence (annual statements, illustrations) that undermine reasonable reliance.

B. For trustees, policyowners, and advisors

Do not ignore grace notices: Even if a prior grace notice appears resolved, each new grace notice must be treated as a fresh and urgent curative demand. The failure to cure within the stated period will likely be dispositive.
Flexible-premium dynamics: Universal life policies can “underfund” over time as costs of insurance rise with age and as credited interest fluctuates. Historic monthly payments may become inadequate. Annual statements and illustrations are not mere formalities—they are risk signals that funding must change.
Rely on writings over oral assurances: Customer-service conversations can clarify, but they seldom override policy text, annual statements, or illustrations. If relying on oral guidance, insist on written confirmation that specifies the cure amount and the effect of payment.
Immediate cure payments: When an illustration or grace notice calls for a lump-sum cure, incremental monthly payments rarely suffice. Absent a written agreement modifying the cure terms, courts are unlikely to find reasonable reliance on continuing the status quo.

C. Doctrinal significance

Notice-content minimalism (New Jersey): The opinion reinforces a minimalist view of grace-notice content under New Jersey law for policies that, by their terms, only require advance written notice before lapse. Absent a regulatory or contractual mandate, courts will not graft a dollar-amount requirement onto grace notices.
Estoppel rigor: The decision underscores New Jersey’s demanding estoppel criteria in insurance disputes: plaintiffs must show a knowing misrepresentation and reliance that is both justified and reasonable in light of all information. Written statements that contradict oral assurances typically defeat the reliance element.

Complex Concepts Simplified

Flexible-premium universal life: A form of permanent life insurance where the policyholder can vary premium payments. The policy has an account value used to pay monthly “cost of insurance” charges. If funding plus credited interest does not cover charges, the account depletes and the policy can enter a grace period and then lapse.
Grace period: A contractually required window (here, 61 days) during which the policy remains in force after nonpayment or insufficient funding. If the insured dies during grace and the deficiency is cured per the policy, benefits may still be payable. If the deficiency is not cured by the end of the grace period, the policy lapses.
Policy illustration: A report projecting policy performance and funding needs under stated assumptions, often used to show the lump sum or ongoing payments required to keep coverage in force. Illustrations are informational but highly influential in establishing what the owner knew or should have known about funding requirements.
Surrender charge: A fee assessed upon surrender or lapse during a specified period. Its impact on account or surrender value can affect when a policy enters grace, but it does not negate the need to heed later grace notices.
Equitable estoppel: A doctrine preventing a party from asserting a right when its conduct knowingly misled another who reasonably and detrimentally relied on that conduct. In New Jersey, it requires (1) a knowing, intentional misrepresentation or equivalent misleading conduct; and (2) reliance that is justified and reasonable.
Material fact (summary judgment): A fact is “material” if it could affect the outcome under governing law. Disputes over immaterial facts do not preclude summary judgment. Here, debates about the exact cure amount or an earlier grace trigger were immaterial because the dispositive question was whether the March 15, 2021 notice complied with the policy and whether the trustee reasonably relied on contrary information.

Conclusion

The Third Circuit’s decision delivers two important, pragmatic messages in the New Jersey insurance context. First, where a policy promises advance written notice before lapse and New Jersey law imposes no further content requirements, a grace-period notice is not invalid merely because it omits the exact dollar cure amount. Timely written warning that coverage will terminate absent payment is enough when the policy so provides. Second, equitable estoppel is a narrow, fact-driven remedy. Vague or conditional customer-service comments do not estop an insurer from enforcing a lapse when policy provisions, annual statements, and illustrations unmistakably signal the need for substantial additional funding—and the policyholder ignores those signals.

Although designated “not precedential,” this opinion is likely to be persuasive in future New Jersey disputes involving universal life funding and lapse, particularly where policyowners rely on historical payment patterns or informal communications while disregarding written notices and illustrations. The takeaways are clear: read the policy, heed grace notices, treat illustrations as action items, and obtain written confirmations for any alleged concessions. Failing that, courts will enforce lapses according to the contract’s plain terms.