Dones v. Life Ins. Co. of N. Am.

• Citation: 269 Cal.Rptr.3d 626,55 Cal.App.5th 665
• Decision Date: 07 October 2020
• Docket Number: A157662
• Court: California Court of Appeals
• Parties: Michael A. DONES, Plaintiff and Appellant, v. LIFE INSURANCE COMPANY OF NORTH AMERICA et al., Defendants and Respondents.

55 Cal.App.5th 665

269 Cal.Rptr.3d 626

Michael A. DONES, Plaintiff and Appellant,

v.LIFE INSURANCE COMPANY OF NORTH AMERICA et al., Defendants and Respondents.

A157662

Court of Appeal, First District, Division 2, California.

Filed October 7, 2020

Turner Friedman Morris & Cohan, Jonathan M. Deer, Beverly Hills, Blakeman Law, Benjamin Blakeman, Los Angeles, for Appellant.

Moscone Emblidge & Reubens, G. Scott Emblidge, Erin H. Reding, San Francisco, Meserve Mumper & Hughes, Nicole Y. Blohm, Charles K. Chineduh, Los Angeles, for Respondent.

Kline, P.J.

While employed by the County of Alameda (County) and on a medical leave of absence, Trina Johnson enrolled online in supplemental life insurance coverage under a group insurance policy insured by the Life Insurance Company of North America (LINA). She remained on leave on the policy's effective date and died six months later, without having returned to work. When her beneficiary claimed benefits, LINA denied coverage based on a policy provision stating the insurance would not become effective if the employee was not in "active service" on the effective date.

Johnson's beneficiary sued both LINA and the County for breach of contract arguing that both waived or were estopped from asserting the active service precondition to coverage. The trial court sustained demurrers without leave to amend and entered judgment in favor of LINA and the County.

As we will explain, we agree with appellant Michael Dones that the trial court erred in sustaining respondent LINA's demurrer without leave to amend. As to the respondent County, we find no error. We will therefore affirm the judgment as to the County but reverse the judgment as to LINA and remand for further proceedings.

BACKGROUND

Trina Johnson was an employee of the Alameda County Sheriff's Department. In 2014, LINA issued a group life insurance policy to the Trustee of the Group Insurance Trust for Employers in the Public Administration Industry for the benefit of the County of Alameda acting on behalf of its employees. This master policy provided a basic life insurance benefit to each eligible employee, including Johnson. The second amended complaint alleged that copies of the master policy were not distributed to employees, and that employees who enrolled for the benefit were supposed to be given certificates of insurance describing the terms of coverage but it was not known whether such certificates were distributed.¹

The master policy states: "If an Employee is not actively at work due to Injury or Sickness, coverage will not become effective for an Employee on the date his or her coverage would otherwise become effective under this Policy. [¶] Coverage will become effective on the date the Employee returns to Active Service."

The master policy defines "Active Service" as follows: "An Employee will be considered in Active Service with the Employer on a day which is one of the Employer's scheduled work days if either of the following conditions are met: [¶] 1. He or she is actively at work. This means the Employee is performing his or her regular occupation for the Employer on a full-time basis, either at one of the Employer's usual places of business or at some location to which the Employer's business requires the Employee to travel. [¶] 2. The day is a scheduled holiday, vacation day or period of Employer approved paid leave of absence, other than disability or sick leave after 7 days."

On April 1, 2016, the master policy was amended to increase the amount of coverage available to employees including Johnson, and she elected to obtain coverage in the maximum amount, $20,000. Again, it was alleged to be unknown whether Johnson received a certificate of insurance.

In October 2016, while on a medical leave of absence, Johnson received an announcement of benefit changes for the 2017 calendar year for which she was eligible, including voluntary supplemental life insurance. The announcement stated, "Voluntary Employee Supplemental Life Insurance – **NEW & SPECIAL** Effective January 1, 2017 Employees may purchase Life insurance in $10,000 increments, not to exceed the lesser of three times (3x) their annual base salary or $300,000 as your guarantee issue. Evidence of insurability is not required up to the guaranteed issued limit during the 2017 Annual Open Enrollment period. Note: Coverage will take effect on January 1, 2017 as long as you are in active service when the coverage takes effect ...." The announcement did not contain a definition of "active service," nor did any other document provided to Johnson. The announcement stated, however, "For more details contact us or use the EBC Website to review the Group Life Insurance Certificate for Non-Managers – Basic Life and Voluntary Employee Life. If you are on a leave of absence on January 1, remember to contact the EBC within 30 days of your return to work to see if you are eligible for this new benefit." The distributed announcement noted, "If you have any questions, you may call the Employee Benefits Center at 891-8991, or visit us, Monday thru Friday from 8:00 am to 5:00 pm for one-on-one assistance."

Johnson made her benefits elections online, selecting $230,000 supplemental coverage. The named primary beneficiary was Dones, who was then Johnson's domestic partner and later her husband. The second amended complaint alleges that the online enrollment form contained a section entitled "Active Service – Employee" but did not provide a complete description of the terms of the insurance policy.

A copy of the online enrollment form (exhibit B to the second amended complaint), shows bolded text in the "Supplemental Life–Employee" section stating, "In order to be eligible for this benefit you must meet the definition of an Active Service – Employee. [¶] Questions? Need additional information, Click Here." The "eBenefits Information Sheet" included in exhibit B includes the following:

"Active Service – Employee [¶] If you are an Employee, you are in Active Service with the Employer on a day which is one of the Employer's scheduled work days if either of the following conditions are met. [¶] 1. You are actively at work. This means you are performing your regular occupation for the Employer on a full-time basis, either at one of the Employer's usual places of business or at some location to which the Employer's business requires you to travel. [¶] 2. The day is a scheduled holiday, vacation day or period of Employer approved paid leave of absence, other than disability or sick leave after 7 days. [¶] You are considered in Active Service on a day which is not one of the Employer's scheduled work days only if you were in Active Service on the preceding scheduled work day."

"Active Service [¶] If you are an Employee, you are in Active Service with the Employer on a day which is one of the Employer's scheduled work days if either of the following conditions are met. [¶] 3. You are actively at work. This means you are performing your regular occupation for the Employer on a full-time basis, either at one of the Employer's usual places of business or at some location to which the Employer's business requires you to travel. [¶] 4. The day is a scheduled holiday, vacation day or period of Employer approved paid leave of absence, other than disability or sick leave after 7 days. You are considered in Active Service on a day which is not one of the Employer's scheduled work days only if you were in Active Service on the preceding scheduled work day."

On October 24, 2016, Johnson was diagnosed with lung cancer

.

On November 1, 2016, Johnson received a list of her 2017 benefit elections from the County Employee Benefits Center confirming her enrollment for the supplemental life insurance and stating the coverage would become effective on January 1, 2017. Johnson's daughter was listed as the beneficiary for the basic life insurance benefit and Dones was listed as the beneficiary for the supplemental life insurance.

On or about December 29, 2016, Johnson received a "Confirmation of Benefit Elections" including the supplemental life insurance.² The confirmation stated, "If this Statement is correct and consistent with your Open Enrollment Summary, retain this document for your records and no further action is required. If the EBC does not receive a corrected Statement from you by 1/13/2017, your elections will be considered correct and final." The confirmation was accurate and Johnson did not notify the County of any changes.

Beginning on January 1, 2017, the County deducted premiums for Johnson's benefits, including the supplemental life insurance, from her paycheck. The supplemental life insurance premiums were sent to and accepted by LINA. At the end of February 2017, Johnson's paycheck was insufficient to cover the premiums for her benefits and she paid out of pocket for those premiums, including the supplemental life insurance.

The second amended complaint alleged that it was "unknown" whether the package of documents provided to Johnson when she enrolled in the supplemental life insurance benefit included the policy provision stating, "If an eligible Employee is not in Active Service on the date insurance would otherwise be effective, it will be effective on the date he or she returns to Active Service." Earlier versions of the complaint had alleged the package provided to Johnson did contain this policy provision;³ the second amended complaint alleged, "after further review of documents, that allegation appears to be unfounded." Johnson was not sent a copy of the insurance policy or an individual certificate setting forth the terms of the insurance coverage (see Ins. Code, § 10209 ). The second amended complaint alleged that Johnson and Dones believed the supplemental life insurance coverage would become effective on January 1, 2017, and neither understood the provision delaying the effective date.

The second amended complaint alleged that unknown to Johnson or Dones, if an employee who elected the...