Hinckley v. Bechtel Corp.

• Decision Date: 21 August 1974
• Citation: 41 Cal.App.3d 206,116 Cal.Rptr. 33
• Court: California Court of Appeals Court of Appeals
• Parties: Mabel W. HINCKLEY, etc., Plaintiff and Appellant, v. BECHTEL CORPORATION et al., Defendants and Respondents. Civ. 31265.

Page 33

116 Cal.Rptr. 33

41 Cal.App.3d 206

Mabel W. HINCKLEY, etc., Plaintiff and Appellant, v. BECHTEL CORPORATION et al., Defendants and Respondents.

Civ. 31265.

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

Aug. 21, 1974.

Melbert B. Adams, Clayton O. Rost, Palo Alto, for plaintiff and appellant.

Paul R. Haerle, Stephen D. Butler, Thelen, Marrin, Johnson & Bridges, San Francisco, for defendant and respondent, Bechtel Corp.

Hassard, Bonnington, Rogers & Huber, John I. Jefsen, Lawrence Handelman, San Francisco, for defendant and respondent, California Western States Life Ins. Co.

KANE, Associate Justice.

Plaintiff, Mabel W. Hinckley, individually and as administratrix of the Estate of Charles Hinckley ('appellant'), appeals from the trial court's judgment entered after respondents' demurrer to the first amended complaint was sustained without leave to amend.

The allegations of appellant's first amended complaint, which in ruling on a demurrer must be regarded true (Alcorn v. Anbro Engineering, Inc. (1970), 2 Cal.3d 493, 496, 86 Cal.Rptr. 88, 468 P.2d 216; Flores v. Arroyo (1961), 56 Cal.2d 492, 15 Cal.Rptr. 87, 364 P.2d 263), disclose that Charles Hinckley ('Hinckley') was employed by respondent Bechtel Corporation ('Bechtel') for 19 years and retired from said employment on March 19, 1969. As one of the employment benefits, Bechtel offered to its employees a low cost group life insurance program through co-respondent California Western States Life Insurance Company ('California Western'). Bechtel administered the program and maintained personnel for this purpose. Under the provisions of the policies an insured has the right to convert the insurance into an individual policy without evidence of insurability within 30 days after termination of employment. Hinckley was insured under the aforementioned group life insurance policies issued to him on or before January 1, 1967, and was entitled to the option of conversion. However, he failed to exercise his option upon his retirement and/or within the statutory period prescribed by Insurance Code, section 10209, subdivision (d).

Hinckley died on October 3, 1970. Subsequently appellant, his widow, brought the present action to recover damages in the amount of $73,000, the monetary value of the group policies. In her complaint appellant advances two theories of recovery: breach of contract (first cause of action) and negligence (second cause of action). In effect, she alleges that notice of termination of group insurance is essential to render the conversion privilege accorded to the employee valuable (Walker v. Occidental Life Ins. Co. (1967), 67 Cal.2d 518, 63 Cal.Rptr. 45, 432 P.2d 741) and the failure to give such notice to Hinckley constituted a breach of both the employment contract with Bechtel and the insurance contract with California Western. In the alternative, appellant maintains that Bechtel's failure to give notice amounted to actionable negligence. As will appear from the discussion below, appellant's contentions cannot be sustained.

(a) Breach of Employment Contract: While appellant's assertion that Bechtel's failure tao give Hinckley notice of his conversion privilege constituted a breach of employment contract is somewhat novel, it lacks requisite legal or factual support and therefore must fail. It is noteworthy that the foregoing claim is not predicated on any express provision of the employment contract, but rather on the premise that the employer's duty to give such notice was an implicit term of the employment agreement (Civ.Code, § 1655 ¹; Walker v. Occidental Life Ins. Co., supra). This contention cannot stand for a number of reasons.

First of all, it is well settled in California that in performing functions necessary to administer group insurance policies the employer is the agent of the insurer; and, with regard to his liability, the rules of agency are governing (Walker v. Occidental Life Ins. Co., supra at p. 522, 63 Cal.Rptr. 45, 432 P.2d 741; see also: Elfstrom v. New York Life Ins. Co. (1967) 67 Cal.2d 503, 63 Cal.Rptr. 35, 432 P.2d 731; Pantzalas v. Superior Court (1969), 272 Cal.App.2d 499, 77 Cal.Rptr. 354).

Second, even if assumed Arguendo that the group life insurance as an ingredient of the benefit plan offered by the employer to all his employees does constitute a part of the employment contract (cf. Hunter v. Sparling (1948), 87 Cal.App.2d 711, 197 P.2d 807), appellant's contention cannot be sustained. It is widely recognized that the courts are not at liberty to revise an agreement under the guise of construing it. Neither abstract justice nor the rule of liberal interpretation justifies the creation of a contract for the parties which they did not make themselves. Courts cannot make for the parties better agreements than they themselves made or rewrite contracts because they operate harshly or inequitably as to one of the parties (Cousins Inc. Co. v. Hastings Clothing Co. (1941) 45 Cal.App.2d 141, 147, 113 P.2d 878). Accordingly, it has been held that covenants or terms in an agreement may be implied only if the following conditions are met: (1) the implication must arise from the language used or it must be indispensable to effectuate the intention of the parties; (2) it must appear from the language used that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it; (3) implied covenants can only be justified on the grounds of legal necessity; (4) a promise can be implied only where it can be rightfully assumed that it would have been made if attention had been called to it; and (5) there can be no implied covenant where the subject is completely covered by the contract (Stockton Dry Goods Co. v. Girsh (1951), 36 Cal.2d 677, 227 P.2d 1; Masciotra v. Harlow (1951), 105 Cal.App.2d 376, 233 P.2d 586; Cousins Inv. Co. v. Hastings Clothing Co., supra).

It is readily apparent that the allegations of appellant's first amended complaint fail to meet each element of the test laid down above. It must be especially emphasized that appellant does not allege that it was clearly within the contemplation of the parties that Bechtel should give special notice to its employees of the conversion right under the group insurance policy and/or that any legal necessity--the most important single element of implied covenant (cf. Freeport Sulphur Co. v. American Sulphur Royalty Co. (1928), 117 Tex. 439, 6 S.W.2d 1039; Grass v. Big Creek Development Co. (1915), 75 W.Va. 719, 84 S.E. 750; Masciotra v. Harlow, supra; Cousins Inv. Co. v. Hastings Clothing Co., supra)--existed for giving such notice. The omission of such allegations from the complaint gains special significance in light of Insurance Code, section 10209 (see below) which requires a group policy of insurance to contain a provision that the insurer will issue to the employer for delivery to the insured employee an individual certificate setting forth a statement as to the insurance protection to which the employee is entitled (see also: Humphrey v. Equitable Life Assur. Soc. (1967), 67 Cal.2d 527, 533, 63 Cal.Rptr. 50, 432 P.2d 746).

Appellant nonetheless insists that in the case at bench the implied covenant of duty to give notice should attach because the first amended complaint is devoid of any allegation that the insurance certificate was, in fact, delivered to Hinckley and, therefore, knowledge of the contents of the policy cannot be presumed. Appellant apparently misses the point.

As indicated above, Insurance Code, section 10209, prescribes a statutory duty for the employer to deliver to the insured employee an individual certificate setting forth Inter alia the time and other conditions of exercising the conversion privilege. The mere existence of a statute, of course, raises a strong disputable presumption that the provisions contained therein have been dutifully carried out (Civ.Code, § 3548; Peabody v. Barham (1942), 52 Cal.App.2d 581, 584, 126 P.2d 668). It is also settled that a general demurrer may be taken not only from the facts appearing upon the face of the complaint, but also from any matter of which the court is required to, or may, take judicial notice (Code Civ.Proc., § 430 (now § 430.30); 3 Witkin, Cal.Procedure (2d ed.), § 798, p. 2412). Insurance Code, section 10209, is a statutory law of this state of which both the trial court and the reviewing court are required to take judicial notice (Evid.Code, §§ 451, 459). All this inevitably leads to the conclusion that in the case at bench a statutory presumption arose that Hinckley received the insurance certificate containing provisions as to the exercise of the conversion right and the statute raising such presumption became a part of the first amended complaint by virtue of mandatory judicial notice which, in the absence of contrary allegations, was properly considered in sustaining the demurrer without leave to amend.

Third, appellant utterly fails to provide any authority in support of the contention that under the facts here presented the Employer was under a legal duty to give notice (other than that required by Ins.Code, § 10209, supra) to its employee with regard to the exercise of the conversion right under a group life insurance policy. In direct contradiction with appellant's proposition, the cases agree that where an employee terminates ² the employment by his own act, the employer is not required to give the employee notice of the termination of employment (Waltz v. Equitable Life Assurance Society of United States (1958), 233 S.C. 210, 104 S.E.2d 384; Pearson v. Equitable Life Assur. Soc. (1938), 212 N.C. 731, 194 S.E. 661; Young v. Minton (1934), 49 Ga.App. 545, 176 S.E. 662; 68 A.L.R.2d, § 84, p. 133).

A case in point is Johnson v. Travelers Ins. Co. (Mo.App.1946), 194 S.W.2d 938. In that case, the insured employee retired on September 30, 1932, and, without exercising his conversion right within the allotted 30-day...