Pearce v. American Defender Life Ins. Co.

• Decision Date: 21 May 1985
• Docket Number: No. 8410SC1045,8410SC1045
• Citation: 74 N.C.App. 620,330 S.E.2d 9
• Parties: Leta PEARCE, on her own behalf and in her capacity as Administratrix and North Carolina Ancillary Administratrix of the Estate of Douglas Allen Pearce v. AMERICAN DEFENDER LIFE INSURANCE COMPANY.
• Court: North Carolina Court of Appeals

Page 9

330 S.E.2d 9

74 N.C.App. 620

Leta PEARCE, on her own behalf and in her capacity as Administratrix and North Carolina Ancillary Administratrix of the Estate of Douglas Allen Pearce v. AMERICAN DEFENDER LIFE INSURANCE COMPANY.

No. 8410SC1045.

Court of Appeals of North Carolina.

May 21, 1985.

Akins, Mann, Pike & Mercer, P.A. by J. Jerome Hartzell, Raleigh, for plaintiff, appellant.

Smith Moore Smith Schell & Hunter by Ted R. Reynolds and Benjamin F. Davis, Jr., Greensboro, for defendant, appellee.

HEDRICK, Chief Judge.

We note at the outset that plaintiff relies heavily on this Court's prior decision, in which we "vacated" the order dismissing plaintiff's complaint for failure to state a claim, in support of her contention that the court erred in granting defendant's motion for judgment notwithstanding the verdict. Plaintiff contends that our holding in the first appeal of this case is binding on this Court on this second appeal, citing N.C.N.B. v. Virginia Carolina Builders, 307 N.C. 563, 299 S.E.2d 629 (1983). "The doctrine of law of the case does not apply to dicta, [however,] but only to points actually presented and necessary to the determination of the case." Waters v. Phosphate Corp. 61 N.C.App. 79, 84, 300 S.E.2d 415, 418 (1983), modified and aff'd, 310 N.C. 438, 312 S.E.2d 428 (1984). We have carefully scrutinized Judge Hill's opinion in this case, and note that this Court went to some length to clearly delineate what it was--and what it was not--deciding in holding that plaintiff's complaint, liberally construed, states a claim upon which relief might be granted:

Both parties expend considerable effort in their respective arguments proceeding from the premise that the exchange of letters in May of 1971 somehow broadens the coverage of the policy, creating attendant problems of agency and contract law. Without passing on the merits of these contentions, our reading of plaintiff's Complaint and the letters therein establishes to our satisfaction that plaintiff has, at the very least, pleaded no insurmountable bar to her claim.

Pearce v. American Defender Life Ins. Co., 62 N.C.App. 661, 665, 303 S.E.2d 608, 610 (1983) (emphasis added). While this Court has held that plaintiff's complaint discloses no insurmountable bar to recovery under at least one of her nine claims for relief, our inquiry in reviewing the court's entry of judgment notwithstanding the verdict in favor of defendant is a very different one: Is the evidence introduced at trial, viewed in the light most favorable to plaintiff, insufficient as a matter of law to support the jury's verdict in plaintiff's favor? Summey v. Cauthen, 283 N.C. 640, 197 S.E.2d 549 (1973). For the reasons set forth below, we hold that the court did not err in granting defendant's motion for judgment notwithstanding the verdict.

We begin our analysis by pointing out that the policy provision in question, which excepts from coverage death resulting from travel in an aircraft if the insured is a flight crew member, is unambiguous. Plaintiff does not contend that the policy, considered as written, independent of the exchange of letters in 1971, obligates defendant to make payment to plaintiff under the Accidental Death Rider. Plaintiff's claim, instead, is that defendant is estopped from relying on the aircraft exception, or that defendant has waived that portion of the insurance contract, or that that portion of the insurance contract was modified by the exchange of letters in 1971.

The doctrines of "waiver" and "estoppel," although related, are conceptually distinct. Waiver is "the voluntary, intentional relinquishment of a known right," Appleman 16B Insurance Law and Practice Sec. 9081 (1981), while estoppel "refers to an abatement raised by law of rights and privileges of the insurer where it would be inequitable to permit their assertion." Id. Waiver is available only when the evidence shows that the insurer intentionally relinquished its rights under the insurance contract. Id. Estoppel, on the other hand, "necessarily implies prejudicial reliance of the insured upon some act, conduct, or nonaction of the insurer." Id. Our courts have often held that forfeiture provisions in an insurance contract may be waived by the insurer, or that the company may, because of its conduct, be estopped from relying on such provisions so as to avoid its obligations under the policy. See, e.g., Durham v. Cox, 65 N.C.App. 739, 310 S.E.2d 371 (1984); Thompson v. Insurance Co., 44 N.C.App. 668, 262 S.E.2d 397, disc. rev. denied, 300 N.C. 202, 269 S.E.2d 620 (1980). While these doctrines sometimes have been relied upon to prevent forfeiture, the rule is well settled that

The doctrines of implied waiver and of estoppel, based upon the conduct or action of the insurer, are not available to bring within the coverage of a policy risks not covered by its terms, or risks expressly excluded therefrom; and the application of the doctrine in this respect is, therefore, to be distinguished from the waiver of, or estoppel to deny, grounds of forfeiture.

Hunter v. Insurance Co., 241 N.C. 593, 595, 86 S.E.2d 78, 80 (1955) (quoting 29 Am.Jur. Insurance Sec. 903). "The theory underlying this rule seems to be that the company should not be required by waiver and estoppel to pay a loss for which it charged no premium...." Annot., 1 A.L.R.3d 1139, 1144 (1965).

In the instant case, the Accidental Death Rider provides for the payment of an additional $40,000 in the event the insured dies as the result of an accident, and expressly exempts from coverage death resulting from an accident involving an aircraft on which the insured serves as a crew member. We think it clear that application of the doctrines of waiver or estoppel on these facts would essentially rewrite the policy, extending coverage to a risk expressly excluded therefrom, and obligating defendant to pay a loss for which it charged no premium. This we cannot do.

We next consider whether plaintiff introduced sufficient evidence that defendant's agent, Miss Wynne, had actual or apparent authority to modify the insurance contract so as to bring Mr. Pearce's death within the scope of coverage. The following provision appears in the policy:

No alteration of this Policy and no waiver of any of its provisions shall be valid unless made in writing by us and signed by our President, Vice President, or Secretary.

Assuming arguendo that the statements made by Miss Wynne in her letter of 12 May 1971 would, if made a part of the insurance contract, constitute a modification of the contract provisions, the record contains undisputed evidence showing that Miss Wynne had no actual authority to make such a modification. She was not the president, vice president, or secretary of defendant corporation at the time she wrote the letter in question, and she testified that she had no authority to extend coverage beyond that provided in the insurance contract. In her brief plaintiff concedes that "Miss Wynne may not have had actual authority to modify Plaintiff's decedent's insurance coverage," but contends that "Mr. Pearce could, in the exercise of reasonable care, have concluded Miss Wynne had authority to speak for and bind the company." Plaintiff further argues that the policy provision governing the manner in which the contract terms could be modified or waived "should not bar plaintiff's decedent from being able to rely on Miss Wynne's written explanation of the policy provisions."

"It is true that a principal, who has clothed his agent with apparent authority to contract in behalf of the principal, is bound by a contract made by such agent, within the scope of such apparent authority, with a third person who dealt with the agent in good faith, in the exercise of reasonable prudence and without notice of limitations placed by the principal upon the agent's authority." Lucas v. Stores, 289 N.C. 212, 220, 221 S.E.2d 257, 262 (1976). "This...