Sequeira v. Lincoln Nat'l Life Ins. Co.

• Decision Date: 31 August 2015
• Docket Number: A139639
• Citation: 192 Cal.Rptr.3d 127,239 Cal.App.4th 1438
• Court: California Court of Appeals Court of Appeals
• Parties: Michelle M. SEQUEIRA, Plaintiff and Appellant, v. LINCOLN NATIONAL LIFE INSURANCE COMPANY, Defendant and Respondent.

239 Cal.App.4th 1438

192 Cal.Rptr.3d 127

Michelle M. SEQUEIRA, Plaintiff and Appellant

v.LINCOLN NATIONAL LIFE INSURANCE COMPANY, Defendant and Respondent.

A139639

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

Filed August 31, 2015

Attorneys for plaintiff and appellant Michelle M. Sequeira: Terrence J. Coleman, Ryan H. Opgenorth.

Attorneys for defendant and respondent Lincoln National Life Insurance Company: Daniel W. Maguire, Edith S. Shea.

Opinion

Miller, J.

Like most of us, Donald Sequeira (Sequeira) did not work on January 1, 2010, because it was a paid holiday. Tragically, he was hospitalized the next day with a sudden illness and died on January 6 without ever returning to work.

Sequeira's widow sought benefits under a supplemental life insurance policy that was issued to Sequeira's employer on January 1, 2010. The trial court ruled that she was not entitled to benefits because the policy required her husband to be “on the job, at his employer's place of employment, performing his customary duties” between January 1 and his death.

We disagree with the trial court and reverse its judgment. The policy is ambiguous regarding whether Sequeira needed to perform his work responsibilities on New Year's Day or anytime after that in order for his wife to receive benefits. We therefore interpret the policy in favor of Sequeira's reasonable expectations, which are that he should not have to work on New Year's Day or when he is sick in order to receive coverage that he has paid for.

FACTUAL AND PROCEDURAL BACKGROUND

Donald Sequeira's Employment and Purchase of Life Insurance

Sequeira had been employed with the City of Vacaville (the City) since approximately 1990. In the fall of 2009, the City changed its life insurance carrier to defendant Lincoln National Life Insurance Company (Lincoln). The City provided basic life insurance coverage to employees from Lincoln, and also offered employees the option of purchasing supplemental coverage from Lincoln.

On October 7, 2009, Sequeira completed an enrollment form for basic coverage as well as an additional $275,000 in supplemental coverage. Sequeira designated plaintiff Michelle M. Sequeira as the primary beneficiary of both the basic and supplemental coverage. Sequeira made two premium payments for the supplemental coverage before the end of the year via paycheck deductions.

The Supplemental Life Insurance Policy

Lincoln issued the basic and supplemental policies to the City on January 1, 2010, for participating employees, including Sequeira. The parties agree that the basic policy was effective on January 1, 2010, and that plaintiff was entitled to benefits under that policy. Their disagreement centers on whether plaintiff was entitled to benefits under the supplemental policy.

The supplemental policy contained the following eligibility provision:

“ELIGIBILITY

“If you are a Full-Time Employee and a member of an employee class shown in the Schedule of Insurance; then you will become eligible for the coverage provided by the Policy on the later of:

“(1) the Policy's date of issue; or

“(2) the day you complete the Waiting Period.”

The supplemental policy defined a “Full-Time Employee” as an employee:

“(1) whose employment with the EMPLOYER is the employee's principal occupation;

“(2) who is not a temporary or seasonal employee; and

“(3) who is regularly scheduled to work at such occupation at least the number of hours as shown in the Schedule of Insurance.”

On the same page as the eligibility provision, the supplemental policy contained the following provision regarding effectiveness:

“EFFECTIVE DATES OF COVERAGES

“Your insurance is effective on the latest of:

“(1) the first day of the Insurance Month coinciding with or next following the day you become eligible for the coverage;“(2) the day you resume Active Work, if you are not Actively at Work on the day you become eligible;

“(3) the day you make written application for coverage; and sign:

“(a) a payroll deduction order; or

“(b) an order to pay premiums from your Flexible Benefit Plan account, if Employer contributions are paid through a Flexible Benefit Plan; or

“(4) the first day of the Insurance Month following the date the Company approves your coverage, if evidence of insurability is required.” (Italics added.)

The parties agree that Sequeira was eligible for coverage under the supplemental policy, but disagree whether the supplemental policy ever became effective as to Sequeira. Their specific dispute centers on whether the “Active Work” requirement in paragraph (2) of the effective dates of coverages provision required Sequeira to perform his job duties between January 1 and his death on January 6 in order for the supplemental policy to become effective.

The terms “Active Work” and Actively at Work” found in paragraph (2) are defined in the supplemental policy as follows:

“ACTIVE WORK OR ACTIVELY AT WORK means the full-time performance of all customary duties of an employee's occupation at the EMPLOYER'S place of business (or other business location to which the EMPLOYER requires the employee to travel.)”

The terms “Active Work” and “Actively at Work” are used in other parts of the supplemental policy. One such place is the waiting period provision, which states:

“WAITING PERIOD: 30 days of continuous Active Work.”

The term “Active Work” also appears in the “Termination of Coverage” provision, which states:

“Ceasing Active Work terminates your eligibility. However, you may continue coverage as follows: ...

“(2) If you cease active work due to a temporary lay off, an approved leave of absence, or a military leave; then coverage may be continued:

“(a) for three Insurance Months after the lay off or leave begins;“(b) provided premium payments are made on your behalf.”

Sequeira's Death and Appellant's Claim for Benefits

Sequeira did not work on January 1, 2010—the day the supplemental policy was issued—because it was a paid holiday. He was hospitalized suddenly on Saturday, January 2 and died on Wednesday, January 6. His cause of death was related to a viral infection in his heart. He did not report to work between January 1 and his death on January 6.

After Sequeira's death on January 6, plaintiff submitted a claim to Lincoln for benefits under both the basic and supplemental policies. Lincoln paid benefits to plaintiff under the basic policy but denied her benefits under the supplemental policy. Lincoln informed her that as to the supplemental policy, “Sequeira never returned to work from 12/30/09 (prior to the effective date) until his date of death. Therefore, Mr. Sequeira was never actively at work on or after the effective date of this policy, so his coverage under this policy never became effective.”

Trial Court Proceedings

Plaintiff filed a complaint against Lincoln on August 31, 2010, and an amended complaint on June 4, 2012. The amended complaint alleged causes of action for breach of contract and bad faith against Lincoln on the ground that Lincoln was obligated to pay $275,000 under the supplemental policy but refused to do so.¹

Plaintiff moved for summary adjudication against Lincoln, arguing that Lincoln owed her a duty under the supplemental policy to pay her $275,000. Lincoln then filed its own motion for summary adjudication on the ground that it did not breach the supplemental policy by denying plaintiff benefits. The trial court heard argument on plaintiff's motion on February 19, 2013, and took it under submission. Although the trial court initially issued a tentative ruling granting plaintiff's motion for summary adjudication prior to the February 19 hearing, the court issued a written order on May 14, 2013, denying it.

The trial court heard argument on Lincoln's motion for summary adjudication on May 21, 2013, and took it under submission. The trial court granted Lincoln's motion on June 20, 2013, in a written order that was similar to its May 14, 2013, written order denying plaintiff's motion. The trial court's June 20 order states, in pertinent part:

“Sequeira had been and remained a full time employee as of January 1, 2010. However, on January 1, 2010, he was not ‘actively at work’ because he was not on the job, at his employer's place of employment, performing his customary duties; he was on paid holiday. Mr. Sequeira was hospitalized on January 2, 2010 and passed away on January 6, 2010. He did not resume Active Work on or after January 1, 2010. As a result, although he met the eligibility requirements, the policy did not become effective as to him. [Citations.]

“... The definition of ‘Active Work or Actively at Work’ in Mr. Sequeira's policy does not pertain to the employees' status. ... The Effective date provision in Sequeira's policy pertained to the employee's location, e.g. he was required to be in full-time performance of his customary duties at the employer's place of business on January 1, 2010.

“Although sympathetic to Plaintiff, the court cannot redraft this insurance contract. [Citation.]”

The parties filed a joint stipulation on August 7, 2013, requesting that judgment be entered in favor of Lincoln, which the trial court did on August 14, 2013. Plaintiff timely filed this appeal.

DISCUSSION

Plaintiff raises three arguments on appeal. First, she argues that the policy should be interpreted as effective because Sequeira was a full-time employee when the policy was issued. Sequeira did not have to perform his work responsibilities between January 1 and January 6, 2010, in order for the policy to be effective. Second, plaintiff argues that the effective dates of coverages provision is unenforceable because its language was not “conspicuous, unambiguous, and unequivocal.” Third, plaintiff argues that the common law “temporary insurance” doctrine provided coverage to Sequeira because he completed an enrollment form and paid premiums for the supplemental policy.

A. Standard of Review and Principles of Interpretation

This appeal relates to motions for summary adjudication brought by plaintiff and Lincoln, who agree that the...