Silva v. National American Life Ins. Co.

• Decision Date: 24 May 1976
• Citation: 58 Cal.App.3d 609,130 Cal.Rptr. 211
• Court: California Court of Appeals Court of Appeals
• Parties: Arthur F. SILVA, Jr., and Carolyn Glider, Plaintiffs and Appellants, v. NATIONAL AMERICAN LIFE INSURANCE COMPANY OF CALIFORNIA, Defendant and Respondent. Civ. 47164.

Page 211

130 Cal.Rptr. 211

58 Cal.App.3d 609

Arthur F. SILVA, Jr., and Carolyn Glider, Plaintiffs and Appellants, v. NATIONAL AMERICAN LIFE INSURANCE COMPANY OF CALIFORNIA, Defendant and Respondent.

Civ. 47164.

Court of Appeal, Second District, Division 3, California.

May 24, 1976.

Price, Martin & Crabtree, Modesto, for plaintiffs and appellants.

Booth, Mitchel, Strange & Smith, Stephen H. Galton, Los Angeles, for defendant and respondent.

ALLPORT, Associate Justice.

Effective December 25, 1968, National American Life Insurance Company issued a decreasing term policy of insurance on the life of A. F. Silva of 1405 Louise Avenue, Modesto, California. The policy was written in conjunction with a mortgage loan. The monthly loan payments, payable in advance to the lender Western Mortgage Corporation included the premium for the insurance. All payments were made by Silva when due up to and including the one of September 28, 1972, covering the period to October 25, 1972. Prior to October 25 Silva sold the mortgaged property and the loan was assumed by the buyer. No further premiums were paid on the insurance policy after September 28, 1972. Silva died on December 27, 1972 and his surviving children filed this action seeking the proceeds of the policy after National American refused payment on the ground the policy had lapsed for nonpayment of premium prior to the death of the insured.

The trial court granted a motion for summary judgment in favor of National American and the Silvas appeal therefrom contending that the policy was in force and effect at the time of the insured's death, and that summary judgment should have been granted in their favor. The Policy

The applicable provisions of the policy are as follows:

'CONSIDERATION. This policy is issued in consideration of the application therefor and the timely payment of the premiums specified herein. If any premium is not paid when due or within the grace period, this policy shall lapse as of the date the defaulted premium was due and, except as herein otherwise provided, shall become void and without value. . . . PREMIUMS. The first premium hereunder shall be due on the effective date of this policy. All premiums after the first shall be payable in advance either at the Home Office of the Company or to an agent of the Company. A grace period of thirty-one days shall be allowed for the payment of each premium after the first; provided, that if the Insured shall die within the period of grace any unpaid premium shall be deducted from any settlement hereunder. . . . Premiums for this policy are payable monthly when paid through the Lending Institution. In the event of termination of this method of payment for any cause whatever, premiums thereafter must be paid at annual intervals at an annual premium rate of twelve times the monthly premium rate.'

Discussion

It is clear, if not conceded, that, by its own terms, the policy lapsed on October 25, 1972, for nonpayment of premium when due or within the 31 day grace period. (Schick v. Equitable Life Assur. Soc., 15 Cal.App.2d 28, 33, 59 P.2d 163.)

The policy beneficiaries contend, however, that National American waived the lapse by resorting to use of a termination notice to cancel the coverage and that the use of termination notice method of cancellation was ineffectual in the instant case because the notice was improperly addressed and no proof was adduced at trial to establish actual receipt of the notice by the insured. The argument is without merit. The policy did not require cancellation or that a notice be sent to effectively terminate the coverage. It appears from the answers to interrogatories and declarations filed in connection with the motions for summary judgments that this notice was mailed October 9, 1972, by the insurance agent, Bond Insurance Agency, after it had learned of the sale of the property on or about October 1, 1972. The act of mailing the termination notice was not a waiver by the carrier of its right to rely upon the automatic termination provision of the policy. The notice, while entitled 'Termination Notice' by its terms was simply confirmation of the lapse for nonpayment of premium resulting from sale of the mortgaged property. ¹ We find nothing in Pierson v. John Hancock Mut. Life Ins. Co., 262 Cal.App.2d 86, 68 Cal.Rptr. 487, relied upon by plaintiffs, persuasive or compelling of a contrary decision regarding termination by notice.

It is also contended that the carrier waived, or is estopped from relying upon, the automatic lapse of the policy for nonpayment of premiums because it entered into negotiations with the insured recognizing the continued validity of the policy. The cases of Faris v. The American Nat. Assur. Co., 44 Cal.App. 48, 56, 185 P. 1035, Page v. Washington Mut. Life Assn., 20 Cal.2d 234, 241, 125 P.2d 20, and Lincke v. Mutual Benefit etc. Assn., 76 Cal.App.2d 222, 172 P.2d 912, are relied upon by plaintiffs in support of the waiver argument.

Conceding that negotiations with an insured after default may under some circumstances operate as a waiver, National American argues that the rule of waiver or estoppel is inapplicable to the facts of the instant case. We agree. The so-called 'negotiations' in the case at bench consisted of mailing the following communication:

National American Life Insurance Company Home Office

'December 27, 1972

Mr. Arthur F. Silva

1405 Louise Avenue

Modesto, California 95350

Re: Policy No. 20024272

Dear Mr. Silva:

Western Mortgage Corporation has notified us that your mortgage loan has been assumed as of October 1972. You were insured by us as one of their borrowers.

The policy you have is a Decreasing Term Life Insurance contract with an initial value of $13,043.00. This policy will decrease only slightly each year for another 23 years. The value as of December 25, 1971 is $12,430.00.

Fortunately, the Mortgage Life Protection Plan you have is of an individual nature, and can be used to protect any new loan or to supplement your personal insurance program. You do not have to have a mortgage to continue with this plan, and it can be changed to a permanent plan which would accumulate values.

To prevent loss of this valuable protection, we have made arrangements for you to continue with this coverage by making payments directly to us on an annual basis. Our billing statement is enclosed for premiums due to the renewal date of the policy. You will be billed for the annual premium prior to each premium renewal date thereafter.

We are pleased to have you as one of our insureds and we look forward to providing continuous service. To that aim, we are enclosing a card; please complete and forward this, and, if you have any further questions, do not hesitate to contact us.

Sincerely,

(s) Peggy Friend, Manager

Policyholder Service'

We note this letter was mailed on December 28, 1972, to Silva at 1405 Louise Avenue, Modesto and thereafter forwarded to him at 21600 Westpark Street, Hayward, California, where it was found unopened at the time his body was discovered on January 3, 1973.

The mailing of this letter standing alone fails to establish a waiver by the carrier of the policy lapse for nonpayment of premium. In each of the cases cited in support of the waiver theory communications or transactions which took place between the carrier and its insured prior to the death were held to be sufficient to constitute 'negotiations' thus establishing a basis for a finding of waiver. Each of these cases is clearly distinguishable from the facts in the instant case. We are referred to no case, nor has independent research revealed the existence of authority, holding that a single letter, regardless of its content, written on the date of an insured's death, mailed the day following the death and found unopened several days after discovery of the body constitutes a basis for the waiver urged herein.

The applicable law is set forth in Scott v. Federal Life Ins. Co., 200 Cal.App.2d 384 at 391--392, 19 Cal.Rptr. 258 at 262, wherein it is said:

'An express provision of an insurance contract stipulating that a default in payment renders the policy void or causes it to lapse is valid, and a default in such payment ordinarily forfeits the policy where statutory provisions are not violated. (45 C.J.S. Insurance § 614, p. 447.) Waiver and estoppel, however, are frequently applied in insurance law in favor of the insured or the beneficiary under a policy. The courts have generally applied the liberal rule in favor of the insured. (Knarston v. Manhattan Life Ins. Co., 140 Cal. 57, 73 P. 740; Truck Ins. Exch. v. Industrial Acc. Comm., 36 Cal.2d 646, 226 P.2d 583.) Like any other contracting party, an insurance company may waive provisions placed in a policy solely for its own benefit and may, by its conduct, be estopped from asserting defenses which might otherwise be available. (J. Frank & Co. v. New Amsterdam Cas. Co., 175 Cal. 293, 295--296, 165 P. 927.)

To constitute a waiver there must be an existing right, a knowledge of its existence, and an actual intention to relinquish it, or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished. (51 Cal.Jur.2d, Waiver, § 3, pp. 307--308, and cases cited therein.) The party who has the right may waive it without reliance by another. The doctrine of estoppel, however, is based on the theory that the party estopped has by his declarations or conduct misled another to his prejudice so that it would be inequitable to allow the true facts to be used against the party misled.

'(T)he party relying upon the doctrine of equitable estoppel must prove the existence of the four required elements essential to its application: (1) that the party to be estopped must be apprised of the facts; (2) he must intend that his conduct will be acted upon, or act in such a manner that the party asserting the estoppel could reasonably believe that he...