Thursday, October 8, 2020
Court of Appeal:
Opinion Says Payments Might Be Owed to Beneficiary Under Life Insurance Policy Although His Late Wife Was on Sick Leave and Policy, Expressly, Was Not to Go Into Effect as to an Employee Not in ‘Active Service’
By a MetNews Staff Writer
A woman who was on sick leave when she enrolled online for supplemental life insurance coverage under her employer’s group policy, and died without having returned to work, may have been covered even though the policy provided that it would not go into effect until an absent employee returned to “active service,” the First District Court of Appeal held yesterday.
The opinion, by Presiding Justice J. Anthony Kline of Div. Two, reverses a judgment of dismissal of an action brought by Michael Dones, husband of the decedent, against the Life Insurance Company of North America (“LINA”), a subsidiary of Cigna Corporation. The judgment followed the sustaining of demurrers, without leave to amend, by Alameda Superior Court Judge Paul D. Herbert.
The master policy provided:
“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.”
Trial Court Decision
Herbert reasoned that this language precluded coverage for Dones’s wife, Trina Johnson, who had been an emergency communications officer for the Alameda County Sheriff’s Department. A condition precedent to the policy going into effect was the absent employee reassuming “active service,” he ruled, and since Johnson hadn’t, the policy had not been activated and LINA’s sole duty was to return the premiums.
The amount of the premiums, paid over a six-month period, was appreciably less that the $230,000 claimed by Dones as the beneficiary under the policy.
The judge rejected the contention by Dones that because LINA accepted premiums—deducted from Johnson’s paycheck by the county or, when the amount was too small, paid directly by Johnson—the doctrines of waiver and estoppel operated to bar the insurer from denying coverage.
To the contrary, Kline declared, Dones’s “allegations of waiver and estoppel are sufficient to withstand demurrer.”
Discounting precedents cited by LINA, he wrote:
“None of LINA’s cases involve waiver or estoppel in the context of a condition precedent to operative policy coverage.”
Kline also said:
“The federal cases, including those LINA relies upon, were decided on motions for summary judgment or after trials, not on the pleadings….Waiver and estoppel are normally questions of fact, and LINA’s cases do not support a conclusion that these doctrines are inapplicable in the present case. We decline to hold that principles of waiver and estoppel cannot establish the existence of an effective contract of insurance as a matter of law.”
Information Not Provided
The jurist explained:
“Johnson was never informed of any information missing from or other problem with her enrollment, and in fact was informed that nothing further was needed, despite LINA’s and County’s knowledge that she was on medical leave and the insurance policy would not take effect as long as she was on leave; was unaware of any requirement that she return to work in order to make the insurance she was paying for effective; was capable of returning to work after the policy effective date; and would have returned if she had known of the requirement.”
All of this, he said, supports Dones’s position that LINA intentional relinquished a known right to preclude coverage until Johnson returned to work.
“The same allegations support the required elements of equitable estoppel that LINA was apprised of the facts and acted in such a way that Johnson had a right to believe the insurer intended her to rely upon the assurance that coverage was in place,” Kline said. “The other elements of estoppel, Johnson’s ignorance of the true state of facts and reliance, are alleged and…not conclusively refuted by the documents attached to the second amended complaint, LINA’s arguments to the contrary notwithstanding.”
Term Is Ambiguous
LINA argued that it was made known to Alameda County employees in a brochure, in the enrollment form, and in other documents that coverage would start on Jan. 1, 2017, only for those in “active service.” Kline responded that “active service” is not susceptible of a single meaning.
“For example, it would not necessarily be unreasonable for an employee, on medical leave but continuing to receive a paycheck, to understand ‘active service’ as a contrast to retirement rather than to a temporary leave of absence,” he said.
The judgment of dismissal was affirmed as to Dones’s causes of action against the county.
“The County is not an insurer,” Kline wrote.
He went on to say:
“The County’s role with respect to the life insurance policy was as agent for LINA; Dones’s claim, if any, is against LINA.”
The case is Dones v. Life Insurance Co. of North America, 2020 S.O.S. 4698.
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