therewith..."); 39 Cal. Jur. 3d Insurance Contracts § 248 (1996).
The November 28, 1994 bill, the first bill Old Line sent Michelle after Old Line switched her to direct quarterly billing, was dated eight days after the November 20, 1996 automatic lapse. Like the Murray letter, Old Line's November 28, 1994 bill requested past-due payments: the bold caption across the top of the page read "Notice of Payment Due October 20, 1994," the body of the notice stated a "Total Due" of $ 65.00, and a pre-addressed payment coupon appeared at the bottom of the page. Therefore, under the authority of Murray, Old Line waived its right to declare an automatic forfeiture.
Old Line's pattern of misleading and equivocal communications bolsters this finding of waiver. See Pierson v. John Hancock Mutual Life Insurance Co., 262 Cal. App. 2d 86, 68 Cal. Rptr. 487 (1968) (insurer waived right to declare a forfeiture after it had exhibited an inconsistent and misleading pattern of accepting payments from the insured). Old Line switched Michelle to a quarterly billing plan at some point after she did not respond to the November 3, 1994 form letter providing the option of launching automatic check drafts. Griesemer Dec. at 3. By initiating this option of direct quarterly billing, Old Line somehow must have altered Michelle's original contractual obligation: after all, the terms of the original contract requiring monthly payments on the 20th of each month could no longer possibly remain in force under a quarterly payment system. But the undisputed evidence shows that Old Line never provided Michelle with information regarding the terms and conditions of the new quarterly billing arrangement. Old Line did send Michelle the November 28, 1994 bill covering three premiums, but that bill did not arrive until after the automatic lapse of the Policy, and it failed to specify what months it covered or a due date.
Furthermore, Old Line itself equivocates as to whether Michelle was obligated to pay quarterly or monthly premiums in late 1994. While Griesemer did declare that Old Line had placed Michelle on a quarterly payment plan, Old Line also contends that the October premium was due October 20, 1994, the November premium due November 20, 1994, and the December premium due December 20, 1994. Griesemer Dec. at 4-5; Joint Separate Statement of Undisputed Material Facts in Support of Cross-Motions for Summary Judgment at 7-9. These monthly due dates are inconsistent with a plan calling for quarterly payments.
The circumstances surrounding the November 28, 1994 bill reveal two additional examples of equivocal and misleading communications. First, Old Line captioned the November 28 bill "Notice of Payment Due October 20, 1994." However, if the bill represents a request for a quarterly payment, the payment could not have been due on October 20, 1994, weeks before Old Line switched Michelle to quarterly billing. And if the bill represents a request for three separate monthly premiums, as Old Line asserts that it does, this Court has yet another basis for a finding of waiver. According to Old Line's own evidence, the November 28, 1994 bill covered two past-due premiums (due October 20, 1994 and November 20, 1994) and one premium not yet due (due December 20, 1994). Old Line's Separate Statement of Undisputed Facts at 5. By demanding payment of the December 20, 1994 premium, a payment not yet due, Old Line waived its right to declare a forfeiture. A demand for a premium subsequent to a premium in default waives forfeiture for nonpayment of prior premium. Couch on Insurance § 32:310 at 626 (2d ed. 1985).
Old Line strongly urges that Silva v. National American Life Insurance Company of California, 58 Cal. App. 3d 609, 130 Cal. Rptr. 211 (1976), mandates that the November 28 bill cannot have constituted a waiver. Silva held that no waiver occurs where an insurance company, after an automatic lapse, sends the insured a correspondence asking for a payment to revive a former policy. Id. at 616. Despite Old Line's urging to the contrary, Silva is readily distinguishable from the present case. The Silva court characterized the letter, which in its second sentence explained to the insured that "you were insured by us as one of their borrowers," id. at 613 (emphasis added), as "an attempt on the part of the carrier to negotiate with the assured for reinstatement of the lapsed policy." Id. at 616 (emphasis added). The court pointed out that the Silva letter addressed the insured as "Having been, rather than Being" insured as of the date of the letter. Id. Therefore, the letter "does not recognize the validity of the coverage extended thereby." Id. In the present case, even Old Line appears to concede that the November 28 letter is not a reinstatement letter, but a bill requesting payment towards a current policy.
In the event that any doubt remains as to the propriety of finding a waiver in this case, it is worth emphasizing that evidence tending to show waiver is favorably regarded by the California courts. Forfeiture of a policy will be avoided on any reasonable showing. Pierson v. John Hancock Mutual Life Insurance Co., 262 Cal. App. 2d 86, 91, 68 Cal. Rptr. 487 (1968).
One important question remains: when did Old Line's waiver of its right to cancel the insurance coverage lapse?
Where the conduct of the insurance company may be considered as a waiver of the forfeiture that would otherwise arise on nonpayment of premium when due, the law permits payments to be made until definite notice is given that failure to pay will work a forfeiture. Thus, where a company extends credit to the insured for payment of premium, it has no right to declare a forfeiture of the policy except after putting the insured in default by giving him or her the appropriate notice.
39 Cal. Jur. 3d Insurance Contracts § 257 (1996).
Therefore, the waiver ended on the day when Michelle received notice of the termination. Because Michelle had died prior to receipt, the Policy remained in effect on the day she died. This court therefore GRANTS summary judgment in favor of Plaintiff Thomas Klotz.
Because this Court has found a waiver, it is not necessary to address the issue of estoppel.
D. Punitive Damages
Plaintiff requests punitive damages of $ 50,000 in his Complaint. Plaintiff, however, offers no evidence tending to show oppressive, fraudulent, or malicious conduct by Old Line. Furthermore, due to the complexity of the facts and the law in this case, it is unlikely that any bad faith can be shown. Plaintiff's request is therefore DENIED.
Based on the reasons set forth above, the Court GRANTS Plaintiff's motion for summary judgment without allowance for punitive damages, and DENIES Defendant's motion for summary judgment.
Defendant is hereby ORDERED to pay Plaintiff the amount of $ 125,000 plus interest, less the amount owed for the October, November, and December premiums, $ 65.00.
IT IS SO ORDERED.
United States District Judge
Pursuant to Fed. R. Civ. P. 58 and this Court's Order Granting Plaintiff's Motion for Summary Judgment, it is hereby ORDERED and DECREED that judgment be entered in the above-captioned matter in favor of Plaintiff.
IT IS SO ORDERED.
U.S. DISTRICT COURT JUDGE