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


Civ. 9908.

Decided: June 14, 1937

Livingston & Livingston, of San Francisco, for appellant. Hartley F. Peart, of San Francisco (Howard Hassard, of San Francisco, of counsel), for respondent. Rolla B. Watt, of San Francisco, for intervener.

In an action brought to recover the amount due the beneficiary of Spencer Jackson Johnson, deceased, under a group insurance policy, the jury returned a verdict in favor of the plaintiff. The trial court granted the defendant's motion for a new trial. From that order the plaintiff has appealed.

After all of the parties had finished introducing evidence, the defendant made a motion that the jury be directed to bring in a verdict in its favor. The trial court denied that motion. Thereafter the defendant made a motion for a new trial. Later the motion was granted. The wording of the order granting the motion was as follows: “The motion for a new trial having been heretofore submitted to the court for decision, and the court having fully considered the same, it is ordered that the said motion for new trial be and the same is hereby granted upon the sole ground that the court erred in denying defendant's motion for a directed verdict for the reason that the premium which became due on January 19, 1932, on the policy described in the complaint was not paid within the grace period expiring February 19, 1932, and that defendant did not waive the payment thereof and is not estopped to forfeit said policy on account of such nonpayment.” The plaintiff asserts that the sole question presented by this appeal is whether the trial court erred in denying the defendant's motion for a directed verdict, and if it did not, then that it erred in granting the motion for a new trial and the order should be reversed. The defendant contends that in its motion for a new trial it made many assignments of error and if any one of said assignments was well made then the order should be affirmed. From the conclusion which we have reached it will not be necessary to discuss anything excepting the order refusing to grant defendant's motion for a directed verdict.

Mullion–Acton Company and Mullin–Johnson Company were affiliated corporations engaged in the insurance business in San Francisco. The uncontradicted testimony showed that Mullin–Johnson Company was the corporate agent in charge of the brokerage business of Mullin–Acton Company. With the facts all known to both parties, on September 18, 1931, the California Western States Life Insurance Company (then Western States Life) wrote a policy of group insurance upon the lives of the employees of the affiliated corporations. That document was known as the master contract of group insurance. The original was lost, but evidence proving its contents was offered at the trial. To each employee a certificate was issued showing his interests under the master policy. By the terms of the policy the premiums fell due on September 19, 1931, and monthly thereafter. A representative of Mullin–Johnson Company collected from its employees and a representative of the Mullin–Acton Company collected the amounts due from its employees and the latter company transmitted the premium moneys to the defendant's home office. In that manner every premium was paid down to and including the month of November. As to each premium the practice was for the insurance company to send to the policyholder a statement showing the amount of each premium and when due. Such a statement and such a notice went forward regarding the premium payable December 19, 1931. The policy provided thirty–one days as a period of grace. On January 14, 1932, Mullin–Acton Company drew and forwarded its check in the sum of $71.38. At that time Mullin–Acton Company was financially embarrassed. On receiving the check the defendant did not immediately deposit it, and when it did the bank on which it was drawn refused to pay the check because the bank had been compelled to exercise its banker's lien to protect itself and no funds remained to pay the check. In the meantime the creditors of Mullin–Acton Company filed an involuntary petition to have the latter adjudged a bankrupt, and on January 22, 1932, it was so adjudged. When the defendant was informed that said check had not been paid it sent Robert F. Benjamin, an employee in the office of the manager of the group department, to attempt to collect the amount of the check from the policyholder. He called on Mr. George H. Mullin, president of Mullin–Johnson Company and formerly president of Mullin–Acton Company. Mr. Mullin advised him to call on Mr. Raymond A. Burr, the receiver in bankruptcy of Mullin–Acton Company. Benjamin did so, but without success, and when he returned Mr. Mullin caused the check of Mullin–Johnson Company to be issued and delivered to Mr. Benjamin. That check was cashed February 10, 1932. It paid the premium that fell due December 19, 1931.

While straightening out the check tangle Mr. Mullin became aware of the dangerous condition in which the insurance of the employees was becoming involved. The pro rata contributions of the Mullin–Johnson Company amounted to $10.40. That sum he offered to pay Mr. Benjamin, but he declined to accept it. In doing so he stated to Mr. Mullin: that the bankruptcy of the Mullin–Acton Company had resulted in the appointment of a receiver, Mr. Burr; that Mr. Burr refused to continue the policy so far as the employees of Mullin–Acton Company was concerned; that under those circumstances it was necessary to recalculate the premiums; and, until the latter step had been taken Mr. Benjamin did not know what sum, or sums, to collect. About this time other conversations were had between Mr. Mullin and Mr. Benjamin. No other tender was made to Mr. Benjamin nor was any sum sent to the home office of the defendant. Affairs stood as stated above when, on February 24, 1932, Spencer Jackson Johnson died. The last date on which the premium which fell due January 19, 1932, could have been paid under the terms of the policy expired February 19, 1932––that is, five days before the date of the death of Mr. Johnson.

In her complaint the plaintiff inserted three separate counts. In the first count she pleaded performance. In the second count she alleged that the premium which became payable February 19, 1932, was not paid, but defendant waived and excused the payment thereof. In the third count she alleged certain facts by reason of which defendant was and is estopped from declaring a forfeiture of the policy. On the trial no evidence of performance was offered. The evidence offered to sustain the claim of waiver was wholly insufficient. Belden v. Union Central Life Ins. Co., 167 Cal. 740, 743, 141 P. 370; Sharman v. Continental Ins. Co., 167 Cal. 117, 125, 138 P. 708, 52 L.R.A.(N.S.) 670.

The plaintiff's claim of estoppel was based on two wholly different theories each theory being addressed to a separate state of facts. The original policy had been lost and plaintiff was not able to produce it at the time of the trial. She introduced evidence that her attorney, Mr. Livingston, had applied to the company for a copy; that it sent one which on its face named the insured “Mullin–Acton Company and Mullin–Johnson Company” as employers. She then introduced evidence to the effect that later Mr. Marcus Gunn, vice president of the insurer, struck out “and Mullin–Johnson Company,” claiming that those words were not in the original policy and were inserted by mistake on the copy. No witness testified that the original policy named the two companies as “the employer.”

The other theory regarding estoppel may in general be summarized as follows: The plaintiff claims that under the facts the insurer caused and allowed Mr. Benjamin to exercise such authority as would constitute him the ostensible general agent of the insurer and that his acts were in legal effect the acts of the company. We think not. Mr. Cranmer was manager of the group department. He obtained from Mullin–Acton Company an application for insurance. Not until after the death of Spencer Jackson Johnson did he have any further contact with the insured. After Mr. Cranmer obtained the application of the employer, Mr. Benjamin, who was a helper in his office, went out and interviewed the employees and obtained their individual applications. No other contacts are noted in the evidence until Mullin–Acton Company's check dated January 14, 1932, was returned unpaid. At that time Mr. Benjamin was directed to endeavor to collect the premium that check represented. He was not given authority to do anything regarding any other premium or take any action regarding or concerning the contract of insurance theretofore entered into. The plaintiff did not claim he was given express authority. On the other hand his express authority was reduced to writing and shows on its face that he had no power to write a contract or alter one.

In her opening brief the plaintiff states that: “This is an action on a certificate issued to S. J. Johnson under a policy of group insurance.” The certificate issued to S. J. Johnson provided: “This is to certify that under and subject to the terms and conditions of a group policy of insurance Number G248,667 issued and delivered to Mullin–Johnson Company of San Francisco, California (herein called the employer) the life of Spencer Jackson Johnson, an employee, is thereby insured as of the date stated below * * *. In the event of termination of employment for any reason whatsoever, the employee's life insurance may be continued as provided under the conversion privilege described on page two hereof.” On page 2 the conversion privilege is stated which must be exercised within thirty–one days. It closes with the sentence: “Such life insurance policy, when issued, shall be dated as of the actual date of termination of employment.” By reason of the reference thereto in the certificate, the policy must be read in connection with the certificate. Magee v. Equitable Life Assur. Soc., 62 N.D. 614, 244 N.W. 518, 85 A.L.R. 1457.

The policy contained, among others, the following provisions: “The payment of any premium shall not maintain the insurance under this policy in force beyond the date when the next premium becomes payable, except * * *. A grace of thirty–one days during which the policy will remain in force will be allowed for the payment of all premiums except the first. * * * Insurance on such employees shall terminate as of the date of termination of employment * * *.” Continuing, a conversion privilege is set forth which is more completely stated, but in harmony with the statement made in the certificate. Finally, section 18 of the policy was as follows: “No agent can make, alter or discharge this policy or extend the time for payment of premiums, nor can this policy be varied or altered or its conditions waived or extended in any respect, except by the written agreement of the Company, signed by the president or vice–president, or secretary, or assistant secretary, whose authority will not be delegated.” Under the clear terms of the contract, insurance under it ceased when employment ceased. Numerous cases have been brought and determined. Counsel have cited no authority, and we find none, that holds otherwise than that the termination clause in a group insurance policy will be given effect according to the clear wording thereof. Emerick v. Connecticut General Life Ins. Co., 120 Conn. 60, 179 A. 335, 105 A.L.R. 413, and extended note. Under the conceded facts Mullin–Acton Company was adjudged a bankrupt and its employment of all employees terminated January 23, 1932. All parties so understood and so acted. Therefore, all insurance under the group policy terminated as of that date. Hoebel v. Travelers Ins. Co., 275 Ill.App. 551. The fact that the employees were entitled within thirty–one days to convert their insurance did not prolong insurance under the group policy, but merely entitled them to apply for individual policies which would operate as from the date of the termination of the employment. Schooley v. Metropolitan Life Ins. Co. (Tex.Civ.App.) 77 S.W.(2d) 886; Lewis v. Connecticut General Life Ins. Co. (Tex.Civ.App.) 94 S.W.(2d) 499; Thompson v. Pacific Mills, 141 S.C. 303, 139 S.E. 619, 55 A.L.R. 1237. If, as contended by the plaintiff, on February 9, 1932, Mr. Benjamin stated to Mr. Mullin that the group insurance policy was still in force and effect, such act tended to “alter” the policy and “extend the time for the payment of premiums” in violation of section 18 of the policy. If, on the same day, Mullin–Johnson Company the affiliated company, and one of the employees of Mullin–Acton Company tendered to Mr. Benjamin the pro rata premiums of the employees of Mullin–Johnson Company, the tender was an idle act as no employee, whether incorporated or not incorporated, of Mullin–Acton Company had any such right under the terms of the policy. Magee v. Equitable Life Assur. Soc., supra; Baker v. Prudential Ins. Co., 279 Ill.App. 5, 12, 13. As we have shown that the termination of the employment occurred on January 22, 1932, and that the sole remaining right of each employee was to convert his insurance, it is patent that the statement of Mr. Benjamin, on February 9, 1932, or thereabouts, did not and could not deprive the insurer of any available right. Therefore, there was neither a waiver by the defendant nor was an estoppel created against it. 21 C.J. 1135. The trial court did not err in granting a new trial.

The order appealed from is affirmed.

I dissent. The effect of the trial court's ruling on the motion for new trial, and of the majority opinion sustaining that ruling, is to declare that the evidence was insufficient to go to the jury on the issue of estoppel. I cannot agree with that declaration.

The present case differs from the ordinary case involving a single assured and a fixed premium. The action was brought upon a certificate issued under a so–called “group policy,” and under this form of insurance the real assured, the employee, deals solely with his employer in making his contributions to the premium paid. The employee's contributions are deducted from his salary and the premium, which is paid by the employer, varies with each payment depending upon the number of employees then employed as well as other factors. It further appears that the group policy under discussion differs from the ordinary group policy in that the employees of more than one company were insured thereunder.

The evidence showed that while the original application was signed only by the Mullin–Acton Company, both the Mullin–Acton Company and the Mullin–Johnson Company were named therein as separate but affiliated corporations. At the time of making said application the Mullin–Acton Company and the Mullin–Johnson Company separately executed requests for group insurance upon the lives of their respective employees. Only one policy was issued and the original was lost. The copy first furnished by the insurer upon request showed that both companies were named as policyholders in the group policy, but the copy supplied by the insurer on the trial named only the Mullin–Acton Company as the policyholder. Nevertheless, separate statements were made out each month calculating the premiums upon the employees of each company separately and the total amount due was computed each month by adding the amount due from Mullin–Acton Company and the amount due from the Mullin–Johnson Company. Furthermore, the certificate issued to Johnson recited that the group policy had been “issued and delivered to Mullin–Johnson Company,” his employer. The evidence was therefore ample to support a finding that the original group policy named both the Mullin–Johnson Company and the Mullin–Acton Company as the policyholders.

It is conceded that the monthly premiums were paid up to the premium which fell due on January 19, 1932. It is further conceded that the last–mentioned premium was not paid and that Johnson died on February 24, 1932, being five days after the expiration of the thirty–one day period of grace allowed for payment by the terms of the policy. The insurer denied liability in the following terms: “Since the monthly premium due under this group contract as of January 19, 1932, was not paid on or before February 19, 1932, the last day of grace for its payment, the contract lapsed and became null and void in accordance with its terms.” It defended upon the same ground. The sole issue presented by this appeal is whether there was sufficient evidence to go to the jury upon the claim that the insurer was estopped to declare a forfeiture of the policy as to the employees of Mullin–Johnson Company.

In addition to the foregoing there was evidence to show that the total premium due on January 19, 1932, from both companies was calculated at $69.72 and that the usual statements were forwarded at that time; that Mullin–Acton Company had been in financial difficulty and was adjudicated a bankrupt on January 22, 1932; that the Mullin–Johnson Company continued to operate until some time after the death of Johnson on February 24, 1932, and that neither the employment of Johnson nor of any other employee of the Mullin–Johnson Company had terminated prior to Johnson's death; that the insurer sent notices to the former employees of Mullin–Acton Company stating that their insurance was “no longer in effect” and advising them to see a representative of the insurer regarding their conversion privileges but the insurer sent no similar notices to the employees of the Mullin–Johnson Company; that Mr. Cranmer was the manager of the group insurance department of the insurer charged with the duty of writing new group insurance and “the conservation thereof”; that Mr. Benjamin was Mr. Cranmer's assistant; that said representatives had handled the writing of the original policy and also the previous difficulty regarding the collection of a premium; that on February 9, 1932, Mr. Mullin discussed with Mr. Benjamin the question of the premium due on account of the employees of the Mullin–Johnson Company and tendered to him the sum which appeared to be due as the premium on account of the employees of that company; that Mr. Benjamin declined to accept this tender, stating that “he could not tell what the premium would be until he got the correct amount from the home office.” He further stated, “it would be necessary for them to recalculate the premiums––because the number of people that were then employed by Mullin–Johnson Company were not––did not equal the original number that were employed by both Mullin–Acton Company and Mullin–Johnson Company”; that “the matter would have to be taken up with the home office in Sacramento” and that Mr. Mullin “would hear from him then within a short period of time”; that thereafter Mr. Mullin tried almost daily without success to reach Mr. Benjamin and Mr. Cranmer by telephone; that between February 15, and February 17, he reached Mr. Benjamin and asked for news from Sacramento; that Mr. Benjamin advised him that he had not heard from Mr. Cranmer; that the home office was upset because of the merger of Western States Life and California States Life; that Mr. Cranmer was spending most of his time in Sacramento and that the policy would be kept in force. That after the conversation with Mr. Benjamin no new statement regarding the premium was sent to the Mullin–Johnson Company and no notice of any kind was sent to any of its employees; that Mullin–Johnson Company was at all times ready, willing, and able to pay the amount due when that amount was ascertained.

The foregoing evidence was ample to go to the jury on the issue of estoppel and, if believed by the jury as it apparently was, it was sufficient to create an estoppel against the insurer. It will be noted that the insurer recognized the fact that it was not entitled to the full premium as it had declared that the insurance of the Mullin–Acton employees under the group policy was no longer in force by reason of the termination of their employment on January 22. It will be further noted that the insurer recognized that the employment of the employees of the Mullin–Johnson Company had not terminated and that their insurance under the group policy remained in force as it sent no notices to said employees similar to those sent to the Mullin–Acton employees. The Mullin–Johnson Company employees had regularly made their contributions on account of the premium to their employer and said employer made a tender during the grace period of the amount which it believed to be due on account of the premium which became payable on January 19. This tender was refused with the statement that the premium would have to be recalculated because of the changed conditions and that a corrected statement would be sent. The insurer failed to recalculate the premium or send a corrected statement within the grace period or prior to Johnson's death. The acts and omissions of the insurer and of its representative, Mr. Benjamin, as shown by the evidence set forth, were such as to warrant the belief on the part of Mullin–Johnson Company and its employees that the insurance would be treated as in force as to said employees pending the recalculation of the premium and the sending of a corrected statement and the insurer should not be permitted to defend upon the claim that the policy was forfeited as to said employees by nonpayment of said premium. We are not here dealing with the question of the authority of a representative to waive payment or extend the time for payment of a premium, but are dealing rather with the question of what acts and omissions on the part of an insurer and its representatives will give rise to an estoppel to declare a forfeiture on the ground of nonpayment of a premium within the time provided by the policy. While no authority directly in point has been cited, the following tend to support the views expressed herein: Baumann v. Metropolitan Life Ins. Co., 144 Wis. 206, 128 N.W. 864; Continental Casualty Co. v. Bridges (Tex.Civ.App.) 114 S.W. 170; United States Life Ins. Co. v. Lesser, 126 Ala. 568, 28 So. 646; Hawkins v. Washington Fidelity Nat. Ins. Co. (Mo.App.) 78 S.W.(2d) 543; Reid v. Northern Assur. Co., 63 Cal.App. 114, 218 P. 290; 10 Cal. Jur. 625 et seq.

The majority opinion proceeds upon the theory that Johnson's employment terminated on January 22, 1932, the date when the Mullin–Acton Company was adjudicated a bankrupt, and that thereafter Johnson was only entitled to exercise a conversion privilege which he did not do. But Johnson was not an employee of the Mullin–Acton Company. He was an employee of the Mullin–Johnson Company and that company continued to operate and Johnson continued in its employ up to the time of his death. He could not therefore have exercised the conversion privilege provided in the policy as that privilege could only be exercised “within 31 days after the actual date of termination of employment.”

The motion for new trial was granted “upon the sole ground that the court erred in denying defendant's motion for directed verdict.” I am of the opinion that the order granting a new trial should be reversed as it cannot be sustained upon the ground which was expressly declared to be the sole ground for the granting thereof.


I concur: NOURSE, P. J.

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