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Court of Appeal, Fourth District, Division 1, California.

James S. RYMAN, Jr. and Joan R. Ryman, Plaintiffs and Appellants, v. AMERICAN NATIONAL INSURANCE COMPANY, Defendant and Respondent.

Civ. 9901.

Decided: October 01, 1970

Hurwitz, Hurwitz & Remer, Franklin I. Remer, Newport Beach, and James B. MacDonald, Fullerton, for plaintiffs and appellants. Garrett & Dimino and David W. Young, Laguna Beach, for defendant and respondent.


Plaintiffs James S. Ryman, Jr. (James) and Joan R. Ryman (Joan) appeal from an adverse judgment in an action to recover under a lapsed policy of insurance for medical and hospital benefits. The judgment is based upon a written statement of stipulated facts.

The policy written by American National Insurance Company, a corporation (defendant), was dated June 17, 1965 and called for a quarterly premium of $61.54 payable in advance; James was named as insured and Joan was named as his covered dependent. All premiums had been paid on or before the due date or within the grace period up to and including that of June 17, 1966. The premium due on September 17, 1966 was not paid when due, after defendant between September 3 and 7, 1966 had mailed to James a notice the quarterly premium would be due on September 17, 1966.

Between September 27 and October 2, defendant mailed James a notice of premium due reminder, giving September 17 as the due date.

The policy contained a provision allowing a period of 31 days' grace. The policy, on October 18, 1966, lapsed for nonpayment of premium.

The policy contained the following provisions:

‘Each renewal premium is due at the expiration of the term period for which the preceding premium was paid and is payable to the Company at its Accident and Health Department, 6665 Delmar Boulevard, St. Louis 30, Missouri.

‘The payment of a premium shall not maintain this Policy in force beyond the end of the term period for which such premium is paid, except as specified in the provision, Grace Period.’

‘Reinstatement: If any renewal premium be not paid within the time granted the Insured for payment, a subsequent acceptance of premium by the Company or by any agent duly authorized by the Company to accept such premium, without requiring in connection therewith an application for reinstatment, shall reinstate the Policy; provided, however, that if the Company or such agent requires an application for reinstatement and issues a conditional receipt for the premium tendered, the Policy will be reinstated upon approval of such application by the Company, or, lacking such approval, upon the forty-fifth day following the date of such conditional receipt unless the Company has previously notified the Insured in writing of its disapproval of such application. The reinstated Policy shall cover only loss resulting from such accidental injury as may be sustained after the date of reinstatement and loss due to such sickness as may begin more than ten days after such date. In all other respects the Insured and Company shall have the same rights thereunder as they had under the Policy immediately before the due date of the defaulted premium, subject to any provisions endorsed hereon or attached hereto in connection with the reinstatment. Any premium accepted in connection with a reinstatement shall be applied to a period for which premium has not been previously paid, but not to any period more than sixty days prior to the date of reinstatement.’

On October 31, 1966, Joan sent by mail to defendant her check for $61.54 which was received by defendant on November 2, 1966.

On November 8, defendant sent to James a notice of lapse, received by Joan on November 10, which stated defendant's records showed the past-due premium had not been paid and the policy had lapsed, and contained this language:

‘Your policy will be considered for reinstatment subject to the terms and conditions of such policy, if you will complete the application on the reverse side and return with payment for the amount of premium due.’

On one side of the form was a printed application for reinstatement which included this language:

‘I agree that any reinstatement of said policy shall be in accordance with and subject to the terms of the policy and that it shall not be considered as reinstated until this application for reinstatement shall be accepted and approved officially by American National.’

On November 10, Joan wrote defendant stating the notice of lapse had been received, that she had mailed a check for $61.54 on October 31, and asking if it had been received. The full text of the body of the letter was:

‘Received ‘notice of Lapse’ today. I mailed Sept. 17, 1966 payment for $62.54, Oct. 31, 1966, check no. 584. Have you received it? Or otherwise notified me immediately.

‘According to my record there will be a other [sic] payment of $61.54 due Nov. 17, 1966.’

On November 11, 1966, both the Rymans were injured in an automobile accident, and for a period of weeds were incapacitated from attending to their affairs.

The total medical expenses for Joan were in the sum of $6,288.50. If the policy was in force and effect, total benefits due would be $5,090.80.

The total medical expenses for James were in the sum of $9,100.97. If the policy was in effect, the total benefits due would be $7,340.78.

Under date of November 22, defendant wrote James stating the payment made on October 31 could not be accepted as it was received after the expiration of the grace period and the lapse of the policy, but that James might apply for reinstatement on a form on the back of the letter, and the application would be considered promptly and if not granted the money being held would be refunded.

The premium payment of October 31 received by defendant on November 2, 1966 was deposited in defendant's account in the First National Band of St. Louis. Prior payments by the Rymans were deposited in the same way. Defendant then credited its suspense file with the amount of the premium payment.

On November 17, 1966 (while the Rymans were hospitalized), Joan's mother forwarded another check in the amount of $61.54 to defendant on behalf of the Rymans. The second payment was deposited and credited in the same manner as the first.

Under date of December 13, defendant wrote James acknowledging receipt of the second remittance, stating it could not be credited as the prerequisites to considering reinstatement had not been furnished, that a form of application for reinstatment was enclosed, that when received it would be considered and that upon reinstatement premiums would be paid to March 17, 1967.

Therafter there was correspondence that resulted in the mailing on January 31, 1967 of a check for $123.08 by defendant to James as a refund of the two remittances.

On February 16, 1967, the Rymans executed and sent to defendant a completed application for reinstatement. The application was accompanied by a letter from their attorneys which stated the application was made only on the basis it be retroactive prior to November 11, 1966. Defendant's check for $123.08 was enclosed to cover the premiums. That application showed thatJan had undergone an operation for a hernia in January 1966, with ‘no complications.’

Under date of March 13, 1967, the application for reinstatement was denied by defendant by a letter ot the Rymans' attorneys which contained a rśumé of the matters related herein.

The Rymans did not apply to any other company and did not at the time of the accident have any other health or accident insurance. At all times prior to and including November 10, 1966, the Rymans were in good health. Between September 17, 1966 and November 10, 1966, defendant was not possessed of any knowledge, actual or implied, that the Rymans were either in good or poor health.

Evidence that the insurer has ascepted premium payments after the grace period has expired, in combinatin with other circumstances, will suport a finding of waiver of a requirement of prompt payment or of estoppel to declare a forfeiture. (Page v. Washington Mut. Life Assn., 20 Cal.2d 234, 125 P.2d 20; Peterson v. Allstate Ins. Co., 164 Cal.App.2d 517, 330 P.2d 843.) Where there is such evidence it becomes a question of fact whether there has been a waiver or an estoppel exists. (McCary v. John Hancock etc. Life Ins. Co., 236 Cal.App.2d 501, 46 Cal.Rptr. 121; Barbera v. John Hancock Mut. Life Ins. Co., 127 N.J.L. 122, 21 A.2d 222; McDonald v. Equitable Life Assur. Soc., 185 Iowa, 1008, 169 N.W. 352.)

In Page v. Washington Mut. Life Assn., supra, 20 Cal.2d 234, 239, 240, 125 P.2d 20, 23, the court said:

‘Forfeitures, particularly in insurance contracts, are not favored. [citation] An if reasonable possible in light of the circumstances, the courts will determine that a forfeiture has not occurred or that a waiver or estoppel exists. [citations]

‘* * * [W]e are not disposed to hold that the acceptance of delinquent premium payments alone was sufficient under the facts of this case to prevent the assertion of a forfeiture, as only two of such payments were accepted by appellant's predecessor, and it is doubtful if such conduct would be binding as a waiver or estoppel against appellant; but there are other significant circumstances present which when combined with the acceptance of late payments establish a situation in which considerations of equity and justice demand that the forfeiture be not enforced.’

The facts may sometimes be such as to show a waiver or an estoppel as a matter of law. (Pierson v. John Hancock Mut. Life Ins. Co., 262 Cal.App.2d 86, 68 Cal.Rptr. 487.) The estoppel may arise from other conduct of an insurer such as the holding out of a certain person as an agent authorized to receive payment. (Huber v. New York Life Ins. Co., 18 Cal.App.2d 269, 63 P.2d 318.)

Unconditional retention of a late premium has been held to be a waiver of the strict requirement of prompt payment and failure to communicate the condition upon which the payment will be accepted may amount to an unconditional retention. (Shea v. Massachusetts Ben. Assn., 160 Mass. 289, 35 N.E. 855; Equitable Life Assur. Soc. v. Brewer, 225 Ky. 472, 9 S.W.2d 206.)

Where an application for reinstatement is called for by the policy, demanded by the insurer, and furnished by the insured under conditions of health that would entitle him to reinstatement, the condition of the policy is met even though the risk insured against intervenes before the application for reinstatement is acted upon. (Kennedy v. Occidental Life Ins. Co., 18 Cal.2d 627, 117 P.2d 3.)

In Kennedy v. Occidental Life Ins. Co., supra, at page 631, 117 P.2d at page 5, the court added the following rule:

‘[W]here the insured within the authorized time furnished proof of insurability which is not open to valid objection in form or substance and tenders all premiums in arrears plus interest thereon, and where in fact the insured is in good health at the time he makes application for feinstatement, he has at that time fulfilled all the conditions for reinstatement * * *.’

The stipulated facts do not contain anything by way of explanation of the failure to complacte and submit the form of application for reinstatemen to James on November 8 and received on November 10. Joan wrote to defendant on November 10 after receipt of the notice of lapse and the notice the policy would be considered for reinstatement upon receipt of the completed form of application for reinstatement.

The insured had no right to ignore that notice and request and to take the position the belated remittance of the amount of the premium took care of the matter.

The policy provision with regard to reinstatement is not to be ignored. It is in conformity with the requirements of Insurance Code, section 10350.4, which reads in part:

‘A disability policy shall contain a provision which shall be in the form set forth herein. The last sentence of such provision may be omitted from a noncancellable policy.’

The statute then scts out under the heading ‘Reinstatement’ the identical language under the same heading which we have quoted from the policy.

In the case at bench if issues of waiver and estippel were tendered and passed upon, they were decided as matters of fact. It does not appear that written findings were requested; none was made on the subjects of waiver and estoppel, or except as contained in the judgment itself; it does not appear that any announcement of an indended decision was made prior to January 1, 1969; the judgment, which may have been signed on February 11, 1969, was entered on May 7, 1969, so that full findings were not required to be made. (Code Civ.Proc. § 632.)

In view of the policy provision, the language of the statute, and the fact that the policy provision and the need for reinstatement were brought home to the insured, which may be inferrd in support of the judgment, as the fact of lapse admittedly was brought to their attention, those cases ae of little assistance that speak of the insurer's failure to call to the insured's attention the provisions and conditions relied upon by the insurer, or which speak of the reasonable expectations of the insured. (See Young v. Metroplitan Life Ins. Co., 272 Cal.App.2d 453, 461, 77 Cal.Rptr. 382; Wernecke v. Pacific Fidelity Life Ins. Co., 238 Cal.App.2d 884, 887, 48 Cal.Rptr. 251; Steven v. Fidelity & Casualty Co., 58 Cal.2d 862, 27 Cal.Rptr. 172, 377 P.2d 284; Ransom v. Penn Mutual Life Ins. Co., 43 Cal.2d 420, 425, 274 P.2d 633.)

In this case the insured had apparently been aware of the grace period and the due dates of the periodical premium which up to the one in question were paid within the grace period; a notice had been sent that the September 17 premium would be due on that date; plaintiffs received a notice of lapse on November 10 after having mailed the amount of the premium on October 31, two weeks after the last day of the grace period; although in good health, the insured failed to make an application for reinstatement of the policy until after having suffered a disabling accident.

No explanation has been given why the application for reinstatement was not made on November 10, although if James had made the applicatin for reinstatement on November 10 when Joan wrote the insurer in would have entitled him to reinstatement under the rule of Kennedy v. Occidental Life Ins. Co., supra, 18 Cal.2d 627, 117 P.2d 3.

The Kennedy case does not do away with the necessity for an application for reinstatement as called for by the policy, but recognizes that reinstatement is a contract right which the court enforced because the applicatin had been timely made.

The necessity for making such application is recognized in Greenberg v. Continental Gas Co., 24 Cal.App.2d 506, 75 P.2d 644.

It is possible that the office of the company from which the notice of lapse was mailed was unaware that the check mailed by Joan had been received by the company. That is not material in view of the fact no payment had ever before been attempted after the expiration of the grace period. The lapse had occurred at the expiration of that period. Only events subsequent thereto could give rise to a waiver of the contract terms or an estoppel against the company to rely upon them.

If the company were to rely upon its right to request an application for reinstatement, it was to the advantage of the insured that such request be made by the company as soon as possible.

Although the policy requires the company to notify the insured that he must make an application for reinstatement, it does not mention the giving of notice that the policy has lapsed. However, the giving of such a notice would seem to be a necessary incident to the giving of notice that an aplication for reinstatement is required.

In the circumstances of the present case, a check having been sent for the amount of the premium, the company must act within a reasonable time to reject the offered payment or to require the making of an application for reinstatement and to issue a conditional receipt for the amount of the check. Here, the conditional receipt was contained in the letter of November 22, by which the company again required an application for reinstatement. That was 20 days after the check had been received and 12 days after the receipt by the insured of the first notice an application for reinstatement was required.

There was an area for a factual determination by the trial court whether the conditional receipt was issued within a reasonable time after the check had been sent and with relation to the notice an application for reinstatement was required.

The judgment contains these specific findings:

‘The defendant has at all times complied with the reinstatement clause of the policy as required by Insurance Code, section 10350.4.

‘The Company acted reasonably under the unambiguous provisions of law and the contract.’

No grounds to support a claim of waiver or estoppel against the insurer existed prior to the receipt by the insured of the notice of lapse. Whether as a matter of fact the language of that notice, together with the fact that Joan had belatedly transmitted a check in the amount of the premium, gave rise to an estoppel would have depended upon the reason for not having made a timely applicatin for reinstatement. The reason for not having done so was not among the stipulated facts.

From the fact a check had been mailed two weeks after the expiration of the grace period, the fact a notice of lapse was received 10 days after the mailing of the check, and the fact the letter of November 10 was sent without making application for reinstatement, several possible inferences might have been drawn, not all necessarily equally reasonable.

It might have been inferred Joan's failure to have her husband execute and send in the applicatin for reinstatement was caused by her uncertainty the company had received her check. Such a finding would tend to support a claim of estoppel.

The trial court might have inferred that the application for reinstatement would have been made if the insurer had written it had received the check but would not apply it to the premium until the application for reinstatement had been made. Such a finding would tend to support a finding of estoppel.

From the language of Joan's letter, it might have been inferred that she believed if the belated check had been received by the company no further action was necessary on the part of the insured except to make the next premium payment, and that the notice of lapse and the request for an application for reinstatement might be ignored. Such a finding would have supported the judgment.

Although the stipulated fact was that both insureds were in good health on November 10, it might have been inferred that the application for reinstatement was not made then because Joan was uncertain about the effect of her January operation upon the reinstatement of the insurance.

Whenever the facts found are such as might authorize different inferences therefrom, it will be presumed that the inference made by the trial court was one that will uphold rather than defeat the judgment. In such case the appellate court will not draw from those facts any inference contrary to that which might have been drawn by the trial court for the purpose of rendering its judgment. (Lincoln v. Averill, 47 Cal.App.2d 335, 338, 117 P.2d 913.)

The inference drawn by the trial court must have been that which would support a finding that the insurer was not estopped to assert a requirement that the policy would not be reinstated without the execution of an application for reinstatement.

The narrow questions before us seem to be whether as a matter of law upon the facts before us the failure of the insured to make application for reinstatement was excused because the insurer had not, prior to November 22, acknowledged receipt of the delinquent payment that had been received; and whether, again as a matter of law, the strict time requirements for payment were waived, or the insurer estopped to assert that the policy had lapsed.

We answer those questions in the negative.

The judgment is affirmend.

WHELAN, Associate Justice.

GERALD BROWN, P. J., and AULT, J., concur.

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