CULLEY v. NEW YORK LIFE INS CO (1945)

This is an appeal from a judgment in favor of the plaintiff in an action upon an insurance policy, in which policy plaintiff was named as beneficiary. The policy in question was issued by appellant upon the life of respondent's husband, and provided for both death and disability benefits. The policy was in the principal sum of $10,000 and as modified, called for the payment of premiums in quarter annual instalments of $70 each, payable on the 20th days of February, May, August and November of each year. Respondent's husband, the insured, died on April 14, 1941, after a protracted illness. Prior to the death of the insured an attempt was made to claim disability benefits, and appellant denied all liability under the policy on the ground that the policy had lapsed for non payment of premiums, and that the disability of the insured had occurred after the default of the insured in the payment of premiums. The present action upon the policy was instituted by respondent, as beneficiary, after the death of the insured.

It appears that installments of premium due August 20 and November 20, 1940 were not paid. The complaint herein alleges that the insured became totally disabled because of a chest cancer in or about the month of May, 1940, and was so totally and presumably disabled on August 20, 1940, and at all times thereafter until his death. The policy provided, in paragraph 4 of section 1 thereof, that: ‘In the event of default in payment of premium after the insured has become totally disabled, the policy will be restored upon payment of arrears of premium with interest at 5%, provided due proof that the insured is totally and presumably permanently disabled, as herein defined, is received by the Company not later than six months after said default and the benefits under this section shall then be the same as if said default had not occurred.’ The policy contained the following provisions with respect to total and permanent disability: ‘Disability shall be deemed to be total whenever the insured is wholly disabled by bodily injury or disease so that he is prevented thereby from engaging in any occupation whatsoever for remuneration or profit.’ ‘Disability shall be presumed to be permanent, (a) Whenever the insured will presumably be so totally disabled for life; or—(b) After the insured has been so totally disabled for not less than three consecutive months immediately preceding receipt of proof thereof.’ A form provided by appellant, and headed ‘Insured's Statement,’ with respect to claim for disability benefits, was filled out and filed with appellant on behalf of the insured on February 21, 1941. At or about the same time there was presented to appellant a check for the premium payment due August 20, 1940, with interest, accompanied by the following letter, dated February 20, 1941; ‘I am enclosing herewith check for $71.75, to apply on the August 20th premium of $70.00, plus interest to date of $1.75, on policy No. 8 599 144, issued to Grant B. Culley, my husband. This is in accordance with the terms of the said policy, and I further wish to state that the November 20th premium was not paid because the insured was permanently and totally disabled at that time. I am also enclosing claim from disability benefits under the above mentioned policy No. 8 599 144, and under policy No. 10 498 108.’ This letter was signed by the wife of the insured. Appellant refused to accept the letter and check tendered in payment of the premium. Under date of March 10, 1941, appellant wrote insured the following letter: ‘We wish to advise that our company has completed its investigation with respect to your claim for disability benefits, and from the information obtained it appears that you did not discontinue the performance of all work until December 19, 1940. In the circumstances, the Company is not warranted in considering that you have been continuously totally disabled as provided from a date prior thereto. Under the terms of policy #85599144 disability benefits became effective upon receipt at the company's home office before default in payment of premium of due proof that an insured is totally and presumably permanently disabled as provided. According to our records policy #859914 is in default for non-payment of the premium due August 20, 1940, and all rights to the disability benefit provision terminated as of that date. Therefore, as it appears you did not become wholly disabled until December 19, 1940, or a date subsequent to the lapse of the policy it is evident that the company is not in a position to favorably consider claim on this policy.’

The complaint contains the following allegations:

‘That prior to the expiration of the six months period mentioned in paragraph 4 of section 1 of the said policy of insurance and before February 20, 1941, Grant Culley was critically ill from said chest cancer, being confined to a hospital. Prior to February, 1941, and while Grant Culley was so confined to the hospital, a request was made of the defendant that he be given information concerning the status of his said policy No. 8599144 in order that he might protect his rights as set forth therein. Said defendant was notified at said time of the total disability of said Grant Culley and that he was totally and presumably permanently disabled as defined in said policy. In response to said request, he was advised that he had no rights; that the defendant had no obligations to him and that the policy of insurance had been forfeited for non-payment of premium. The defendant denied liability on said policy although it well knew of the existence of the aforesaid paragraph 4 of Section 1 of said policy and that Grant Culley had certain rights and the defendant had certain obligations in the event Grant Culley was totally disabled as set forth in said policy. That after the expiration of the six months period mentioned in paragraph 4 of Section 1 of said policy and during the months of February, March and April, 1941, the defendant entered into negotiations with Grand Culley which negotiations recognized the continued validity of the policy in that defendant requested and received further statements and letters by physicians who attended Grand Culley setting forth facts proving that Grand Culley was totally disabled from and after May, 1940, and continuously up to the time of the submission of said statements and letters and also proving that Grand Culley was totally and presumably permanently disabled as defined in said policy. That said proofs so submitted to the defendant at its request were for the purpose of complying with the instructions of the defendant and were accepted by the defendant in order that Grant Culley might receive the benefits due him under said policy. That all of the terms and conditions of said policy of insurance No. 8599144 required to be performed by Grant Culley were so performed except those which were waived by defendant as set forth herein and those which defendant is estopped to deny were performed, as set forth herein.’

Appellant, as defendant, by its answer denied the allegations above quoted, except that appellant admitted that in response to an inquiry concerning the status of the policy in question, appellant notified and advised the insured that the policy had lapsed because of the failure of the insured to pay the quarter annual premium due thereon August 20, 1940, and that defendant denied liability on said policy; and except that appellant admitted carrying on negotiations relating to the rights of the insured with respect to disability under the terms of a separate and distinct policy of insurance other than the one upon which this suit is based.

The trial court found that while appellant had lapsed said policy of insurance on its records, that thereafter the insured had valuable rights under the policy provisions; and the court found that it was not true that after December 31, 1940, the policy ceased to have any value to the insured; that due proof of total and presumably permanent disability of insured, as defined in the policy, was received by appellant on or before six months after August 20, 1940, to-wit: on February 20, 1941, and that appellant denied liability on said policy on February 18, 1941. The court also found that: ‘It is also true that defendant has by its acts, actions and conduct waived the right to receive proof of Grand B. Culley's total and permanent disability prior to February 20, 1941, and has waived its right to require the tender to the defendant of any premiums or interest, by reason of its acts, actions and conduct.’ It should also be noted that the trial court found that no premium was due and payable on August 20, 1940, because the insured was totally and permanently disabled on said date. In this connection, the court found the following allegations of the complaint to be true: ‘That on or about the month of May, 1940, Grant Culley became totally disabled because of a chest cancer and was so totally disabled and totally and presumably permanently disabled on August 20, 1940 and on April 14, 1941, the date of death of said Grant Culley. That said Grant Culley was totally and presumably permanently disabled as defined in said policy before August 20, 1940, and at all times thereafter and until his death. That said total disability from a chest cancer was continuous from on or about the month of May, 1940 and until April 14, 1941.’ The court adjudged the policy valid, and an existing valid obligation of appellant, and gave judgment to respondent upon the policy in the sum of $10,632.46, including interest from April 14, 1941, to the date of judgment.

Appellant contends that regardless of when total disability commenced, the policy lapsed for default in payment of premiums; and that the policy was never restored under the terms of the restoration clause of the policy. Respondent contends that the finding of the court that the insured was totally and permanently disabled prior to August 20, 1940, is supported by the evidence; and that the findings of waiver of the provisions of the policy on the part of appellant are likewise supported by substantial evidence.

The restoration clause, referred to, is paragraph 4 of section 1 of the policy, above quoted. The provisions thereof are reasonably plain. Under these provisions, if the insured becomes totally disabled and thereafter defaults in payment of premiums, if the insured files with the insurance company ‘due proof’ of such total disability as the policy requires, within six months after such default, the benefits under the policy will be restored to the same status as before the default occurred, upon payment of the arrears of premium with 5% interest. It is to be noted that the only limitation as to time in said provisions is that within which the proof of disability must be filed. There is no limitation as to time within which arrears of premium shall be paid, under such circumstances. Appellant contends that in any event, under the terms of the policy, proof of disability must be received before default in payment of premiums. This contention is based upon paragraph 3 of section 1 of the policy which provides that benefits will be granted upon receipt at the Company's home office, before default in payment of premium, of due proof that the insured is totally and presumably permanently disabled. Such contention is wholly inconsistent with the provisions of paragraph 4 of section 1, above, and at most creates an uncertainty or ambiguity in the terms of the policy, which, under the well settled rule in such instances, must be construed most strongly against the insurer; and it must be assumed that the trial court so construed it. It should be pointed out, however, that both respondent and the trial court appear to have labored under a misapprehension regarding the obligation to pay premiums after disability. It is expressly provided by the terms of the policy that any premium due prior to approval of proof of disability is payable in accordance with the terms of the policy, but if due after receipt of proof will, if paid, be refunded upon approval of proof. Any premium falling due after approval of proof and during disability is expressly waived. The premiums here in question both fell due prior to receipt by the company of proof of disability and payment of such premiums was not waived by the terms of the policy, nor would the insured be entitled to a refund thereof under such terms if the same had been paid.

In the present case the prime requisite to recovery under the policy was the occurrence of total disability prior to August 20, 1940, the date of the first default in payment of premium. Under the terms of the policy, as above noted, an insured is deemed to be totally disabled when prevented by injury or disease from engaging in ‘any occupation whatsoever for remuneration or profit.’ The rule of construction of such a policy provision is now settled in this state, and there appears to be little, if any, need for further discussion or analysis of the subject. However, it should be pointed out that the language of the clause here in question, taken in its literal sense, does not mean that to be disabled the insured must have been reduced to a condition of helplessness. The ability to earn remuneration or profit is plainly made the test of disability, even under a literal interpretation of the policy provision. It is the settled rule in this state that the question of disability is one of fact for the decision of the trial court or jury; and if it appears from the evidence in the present case that the insured prior to August 20, 1940, was suffering from a disease which prevented him from performing the substantial duties of his occupation in the usual way, and that the insured was thereby prevented from earning his usual livelihood, the finding of the court as to total disability prior to said date must be upheld. Wright v. Prudential Ins. Co., etc., 27 Cal.App.2d 195, 80 P.2d 752; Hill v. New York Life Ins. Co., 38 Cal.App.2d 627, 101 P.2d 752; Hurwit v. Prudential Insurance Co. of America, 45 Cal.App.2d 74, 113 P.2d 691; Clark v. Metropolitan Life Ins. Co., 47 Cal.App.2d 773, 118 P.2d 919; Trousdell v. Equitable Life Assur. Soc., 55 Cal.App.2d 74, 130 P.2d 173, 990; Erreca v. Western States Life Ins. Co., 19 Cal.2d 388, 121 P.2d 689, 694, 141 A.L.R. 68. This is in accord with the rule of the cases just cited, and is not in conflict with the statement in Erreca v. Western States Life Ins. Co., supra, that: ‘Under this construction, ‘any occupation’ may mean the insured's usual occupation only if he is for any reason unfit to perform the duties pertaining to any other type of business or employment.' The statement just quoted is qualified by the following language, from the same case: ‘This construction of the words ‘any occupation’ is based upon the theory that it is unreasonable to deprive an uneducated laborer, disabled from performing any manual work, of the benefits of his policy, because he might notwithstanding those disabilities, with training and study, pursue a profession at some future date, or become an accountant or a banker. And it would be equally unreasonable to hold that a doctor, lawyer, or business executive is not totally disabled from engaging in ‘any occupation’ or from performing ‘any work’ because he is able to run a news stard or work as a day laborer.' It appears from the record that the insured in the present case was engaged in the real estate and appraisal business almost exclusively for fifteen years, and had the general duties of a real estate broker. If it may be established by the evidence that the insured, because of the disease from which he suffered, was unable to perform the substantial duties of such occupation in the usual way, and was thus prevented from earning his usual livelihood, such a state of facts would support an inference that the insured was unable to perform the duties of any type of occupation for which he was fitted, for remuneration or profit, and thus support the finding of the trial court with regard to the time when the insured's total disability occurred.

There is evidence in the record that insured developed what was apparently a violent pain in his left arm in the spring of 1940; that insured would continually grab his arm, and would rub it all the time during conferences. There was a noticeable change in insured's activity in the early part of 1940. This change became very market and resulted in insured's doing much less walking than he customarily did; and it was necessary for him to have someone else drive his car, as the pain in his arm prevented his driving. His attendance at the office became irregular. When at the office, very often he would just sit and stare. In the previous year, 1939, insured would make an average of three or four appraisals a month. After June 1940 he made but two small appraisals. From July 1940 to December 1940 insured earned but $150 from his efforts in his real estate association. His activities on the realty board were markedly curtailed after the first three months of 1940. One witness testified that it was about May 1940 when he first noticed that insured was losing his zest and zeal for the interest of the board. The evidence presented in the record sufficiently establishes the fact that the insured was suffering from disease prior to August 20, 1940, and that his consequent state of health was the cause of a marked decrease in his business activities, which had very seriously affected his earning capacity. This last fact is demonstrated by the negligible earnings of insured for the last six months of 1940. The evidence is sufficient to support the finding of total disability of insured prior to August 20, 1940, the date of the first default in the payment of premiums. Appellant contends that the insured's statement of disability and the letter of February 20, 1941, tendering payment of premium due August 20, 1940, and interest, show that insured was not disabled on August 20, 1940. The documents in question do not of themselves establish such fact. Moreover, since it appears from the evidence that appellant made an investigation of the matter of disability and did not rely on the statements made by insured or his representatives, it cannot be held that either the insured or respondent were bound by such statements.

Although the statement of insured as to disability, made on the form furnished by appellant, was filed six months and one day after the first default in payment of premiums, there is sufficient evidence to show that the representatives of insured requested such form for the purpose of presenting proof of disability and relied on appellant to supply the same; and the evidence is sufficient to have warranted an inference by the trial court that the statement was filed one day late because of the failure of appellant to furnish the form in time. This being true, appellant's effort to charge respondent with the one day delay cannot be upheld.

Therefore, regardless of when appellant may have denied liability under the policy, it is clear that the insured at all times after August 20, 1940, had a valid subsisting interest in the policy in question. Such interest consisted of the right to restoration of the policy provisions under paragraph or subdivision 4 of section 1 of the policy. Moreover, after the filing of the insured's statement of disability, there remained only the payment of arrears in premiums with interest in order to restore insured to full rights under the policy. The effect of the rejection by appellant of the tender of a portion of the arrears need not be considered, because it is definitely established that appellant denied all liability under the policy in the letter written March 10, 1941, above quoted. A cause of action accrued to insured immediately upon such denial of liability, and the requirement of payment of arrears was no longer necessary to give insured such right of action. ‘The rule is * * * settled * * * that an unconditional denial of liability by the insurer after the insured has incurred loss and made claim under the policy gives rise to an immediate right of action.’ Bollinger v. National Fire Insurance Co., 25 Cal.2d 399, at page 404, 154 P.2d 399, at page 402; Paez v. Mutual Indemnity, etc., Ins. Co., 116 Cal.App. 654, 3 P.2d 69. While the cases cited in support of the above quoted statement from Bollinger v. National Fire Ins. Co., supra, are mostly concerned with waiver of the necessity of proof of loss under the terms of an insurance policy, yet the principle here involved is that of a general rule with relation to contracts, namely, that when tender of performance of an act is necessary to the establishment of any right against another party, this tender or offer to perform is waived, or becomes unnecessary, when it is reasonably certain that the offer will be refused, or that payment or performance will not be accepted. Hoppin v. Munsey, 185 Cal. 678, 198 P. 398; Lewis v. Fowler, 80 Cal.App. 717, 252 P. 786; Cowan v. Tremble, 111 Cal.App. 458, 296 P. 91; Hills v. National Albany Exchange Bank, 105 U.S. 319, 26 L.Ed. 1052, 12 F. 93. At the time of appellant's denial of liability, the insured was entitled to be restored to his rights under the policy on payment of arrears of premium. This was a condition precedent to enforcing a claim under the policy. But the insurer denied all liability; and to require the insured thereafter to tender full payment of arrears before bringing suit would be to require an idle act. It should be emphasized that there was no default on the part of the insured with respect to carrying out the restoration provisions of the policy in connection with payment of arrears, since, as already mentioned above, the policy did not provide a time limit for such payment. Hence, the provisions of section 1440 of the Civil Code are also applicable, namely; ‘If a party to an obligation gives notice to another, before the latter is in default, that he will not perform the same upon his part, and does not retract such notice before the time at which performance upon his part is due, such other party is entitled to enforce the obligation without previously performing or offering to perform any conditions upon his part in favor of the former party.’ It should also be pointed out that the denial of liability by appellant was unconditional and was not a mere denial of liability until the arrears had been paid. Moreover, a condition involving a forfeiture must be strictly interpreted against the party for whose benefit it was created. Sec. 1442, Civ.Code.

If the date of denial of liability by appellant is taken as February 18, 1941, as found by the trial court, the conclusion here reached with respect to the right of recovery under the policy would be the same, except that in such instance the requirement of filing ‘due proof’ of disability not later than six months after disability would thus have been waived. Since it has already been held above that appellant is estopped, under the circumstances considered, to enforce such provision, further consideration of the evidence tending to support the finding of the court as to the date of denial of liability does not appear necessary. Under the facts presented herein, any contention by appellant of lack of authority in its agents or representatives in the matter is wholly without merit.

Appellant contends that the trial court erred in awarding respondent judgment for nine months disability benefits. The court concluded that respondent was entitled to judgment against appellant in the sum of $900 for disability benefits under the policy. The policy provided for disability benefits in the sum of $100 per month. Subdivision 3 of section 1 of the policy provides in part: ‘Benefits—Upon receipt at the Company's Home Office, before default in payment of premium, of due proof that the Insured is totally and presumably permanently disabled and that such disability occurred after the insurance under this Policy took effect and before its anniversary on which the Insured's age at nearest birthday is sixty years, the following benefits will be granted: (a) Income Payments—The Company will pay to the Insured a monthly income of $10 per $1,000 of the face of the policy during his lifetime and continued disability, beginning immediately on receipt of said proof. Any income payment due before the Company approves the proof of disability shall be payable upon such approval. * * *’ It is plain from the language of the policy, above quoted, that the monthly disability payments are to begin on receipt of proof of disability; and appellant has submitted authorities so construing such provision, though the language itself appears unambiguous in this respect. But in the present case the trial court found that appellant had denied liability under the policy on February 18, 1941. There is sufficient evidence to support such finding in the letter of February 13, 1941, written to insured from the home office of appellant in New York City, as follows: ‘This policy having lapsed for non-payment of premium due, as specified above, the indebtedness against said policy at date of lapse, as shown above, has been satisfied by deduction from the cash value of the policy pursuant to the term of the policy and policy loan agreement. The excess of the cash value over the indebtedness has been used to purchase and has purchased temporary insurance for $7903 which expired December 31, 1940. The policy has no further insurance value and has been canceled on the company's records.’

Hence, on February 18, 1941, in accordance with the authorities heretofore cited on the effect of denial of liability under an insurance policy, a cause of action on the policy accrued to insured at that time without the necessity of submitting proof of loss as a condition precedent to recovery. There being no necessity thereafter to file a proof of loss in order to recover disability benefits, the obligation to pay disability benefits must date from the denial of liability by appellant, as found by the trial court. Since it is obvious that the award of disability benefits in the sum of $900 is based upon a calculation which sets the accrual of the obligation to pay such benefits at a date considerably prior to February 18, 1941, the judgment must be modified in this respect.

It follows that the material findings of the trial court as to liability of appellant under the policy in question are sustained by the evidence and that respondent was entitled to recover under the policy. However, the trial court was in error in finding that the premiums due August 20 and November 20, 1940, were not due because of the disability of insured, as has already been pointed out above. While it was not necessary, under the circumstances presented, to tender payment thereof with interest before bringing suit herein, the premium payments in question were not excused under the terms of the policy, nor was the ultimate payment thereof waived. The trial court was also in error in awarding judgment in the sum of $900 for disability benefits.

The judgment is therefore modified to provide for deduction from the amount recovered of the installments of premium in question, with interest thereon at 5% to date of judgment, and to provide for recovery of disability benefits from February 18, 1941, only. As so modified the judgment is affirmed; respondent to recover costs on appeal.

DORAN, Justice.

YORK, P. J., and WHITE, J., concur.