Case Name: GLORIA PIERSON, Plaintiff and Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, et al., Defendants and Respondents
Court: Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 1968-05-10
Citations: 262 Cal. App. 2d 86
Docket Number: Civ. No. 31146
Parties: GLORIA PIERSON, Plaintiff and Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, et al., Defendants and Respondents.
Judges: 
Reporter: California Appellate Reports, Second Series
Volume: 262
Pages: 86–97

Head Matter:
[Civ. No. 31146.
Second Dist., Div. Two.
May 10, 1968.]
GLORIA PIERSON, Plaintiff and Appellant, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, et al., Defendants and Respondents.
Herbert A. Holmes, Jr., for Plaintiff and Appellant.
Meserve, Mumper & Hughes, Cromwell Warner, Jr., and Dennett P. Kouri for Defendants and Respondents.

Opinion:
ROTH, P. J.
Appellant, the beneficiary of a policy issued by respondent company (herein severally referred to as respondent) insuring the life of her husband, seeks declaratory relief against respondent and one Gormley to establish her right to the proceeds of the policy. Respondent asserted the policy had lapsed prior to the date of death due to nonpayment of premium. Appellant appeals from a judgment in favor of respondent and Gormley.
Appellant's husband had been insured with respondent prior to application for and issuance of the policy before us.
The facts hereafter outlined are uncontradicted.
Glenn Gormley, agent for respondent, met with the Pier-sons (appellant and her deceased husband) to discuss insurance coverage in December of 1962. Decedent Pierson had applied for a 15-year term monthly premium policy in the face amount of $10,000, naming appellant as beneficiary. On January 17, 1963, he sent a cheek together with his application, to respondent for $19.81 which was to be applied in payment of the first monthly installment under the policy for which he had applied and for which he had been accepted. Respondent, however, had discontinued the applied-for policy on December 31, 1962. In response to the accepted application, it substituted a similar policy called "Modified 15 Tear Term Insurance. ' ' Gormley explained that the premium cost on the substituted policy had been reduced from $19.81 per month to $41.61 payable quarterly. The Piersons informed Gormley that they could not budget for quarterly payments and requested monthly payments. Gormley told them that the monthly premium under the modified policy was $14.27, an amount below the $15 minimum monthly premium respondent would accept, and that monthly payments would not be accepted under this policy. Although dissatisfied with the quarterly method of payment, decedent accepted the modified policy. The substituted policy dated February 1, 1963, was delivered on February 8, 1963. It specified on its face that it was in effect from February 1, 1963. The Piersons accepted the substituted policy and on March 1, 1963, sent respondent a check for $21.80, which amount added to the previous check for $19.81 equaled full payment of the first quarterly installment. The delivered policy provided that premiums were payable annually in advance on the first day of its interval of premium payment, which day for the first premium is the date of issue, in this case, February 1. The policy itself does not provide for quarterly payments. The policy provided that "Premiums are payable as provided on page 3 (which specified annual premiums) and may be paid at more frequent intervals in accordance with [respondent's] published rates and minimum-amount requirement in effect at the Date of Issue." Decedent was billed on a quarterly payment basis.
Prior to May 1, a "Notice of Premium Due" was sent to decedent for $41.61, due on May 1, 1963, for the quarter May-June-July. The policy included a 31-day grace period. The premium demanded by the notice therefore was payable between May 1 and June 1. The "grace" provision was that "Any premium, other than the first, not paid when due may, prior to the Date of Expiry, be paid within a grace period of 31 days after its due date provided premiums have been paid to that date. The policy will continue in full force during that period." On May 31, 1963, appellant mailed to respondent a check for $21.61, together with the "Notice of Premium Due." On the premium notice appellant had written "The Rest 7/1." Respondent did not return the check. On, June 3 and again on June 11, Gormley visited the Piersons and told them the policy was over the grace period, but if they remitted the balance of the quarterly payment by June 15, respondent would accept it without requiring a reinstatement form certifying to the insured's present good health. At the meeting on June 11, Gormley and the Piersons set up a meeting for June 15 between Mr. Pierson and Gormley to achieve a monthly payment schedule which Gormley had suggested could be done by increasing the face amount of the issued policy and a raise in premium from $14.27 to $15 per month. The meeting was cancelled. On July 3, decedent died from natural causes. No further payments on the policy had been made. On July 4, appellant executed respondent's proof of death form. The district manager informed her that it would probably not be accepted. On July 19 appellant received a notice of premium due for the August-September-Oetober quarter payable August 1 in the amount of $41.61. On October 7, respondent by letter to appellant, denied liability and for the first time remitted to her the amount of the part payment theretofore made May 31.
The question presented is whether a tender of part payment of the second quarterly premium on the last day of the grace period with a concurrent endorsement on the notice, to wit: "Rest 7/1" had the effect of maintaining the policy for the quarter in question.
The cases have held that acceptance of inconsistent performance, such as a partial or insufficient payment of premium under a life insurance policy, when the circumstances show equivocal or misleading conduct on the part of an insurance company in its acceptance, may be the basis of a waiver or estoppel against the company's right to demand performance according to specifications in the policy. (Peterson v. Allstate Ins. Co. (1958) 164 Cal.App.2d 517 [330 P.2d 843]; Page v. Washington Mut. Life Assn. (1942) 20 Cal.2d 234 [125 P.2d 20]; Guerin v. California Western States Life Ins. Co., (1964) 229 Cal.App.2d 325 [40 Cal.Rptr. 344]; Murray v. Home Benefit Life Assn. (1891) 90 Cal. 402 [27 P. 309, 25 Am.St.Rep. 133].)
Prom the beginning of appellant's association with respondent, the payments (none of them in full) made and accepted show a pattern inconsistent with the terms of the policy and respondent's billing. (Of. Peterson v. Allstate Ins. Co., supra.) All payments, including the original payments which was made for a different policy were part payments and all were accepted. None of them were below the monthly minimum amount, to wit: $15 which Gormley had stated was the monthly minimum respondent would accept on any policy. The May 31st payment made with a concurrent indorsement on the premium notice "Rest 7/1' was retained by respondent, apparently on the theory of the statements by Gormley on June 3 and 11 that the grace period of the policy had been extended to June 15. Gormley at no time stated that respondent had exercised its option to forfeit the policy. He at no time offered to return the May 31 check. Instead a meeting was set up between himself and decedent for June 15 to negotiate an increase in the policy, which would result in monthly payments of $15. The meeting was not held and the May 31 check was not returned.
Acceptance of a premium by an insurance company, when it might have insisted on a forfeiture, has been held to amount to a recognition that the policy was in full force and effect (Peterson v. Allstate Ins. Co., supra); • and to establish a waiver of the right to claim the forfeiture. (Murray v. Home Benefit Life Assn., supra.)
Retention of the check of May 31 tendered with the notice of premium payment on which was indorsed "Rest 7/1" was inconsistent with a claim that the policy lapsed on June 1, or Gormley's oral statement that it would lapse on June 15 if the balance were not paid. (Cf. John Hancock Mut. Life Ins. Co. v. Markowitz (1944) 62 Cal.App.2d 388, 412 [144 P.2d 899].)
The amount of the May 31 check, if prorated, was sufficient to keep the policy in effect until June 15, the date fixed by Gormley. The May check, however, was tendered as a part payment of a quarterly premium and not as a proration for the purpose of extending the grace period.
There is no provision in the policy for extension in this manner and there is no pretense that the Piersons agreed orally or in writing with Gormley's unilateral declaration.
Respondent, on the expiration of the 31-day grace period, had the undoubted right to insist on strict performance. It did not do so. Such failure coupled with its past conduct in respect of receiving past payment, amounts to a waiver. (McCary v. John Hancock Mut. Life Ins. Co. (1965) 236 Cal.App.2d 501 [46 Cal.Rptr. 121]; 14 Appleman, Insurance Law and Practice 293.)
In McCary, supra, the court at pages 507, 508, treating an analogous situation, said:
"The Company points to the following provision in the ' late payment offer': 'By accepting the premium now over due, the Company does not waive its rights in the event any future premium is not paid when due. ' (Italics ours.)
"However, the implication inherent in this provision is that, if the Company does accept payment of a certain premium, it thereby waives its right to forfeiture based upon nonpayment of that particular premium. '
An insurance company will be deemed to waive any ground which would otherwise entitle it to rescind a policy or treat it as forfeited when, despite knowledge of the facts giving it the option, it impliedly recognizes the continuing effect of the policy. (Page v. Washington Mut. Life. Assn., supra.) When the terms of a policy are violated, and the company knows it and fails to declare a forfeiture, or to cancel, or rescind the contract in a reasonable time, it will be regarded as having waived the violation, or as being estopped from asserting it as a ground of nonliability. (Steil v. Sun Ins. Office, 171 Cal. 795, 801 [155 P. 72].) If the part payment made on May 31 was a violation, there is no doubt that respondent, at that time assuming a violation, had the option to cancel the policy.
The admitted facts show that there was no valid contract to vary the terms of the policy by a unilateral extension of the grace period.
Accepting arguendo respondent's theory of full quarterly payments as sound, it would not be disputed that respondent could have returned the May 31st check and exercised its option to cancel the policy. Had it done so, there would be no liability on the policy if the insured had died even a month earlier. However, since it did accept the May 31st check, it cannot be heard to say, that it was on the basis of a unilaterial extension of the grace period. Respondent is as fully as obligated as if the May 31st payment had been in cash.
Evidence tending to show waiver is favorably regarded by a court. Forfeiture of a policy will be avoided on any reasonable showing. (National Auto. Ins. Co. v. Industrial Acc. Com. (1937) 19 Cal.App.2d 276, 281 [65 P.2d 128].)
The judgment is reversed. The trial court is directed to enter judgment for appellant against respondent John Hancock Mutual Life Insurance Company in the sum of $10,000. Costs on appeal will be borne by respondent.
Fleming, J., concurred.