Opinion ID: 38079
Heading Depth: 2
Heading Rank: 2

Heading: MLIC’s Breach of Contract

Text: 4 Sondra has abandoned her claims against MLIC for negligence and negligent misrepresentation and her claim against NovaStar for negligent misrepresentation by failing to brief these claims on appeal. See Sepulvado v. CSC Credit Servs., 158 F.3d 890, 897 n.7(5th Cir. 1998)(claims not briefed on appeal are considered abandoned). 5 See Markos v. City of Atlanta, 364 F.3d 567, 570 (5th Cir. 2004). 9 As a general rule, “[t]he payment of the premium in accordance with the provisions of an insurance policy is a condition precedent to the establishment of liability of the insurer.”6 On appeal, MLIC argues that the Jenkinses’ failure to pay the first premium prior to either the April 1, 2001 effective date of the policy or the April 4, 2001 date of Alvin’s death is legally conclusive that no contract of insurance capable of being breached was in effect at the time of Alvin’s death. In response, Sondra asserts that MLIC either waived its right to assert prepayment of the first premium as a condition precedent to commencement of coverage, or is estopped from doing so, by virtue of misrepresentations in the cover letter, brochure, application, and approval letter regarding what was required on the part of the Jenkinses to bring coverage into effect. Sondra also contends that, as MLIC’s agent for collection of premiums, NovaStar was negligent in failing to collect and remit her first premium prior to the April 1, 2001 effective date of the policy, thereby vicariously estopping its principal, MLIC, from asserting prepayment of the first premium as grounds for withholding the policy’s proceeds. As Sondra’s assertion of both waiver and estoppel based on MLIC’s own words and 6 Walker v. Fed. Kemper Life Assurance Co., 828 S.W.2d 442, 449 (Tex. App. —— San Antonio 1992, reh. d.). 10 conduct has facial merit, we remand to the district court for full fact-finding on these claims.7
Generally, Texas law defines estoppel as “conduct which causes the other party to materially alter his position in reliance on that conduct.”8 The elements of equitable estoppel are: “(1) A false representation or concealment of material facts made with knowledge (actual or constructive) of those facts, (2) with intention that it should be acted on, (3) to a party without knowledge, or means of knowledge of those facts, (4) who detrimentally relied upon those representations.”9 MLIC contends that Sondra has failed to raise a genuine issue of material fact as to the fourth element of equitable estoppel because she cannot show that she relied on MLIC’s post hoc notification that coverage had commenced on April 1, 2001. To this end, MLIC emphasizes that both the application and the approval letter are silent as to when the insurance would become effective, 7 As we remand to the district court on the direct issues of waiver and estoppel, we also remand on the issue of estoppel grounded in respondeat superior. This is because, on the undeveloped summary judgment record before us, there could exist a situation in which MLIC is not liable to Sondra by virtue of its own actions but is vicariously liable by virtue of those of NovaStar. We forgo discussion of the issue here for the reasons stated below. See infra note 22. 8 Braugh v. Phillips, 557 S.W.2d 155, 158 (Tex. App. —— Corpus Christi 1977, reh. d.). 9 Robinson v. Robinson, 961 S.W.2d 292, 231 (Tex. App. —— Houston [1st Dist.] 1997). 11 and that the only representation that coverage commenced on April 1, 2001 is contained in the policy itself, which Sondra did not receive until April 5, 2001. We find that the following evidence raises a genuine issue of material fact, however, as to whether the Jenkinses detrimentally relied on MLIC’s representations as to when coverage under the policy would begin. Sondra has shown prima facie that she and Alvin might have relied —— reasonably and to their detriment —— on MLIC’s earlier representations in the brochure, the application, and the approval letter, and Nova Star’s representations in the cover letter, about the requirements to bring coverage into effect before Alvin’s death on April 4. Of particular importance are the representations in these materials that relate to the 30-day “no risk” examination period. These representations, contained not only in the cover letter and brochure but also highlighted in bold print at the top of the application, state affirmatively that the Jenkinses will be “fully covered” for 30 days while they “look over” their policy yet omit any reference to the fact on which MLIC now relies —— that coverage will become effective only on MLIC’s receipt of the first premium payment. In fact, the only references to the requirement that the prospective insured pay the first premium before the effective date of the policy in any of the promotional materials sent to the Jenkinses are (1) the inferences to be drawn from the statement in the application that the Jenkinses’ account will be “credited in 12 full” if they elect to return the policy within the 30-day examination period and (2) the statement in fine print above the applicant’s signature line that “no insurance is in effect unless the application is approved by the Insurance Company and the first premium is paid.” When viewed in the context of MLIC’s repeated emphasis that the 30-day period was “no risk” and the assurance that “there are no checks to write,” these disclaimers may not have been sufficient in themselves to place an applicant on notice that payment of the first premium is a condition precedent to coverage. MLIC’s contentions are even more troubling when considered in light of the fact that the completion instructions to potential applicants do not recommend, much less expressly require, that the applicant remit the first premium payment directly to MLIC with the application. Rather, MLIC’s solicitations instruct the applicant merely to (1) “[i]ndicate the type of insurance desired;” (2) “[d]etermine [the] premium based on the rates shown on the reverse side [of the application];” and (3) “[c]omplete, sign, and return your application today.” There is no mention whatsoever of remitting the initial premium, much less when, where, or to whom the applicant should deliver the first premium payment. The instructions in the application go on to state that once MLIC approves the application, the applicants’ “[c]ertificate/[p]olicy will be issued and [the] premium will be 13 added to [the applicant’s] monthly mortgage payment.”10 Significantly, this instruction does not state that the applicant must do the adding. A factfinder could thus reasonably conclude that NovaStar —— rather than the applicant —— would be the one to perform the “adding” function and that no further act will be required on the part of the applicant.11 That this is a reasonable reading from the viewpoint of an applicant is fostered by the advice given to the applicant that no additional check will be required. Yet only by preparing and remitting a separate check could the Jenkinses have paid the first premium (1) before the effective date selected unilaterally by MLIC alone, or (2) before Alvin’s death. Likewise, MLIC’s March 14, 2001 letter, which formally notified the Jenkinses that their application had been approved, is devoid of any admonition that coverage is conditioned on their prior payment of the first premium. Like the application itself, this notice’s terse congratulatory statement, which informed the Jenkinses that their Certificate of Insurance/Policy would “arrive shortly,” could have implied to the Jenkinses that, by completing and mailing their application to MLIC months earlier, they had successfully completed all acts required on their part to bring coverage into effect. 10 Emphasis added. 11 Indeed, NovaStar did just that, adding that amount of the MLIC monthly payment to the Jenkinses’ mortgage invoice for April. 14 Neither does MLIC’s argument that the Jenkinses were somehow remiss in not sending a separate check to MLIC or NovaStar for their mortgage life insurance premium or in not adding the amount of their premium to their March invoice from NovaStar entitle it to summary judgment. Not only do the instructions quoted above tell the Jenkinses that their premium “will be added” to the monthly mortgage payment (not that they must do the adding), but (1) the brochure guarantees that “[t]here are no checks to write,” because the “insurance premium [will be] conveniently added to [the] monthly mortgage payment,” and (2) the application itself contains the applicants’ express authorization for “the lender [NovaStar] to add the premium for the Mortgage Insurance indicated above to [the Jenkinses’] mortgage payment.”12 Taken together and considered in combination, these statements could lead an applicant to assume that MLIC did not make it incumbent on them, as NovaStar’s borrowers, to mail a separate check for their premium or, absent an invoice, to add the amount of their premium to their payment to NovaStar for the month in which MLIC’s approval letter is received. The same is true as to any requirement that a check for the first premium must be sent directly to MLIC after it approved the application and before coverage (and the 30-day risk-free period) would begin. Based on the totality of these writings, any reasonable applicant could 12 Emphasis added. 15 justifiably conclude that separately and independently paying the first premium before coverage would become effective was simply not required. Obviously, the Jenkinses did not rely on coverage commencing specifically on April 1, 2001 because MLIC did not communicate that date to them until April 5. That contention by MLIC is a red herring. The record contains ample evidence that the Jenkinses could have reasonably relied on (1) MLIC’s representation that nothing more than completing their application and mailing it to MLIC was required on their part to bring coverage into effect once it was approved by MLIC, and (2) MLIC’s failure to communicate clearly and unambiguously that payment of the first premium was a condition precedent to coverage. Accordingly, we conclude that genuine issues of material fact exist as to whether the Jenkinses relied on MLIC’s representations to their detriment. We thus remand this issue to the district court.
Under Texas law, “waiver is a voluntary, intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right.”13 Unlike estoppel, which requires reliance, “[w]aiver of a right results as a legal consequence from the unilateral act of the party against whom it operates [here, 13 First Interstate Bank, N.A. v. Interfund Corp., 924 F.2d 588, 595 (5th Cir. 1991)(citing Edwin M. Jones Oil Co. v. Pend Oreille Oil & Gas Co., 794 S.W.2d 442, 447 (Tex. App. —— Corpus Christi 1990))(emphasis added). 16 MLIC], and no act of the party in whose favor it operates [here, Sondra] is necessary to complete it.”14 The party asserting waiver must show, as to the party asserting a right, “(1) an existing right, benefit, or advantage[,] (2) knowledge, actual or constructive, of its existence[,] and (3) actual intent to relinquish the right, which can be inferred from conduct.”15 “Although waiver is ordinarily a question of fact, when the facts and circumstances are admitted or clearly established, the question becomes one of law.”16 At the outset, we reject MLIC’s contention that, because Texas law precludes the use of the doctrines of waiver and estoppel to create or extend insurance coverage, Sondra is prohibited from relying on waiver as a means of establishing MLIC’s liability under the policy. MLIC mischaracterizes Sondra’s contention. Texas, like many common law jurisdictions, adheres to the principle that “waiver . . . cannot enlarge the risks covered by [an existing] policy [nor can they] be used to create a new and different contract with respect to the risk covered and the insurance 14 Pioneer Oil Co. v. Vallejo, 750 S.W.2d 928, 929 (Tex. App. —— Corpus Christi 1988). 15 First Interstate, 924 F.2d at 595 (citing Missouri-KansasTexas R.R. v. Heritage Cablevision of Dallas, Inc., 783 S.W.2d 273, 280 (Tex. App. —— Dallas 1989, no writ)). 16 Motor Vehicle Bd. of the Tex. Dept. of Transp. v. El Paso Indep. Auto. Dealers Ass’n, Inc., 1 S.W.3d 108, 111 (Tex. 1999). 17 extended [by an existing policy].”17 Texas insureds are not prevented, however, from employing waiver to show that an insurer has forfeited its right to assert a condition precedent in defense of its responsibility under a putative new policy.18 This holds true whether the condition precedent is actual delivery, payment of the premium directly to the insurer as opposed to its authorized agent, or prepayment of the first premium, which is the case here.19 Accordingly, to the extent that statements in MLIC’s application 17 Minnesota Mut. Life Ins. Co. v. Morse, 487 S.W.2d 317, 320 (Tex. 1972)(citing Great Am. Reserve Ins. Co. v. Mitchell, 335 S.W.2d 707 (Tex. App. —— San Antonio, 1960, writ ref’d))(emphasis added). 18 “A condition precedent may be waived,” Kennedy v. McMullen, 39 S.W.2d 168, 174 (Tex. Civ. App. —— Beaumont, 1931, writ ref’d), and the waiver of a condition precedent may be inferred from the party’s conduct.” Sun Exploration & Prod. Co., 728 S.W.2d 35, 37 (citing Ames v. Great Southern Bank, 671 S.W.2s 447, 449 (Tex. 1984)). 19 See, e.g., Scott v. Nat’l Bankers Life Ins. Co., 253 S.W.2d 485, 488 (Tex. App. —— San Antonio 1952, reh. d.)(insurance company may waive express condition precedent to insurer’s liability under the policy); United Fid. Life Ins. Co. v. Handley, 53 S.W.2d 833, 838 (Tex. App. —— Amarillo 1932, reh. d.)(stipulation in insurance application limiting insurer’s liability to the time when the application was made and the first premium paid “was for the benefit of the [insurer] and could be waived by it”). See also 45 TEX. JUR. 3D, INSURANCE CONTRACTS AND COVERAGE §85, §87 (Although “a provision in a policy that declares that the policy shall not become effective . . . until the premium has been paid is valid,” “[t]he condition of prepayment of the premium may be waived by the insurer”)(Jody L. Mikasen et al. eds., 3d ed. 1995)(cites omitted); LEE R. RUSS & THOMAS F. SEGALLA, COUCH ON INSURANCE § 12:11 (3d ed. 1996)(“Since provisions requiring prepayment of premium are for the benefit of the company, they may be waived by it, with the result that the contract becomes binding without prepayment, even though the policy provides that the premium must be prepaid, either at the company’s office or to an agent duly authorized in writing to receive it.”)(cites omitted). 18 form and insurance policy would make prepayment of the first premium a condition precedent to commencement of coverage, that condition is susceptible of waiver. More to the point of MLIC’s mischaracterization of what Sondra seeks to accomplish, it is readily apparent that Sondra does not employ waiver to “enlarge the risks covered by [an existing] policy [or] to create a new and different contract with respect to the risk covered and the insurance extended.”20 The policy that MLIC issued explicitly covers the risk at issue, i.e., the death of either mortgagor/insured, and extends that coverage up to the proceeds amount sought by the beneficiary, i.e., payment of the entire mortgage balance up to $300,000. When we examine the gravamen of Sondra’s waiver argument, the legal possibility that MLIC might be held to have waived its right to insist on prepayment of the first premium as a condition precedent to coverage becomes apparent. MLIC might have done so when it unconditionally approved the Jenkinses’ application on March 14, 2001, with an April 1, 2001 effective date, prior to receiving the Jenkinses’ first premium payment directly, and in the full knowledge that —— under its arrangement with NovaStar —— the Jenkinses could not possibly have been invoiced by NovaStar for their first premium until sometime after April 9, 2001, the next of the monthly dates on which MLIC notifies NovaStar of approved 20 Morse, 487 S.W.2d at 320. 19 applications. MLIC might also have done so when it issued the policy in the full knowledge of its documents’ assurances that the insureds would not need to send a separate premium check, either to MLIC with the application or to NovaStar as MLIC’s agent, and that applicants would remain covered during the thirty days that they had in which to examine their policy risk free. Simply put, because MLIC chose to adopt notification procedures that would not permit the Jenkinses (or anyone similarly situated) to comply with the policy’s requirement that the first premium be paid prior to the date selected by MLIC as the effective date of coverage, MLIC might well be held to have waived the right to assert that commencement of coverage was barred by the Jenkinses’ failure to pay the first premium before (1) the effective date (which was not communicated to them until April 5, 2001) or (2) Alvin’s death (on April 4, 2001). This too will depend on the results of more complete factfinding. As a matter of law, MLIC’s notification procedures might well have resulted in its assumption of the risk that it could be liable for death benefits accruing after it approved the insured’s application and issued a policy, but before the insured paid the first premium —— here, the span of more than a fortnight between March 14 and April 1, 2001. Accordingly, MLIC might ultimately be found to have waived its right to assert prepayment of the first premium as a condition precedent to coverage. We therefore reverse the district court’s grant of summary judgment to MLIC in the 20 declaratory judgment suit rejecting Sondra’s claim for breach of contract, and we remand to the district court for further proceedings consistent with this opinion.21