Court Opinion

ID: 4573897
Source: CourtListenerOpinion
Date Created: 2020-10-07 19:03:27.016722+00
Date Added: 2024-06-11T13:32:07.567162
License: Public Domain

Filed 10/7/20
                     CERTIFIED FOR PUBLICATION

       IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                       FIRST APPELLATE DISTRICT

                                 DIVISION TWO

MICHAEL A. DONES,
      Plaintiff and Appellant,
v.                                          A157662
LIFE INSURANCE COMPANY OF                   (Alameda County Super. Ct.
NORTH AMERICA et al.,                       No. RG18911237
      Defendants and Respondents.

       While employed by the County of Alameda (County) and on a medical
leave of absence, Trina Johnson enrolled online in supplemental life
insurance coverage under a group insurance policy insured by the Life
Insurance Company of North America (LINA). She remained on leave on the
policy’s effective date and died six months later, without having returned to
work. When her beneficiary claimed benefits, LINA denied coverage based
on a policy provision stating the insurance would not become effective if the
employee was not in “active service” on the effective date.
       Johnson’s beneficiary sued both LINA and the County for breach of
contract arguing that both waived or were estopped from asserting the active
service precondition to coverage. The trial court sustained demurrers
without leave to amend and entered judgment in favor of LINA and the
County.

                                       1
      As we will explain, we agree with appellant Michael Dones that the
trial court erred in sustaining respondent LINA’s demurrer without leave to
amend. As to the respondent County, we find no error. We will therefore
affirm the judgment as to the County but reverse the judgment as to LINA
and remand for further proceedings.
                                  BACKGROUND
      Trina Johnson was an employee of the Alameda County Sheriff’s
Department. In 2014, LINA issued a group life insurance policy to the
Trustee of the Group Insurance Trust for Employers in the Public
Administration Industry for the benefit of the County of Alameda acting on
behalf of its employees. This master policy provided a basic life insurance
benefit to each eligible employee, including Johnson. The second amended
complaint alleged that copies of the master policy were not distributed to
employees, and that employees who enrolled for the benefit were supposed to
be given certificates of insurance describing the terms of coverage but it was
not known whether such certificates were distributed.1
      The master policy states: “If an Employee is not actively at work due to
Injury or Sickness, coverage will not become effective for an Employee on the
date his or her coverage would otherwise become effective under this Policy.
[¶] Coverage will become effective on the date the Employee returns to Active
Service.”
      The master policy defines “Active Service” as follows: “An Employee
will be considered in Active Service with the Employer on a day which is one
of the Employer’s scheduled work days if either of the following conditions

      1 The master policy stated, “A certificate of insurance will be delivered
to the Employer for delivery to Insureds. Each certificate will list the
benefits, conditions and limits of the Policy. It will state to whom benefits
will be paid.”

                                       2
are met: [¶] 1. He or she is actively at work. This means the Employee is
performing his or her regular occupation for the Employer on a full-time
basis, either at one of the Employer’s usual places of business or at some
location to which the Employer’s business requires the Employee to travel.
[¶] 2. The day is a scheduled holiday, vacation day or period of Employer
approved paid leave of absence, other than disability or sick leave after 7
days.”
      On April 1, 2016, the master policy was amended to increase the
amount of coverage available to employees including Johnson, and she
elected to obtain coverage in the maximum amount, $20,000. Again, it was
alleged to be unknown whether Johnson received a certificate of insurance.
      In October 2016, while on a medical leave of absence, Johnson received
an announcement of benefit changes for the 2017 calendar year for which she
was eligible, including voluntary supplemental life insurance. The
announcement stated, “Voluntary Employee Supplemental Life Insurance –
**NEW & SPECIAL** Effective January 1, 2017 Employees may purchase
Life insurance in $10,000 increments, not to exceed the lesser of three times
(3x) their annual base salary or $300,000 as your guarantee issue. Evidence
of insurability is not required up to the guaranteed issued limit during the
2017 Annual Open Enrollment period. Note: Coverage will take effect on
January 1, 2017 as long as you are in active service when the coverage takes
effect. . . .” The announcement did not contain a definition of “active service,”
nor did any other document provided to Johnson. The announcement stated,
however, “For more details contact us or use the EBC Website to review the
Group Life Insurance Certificate for Non-Managers – Basic Life and
Voluntary Employee Life. If you are on a leave of absence on January 1,
remember to contact the EBC within 30 days of your return to work to see if

                                        3
you are eligible for this new benefit.” The distributed announcement noted,
“If you have any questions, you may call the Employee Benefits Center at
891-8991, or visit us, Monday thru Friday from 8:00 am to 5:00 pm for one-
on-one assistance.”
      Johnson made her benefits elections online, selecting $230,000
supplemental coverage. The named primary beneficiary was Dones, who was
then Johnson’s domestic partner and later her husband. The second
amended complaint alleges that the online enrollment form contained a
section entitled “Active Service – Employee” but did not provide a complete
description of the terms of the insurance policy.
      A copy of the online enrollment form (exhibit B to the second amended
complaint), shows bolded text in the “Supplemental Life–Employee” section
stating, “In order to be eligible for this benefit you must meet the definition of
an Active Service – Employee. [¶] Questions? Need additional information,
Click Here.” The “eBenefits Information Sheet” included in exhibit B
includes the following:
      “Active Service – Employee [¶] If you are an Employee, you are in
Active Service with the Employer on a day which is one of the Employer’s
scheduled work days if either of the following conditions are met. [¶] 1. You
are actively at work. This means you are performing your regular occupation
for the Employer on a full-time basis, either at one of the Employer’s usual
places of business or at some location to which the Employer’s business
requires you to travel. [¶] 2. The day is a scheduled holiday, vacation day or
period of Employer approved paid leave of absence, other than disability or
sick leave after 7 days. [¶] You are considered in Active Service on a day
which is not one of the Employer’s scheduled work days only if you were in
Active Service on the preceding scheduled work day.

                                        4
      “Active Service [¶] If you are an Employee, you are in Active Service
with the Employer on a day which is one of the Employer’s scheduled work
days if either of the following conditions are met. [¶] 3. You are actively at
work. This means you are performing your regular occupation for the
Employer on a full-time basis, either at one of the Employer’s usual places of
business or at some location to which the Employer’s business requires you to
travel. [¶] 4. The day is a scheduled holiday, vacation day or period of
Employer approved paid leave of absence, other than disability or sick leave
after 7 days. You are considered in Active Service on a day which is not one
of the Employer’s scheduled work days only if you were in Active Service on
the preceding scheduled work day.”
      On October 24, 2016, Johnson was diagnosed with lung cancer.
      On November 1, 2016, Johnson received a list of her 2017 benefit
elections from the County Employee Benefits Center confirming her
enrollment for the supplemental life insurance and stating the coverage
would become effective on January 1, 2017. Johnson’s daughter was listed as
the beneficiary for the basic life insurance benefit and Dones was listed as
the beneficiary for the supplemental life insurance.
      On or about December 29, 2016, Johnson received a “Confirmation of
Benefit Elections” including the supplemental life insurance.2 The
confirmation stated, “If this Statement is correct and consistent with your
Open Enrollment Summary, retain this document for your records and no
further action is required. If the EBC does not receive a corrected Statement
from you by 1/13/2017, your elections will be considered correct and final.”

      The second amended complaint erroneously indicated the date
      2

Johnson received the confirmation as December 29, 2017.

                                        5
The confirmation was accurate and Johnson did not notify the County of any
changes.
      Beginning on January 1, 2017, the County deducted premiums for
Johnson’s benefits, including the supplemental life insurance, from her
paycheck. The supplemental life insurance premiums were sent to and
accepted by LINA. At the end of February 2017, Johnson’s paycheck was
insufficient to cover the premiums for her benefits and she paid out of pocket
for those premiums, including the supplemental life insurance.
      The second amended complaint alleged that it was “unknown” whether
the package of documents provided to Johnson when she enrolled in the
supplemental life insurance benefit included the policy provision stating, “If
an eligible Employee is not in Active Service on the date insurance would
otherwise be effective, it will be effective on the date he or she returns to
Active Service.” Earlier versions of the complaint had alleged the package
provided to Johnson did contain this policy provision;3 the second amended
complaint alleged, “after further review of documents, that allegation appears
to be unfounded.” Johnson was not sent a copy of the insurance policy or an
individual certificate setting forth the terms of the insurance coverage (see
Ins. Code, § 10209). The second amended complaint alleged that Johnson
and Dones believed the supplemental life insurance coverage would become

      3The original and first amended complaints alleged, “16. The
Supplemental Benefit provided that the coverage would become effective on
January 1, 2017. There was a notice in the package stating that if the
employee was not actively at work, the coverage would take effect when the
employee returned to active service. If any employee who elected the
Supplemental Benefit while on leave returned to work for even one day in
2017, the Supplemental Benefit became active. The Decedent did not
appreciate the significance of the requirement, and believed that she would
be covered under the policy automatically after the effective date.”

                                        6
effective on January 1, 2017, and neither understood the provision delaying
the effective date.
      The second amended complaint alleged that unknown to Johnson or
Dones, if an employee who elected the supplemental insurance benefit while
on leave returned to work for even one day after the January 1, 2017,
effective date, the supplemental benefit would become active, but Johnson did
not understand the requirement and reasonably believed that she would be
covered under the policy automatically after the effective date. It was further
alleged that Johnson was capable of performing her duties for at least the
first several months of 2017, and could and would have returned to work if
she had been aware of the need to do so in order to activate the insurance
coverage. It was alleged that although the County was aware both that
Johnson was on a medical leave of absence and that the insurance policy
required employees be actively at work for the benefit to take effect, no one
advised Johnson of the work requirement or that the policy was not in effect.
      The second amended complaint alleged that the County was acting as
agent for LINA in administration of the insurance policy; that Johnson
detrimentally relied on the confirmation that the insurance was in effect; and
that by repeatedly deducting the premiums from Johnson’s paycheck and not
notifying her of any deficiency in her application for coverage, the County, for
itself and as agent for LINA, knowingly and voluntarily waived any
requirement that the insured be actively at work for the insurance coverage
to take effect.
      Johnson died on July 9, 2017. In August, Dones was informed by a
County human resources benefits manager that Cigna had confirmed
Johnson’s supplemental life insurance policy never became effective because
she had not returned to active service, and that the County would be

                                       7
refunding the premiums deducted from Johnson’s paycheck to her estate.
Although informed that a claim for the supplemental insurance would be
denied, Dones submitted a claim which Cigna then denied on behalf of LINA
on the ground that the coverage never became effective. Dones’s appeal from
the denial was denied, and the County rejected Dones’s claim for damages.
      Dones’s initial complaint named “Cigna Life Insurance Company” and
the County as defendants and alleged causes of action for breach of contract
and breach of implied contract against both, as well for breach of fiduciary
duty against the County and for breach of the duty of good faith and fair
dealing against the insurer. Dones then filed a first amended complaint
naming LINA, a subsidiary of Cigna Corporation, in place of Cigna Life
Insurance Company, with causes of action against LINA and the County for
negligence and breach of implied contract, against LINA for breach of
contract and breach of the duty of good faith and fair dealing, and against the
County for breach of fiduciary duty. Demurrers filed by LINA and by the
County were sustained with leave to amend.
      Dones’s second amended complaint alleged causes of action for breach
of contract and breach of implied contract against LINA and the County and
for breach of the implied duty of good faith and fair dealing against LINA.
The County and LINA again demurred.
      The trial court sustained the demurrers without leave to amend. As to
the causes of action for breach of contract and implied breach of contract, the
court held that since it was alleged the life insurance benefits would not go
into effect until Johnson returned to active service, which she did not do,
failure to provide supplemental life insurance benefits was not a breach of
contract. The court rejected Dones’s argument that LINA and County waived
or were estopped from enforcing the active service requirement based on

                                       8
caselaw holding waiver and estoppel arguments cannot be used to create
insurance coverage that does not exist, reasoning that Johnson’s failure to
meet the condition precedent meant the policy never went into effect. Also,
as to the County, the court found Dones failed to plead facts showing the
“grave injustice” necessary for equitable estoppel against the County and
failed to allege the Board of Supervisors—the only body legally authorized to
approve health and welfare benefits—approved a benefit providing Johnson
with life insurance coverage if she did not return to active service. While
finding it unnecessary to reach Dones’s agency allegations given its
conclusion there was no breach of contract, the court noted that the second
amended complaint successfully alleged an agency relationship between the
County and LINA but failed to adequately allege an “undisclosed or partially-
disclosed” agency relationship. The court found the cause of action for breach
of the covenant of good faith and fair dealing failed because it could not
survive without an adequately pled breach of contract. Finally, the court
declined to rule on the argument that the second amended complaint was a
sham pleading but noted that in light of the contradictions between it and
previous versions of the complaint, it was “at the very least susceptible to
consideration as sham pleading designed primarily to avoid further
demurrer.”
      The court entered a judgment dismissing the action, and this appeal
followed.
                                DISCUSSION
      “On review from an order sustaining a demurrer, ‘we examine the
complaint de novo to determine whether it alleges facts sufficient to state a
cause of action under any legal theory, such facts being assumed true for this
purpose. [Citations.]’ (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th

                                       9
412, 415.) We may also consider matters that have been judicially noticed.
(Serrano v. Priest (1971) 5 Cal.3d 584, 591; City of Morgan Hill v. Bay Area
Air Quality Management Dist. (2004) 118 Cal.App.4th 861, 869–870.)”
(Committee for Green Foothills v. Santa Clara County Bd. of Supervisors
(2010) 48 Cal.4th 32, 42.) “If the court sustained the demurrer without leave
to amend, as here, we must decide whether there is a reasonable possibility
the plaintiff could cure the defect with an amendment. ([Blank v. Kirwan
(1985) 39 Cal.3d 311, 318.]) If we find that an amendment could cure the
defect, we conclude that the trial court abused its discretion and we reverse;
if not, no abuse of discretion has occurred. (Ibid.) The plaintiff has the
burden of proving that an amendment would cure the defect. (Ibid.)”
(Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
                                        I.
      As we have said, LINA denied coverage on the ground that Johnson’s
supplemental life insurance benefit never went into effect because she did not
return to active service. The provision that the insurance would go into effect
only if an eligible employee was in “active service” was a condition precedent:
“[A] condition precedent is either an act of a party that must be performed or
an uncertain event that must happen before the contractual right accrues or
the contractual duty arises. [Citations.]” (Platt Pacific, Inc. v.
Andelson (1993) 6 Cal.4th 307, 313.) “If the condition is not fulfilled, the
right to enforce the contract does not evolve. (5 Williston on Contracts [(3d
ed.-Jaeger 1961)] § 663, p. 127.)” (Kadner v. Shields (1971) 20 Cal.App.3d
251, 258.) Accordingly, the trial court determined that the supplemental life
insurance for which Johnson paid premiums by payroll deductions and out of
pocket payments never actually became operative and LINA had no
obligation to do more than return the premium payments to Johnson’s estate.

                                       10
      Dones contends that LINA waived any requirement of “active
employment” by informing Johnson through her pay stub that her
supplemental life insurance was in force, deducting premiums from her
paycheck, requiring her to pay premiums out of pocket when her paycheck
did not cover the premiums, failing to provide her with an insurance
certificate stating the terms of the insurance, which would have informed her
if she was not covered, and failing to notify her that the policy would not be in
force until she returned to work for at least one day. Also, because these acts
led Johnson to believe she had coverage at a time when she could and would
have satisfied the condition precedent if she had known of it, Dones
maintains LINA is estopped from denying the existence of the insurance
policy. With the exception of accepting premium payments, the conduct
alleged as the basis of the waiver and estoppel arguments was by the County,
not LINA; as will be discussed below, Dones maintains LINA is liable because
the County was acting as the insurer’s agent.
      “ ‘ “[W]aiver” means the intentional relinquishment or abandonment of
a known right.’ (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1048;
see Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 31.) Waiver
requires an existing right, the waiving party’s knowledge of that right, and
the party’s ‘actual intention to relinquish the right.’ (Bickel, at p. 1053.)
‘ “Waiver always rests upon intent.” ’ (City of Ukiah v. Fones (1966) 64 Cal.2d
104, 107.) The intention may be express, based on the waiving party’s words,
or implied, based on conduct that is ‘ “so inconsistent with an intent to
enforce the right as to induce a reasonable belief that such right has been
relinquished.” ’ (Savaglio v. Wal-Mart Stores, Inc. (2007) 149 Cal.App.4th
588, 598; see Waller, at pp. 31, 33–34.)” (Lynch v. California Coastal
Com. (2017) 3 Cal.5th 470, 475.)

                                        11
      “Generally ‘ “four elements must be present in order to apply the
doctrine of equitable estoppel: (1) the party to be estopped must be apprised
of the facts; (2) he must intend that his conduct shall be acted upon, or must
so act that the party asserting the estoppel had a right to believe it was so
intended; (3) the other party must be ignorant of the true state of facts; and
(4) he must rely upon the conduct to his injury.” ’ (California Ins. Guarantee
Assn. v. Workers’ Comp. Appeals Bd. (1992) 10 Cal.App.4th 988, 997.)”
(Colony Ins. Co. v. Crusader Ins. Co. (2010) 188 Cal.App.4th 743, 751.)
                                         A.
      LINA argues the waiver and estoppel arguments must be rejected as a
matter of law, as the trial court ruled. LINA relies upon cases holding that
waiver and estoppel cannot be used to create insurance coverage that does
not otherwise exist. “ ‘ “ ‘The rule is well established that the doctrines of
implied waiver and of estoppel, based upon the conduct or action of the
insurer, are not available to bring within the coverage of a policy risks not
covered by its terms, or risks expressly excluded therefrom, and the
application of the doctrines in this respect is therefore to be distinguished
from the waiver of, or estoppel to assert, grounds of forfeiture. . . .’ ” ’ (Aetna
Casualty & Surety Co. v. Richmond (1977) 76 Cal.App.3d 645, 653.)”
(Manneck v. Lawyers Title Ins. Corp. (1994) 28 Cal.App.4th 1294, 1303
(Manneck); Komorsky v. Farmers Ins. Exchange (2019) 33 Cal.App.5th 960,
972; R & B Auto Center, Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th
327, 352 (R & B Auto).)
      The cases LINA relies upon involve plaintiffs’ attempts to obtain
coverage under existing insurance policies for claims not covered by the terms
of their policies. For example, Manneck, supra, 28 Cal.App.4th at page 1297,
held a title insurance company was not obligated to prosecute an action on

                                         12
behalf of the plaintiffs, or indemnify them for losses, due to alleged defects in
title to their property. Subsequent to purchase of their home and title
insurance, a survey revealed the plaintiffs’ pool and related structures were
actually on adjoining property they did not own. (Id. at p. 1297. The insurer
communicated with the adjoining owner, which agreed to resolve the
situation, and advised the plaintiffs that while their policy provided for
coverage if they were forced to remove structures extending onto adjoining
land, it did not provide coverage absent a pending forced removal. (Id. at
p. 1298.) Accordingly, the insurer refused to institute legal action against the
adjoining owner prior to any forced removal. (Ibid.) Manneck rejected the
plaintiffs’ attempts to establish coverage by estoppel or waiver based on the
rule that “coverage under an insurance policy cannot be established by
estoppel or waiver,” finding the plaintiffs’ reliance on the insurer’s conduct in
handling the claim “of no consequence because of the inapplicability of the
doctrines of estoppel or waiver.” (Id. at p. 1303.)
      In R & B Auto, a used car dealership sought insurance including
liability coverage for losses due to lemon laws and was advised by an
insurance agent and representative of the insurer that the policy it purchased
included this coverage. (R & B Auto, supra, 140 Cal.App.4th at pp. 333–334.)
In fact, the plain language of the policy provided coverage only for sales of
new cars. (Id. at p. 336.) When the dealership was sued by a customer for
violation of the lemon law, the insurer did not agree to provide a defense or
indemnity and the dealership subsequently sued for claims including breach
of contract. (Id. at p. 335.) R & B Auto rejected the argument that the
insurer waived any defenses to coverage by choosing not to deny a duty to
defend or indemnity, leaving the coverage determination up in the air, and
should be estopped from denying coverage for this reason and because the

                                       13
dealership relied on the agents’ representations that the policy would cover
used car sales. (Id. at pp. 351–352.) R & B Auto quoted the rule described in
Manneck, supra, 28 Cal.App.4th at page 1303, distinguishing the use of
waiver and estoppel theories to establish an insurer had forfeited a right
under the contract from the dealership’s attempted “use of the theories of
waiver and estoppel to create coverage where none otherwise exists—that is,
to create an otherwise nonexistent written contact providing lemon law
coverage for used car sales, in order to use the newly created contract as the
basis for a claim of breach.” (R & B Auto, at p. 352; see, Aetna Casualty &
Surety Co. v. Richmond, supra, 76 Cal.App.3d at pp. 648–650, 653; Raisin
Bargaining Assn. v. Hartford Cas. Ins. Co. (E.D.Cal. 2010) 715 F.Supp.2d
1079, 1089 [waiver and estoppel could not be used to avoid insurer’s reliance
on exclusionary provisions of contract]; California Dairies, Inc. v. RSUI
Indemnity Co. (E.D.Cal., Apr. 16, 2010) 2010 WL 1541230, pp. *8–*10, *16
[discussing Manneck and related cases but finding implied waiver of
exclusionary provision a question of fact].)
      Unlike the cases LINA relies upon, the present case does not involve
the scope of coverage under an existing insurance policy but rather the
question whether the policy ever went into effect. None of LINA’s cases
involve waiver or estoppel in the context of a condition precedent to operative
policy coverage.
      Salyers v. Metropolitan Life Insurance Company (9th Cir. 2017) 871
F.3d 934 (Salyers), a case involving employee benefits subject to the
Employee Retirement Income Security Act (ERISA) (29 U.S.C. § 1001 et seq.),
found waiver in circumstances more similar to the present case. The
employee initially applied for $20,000 life insurance coverage for herself and
her husband through a group plan offered by her employer, an amount the

                                       14
summary plan description stated did not require evidence of insurability (a
statement of health). (Salyers, at p. 936.) Due to an administrative error,
the employer entered the amount of coverage for the husband as $500,000, an
amount that did require evidence of insurability, and deducted premiums
from the employee’s paycheck based on that higher level of coverage; neither
the employer nor the insurer asked for evidence of insurability. (Ibid.)
During the next open enrollment period, the employee elected $250,000
coverage for her husband and, although the plan documents stated evidence
of insurability was required and the open enrollment guide stated any
coverage requiring a statement of health would not take effect until approved
by the insurer, the employee did not submit evidence of insurability but the
employer again deducted the premiums and neither the employer nor the
insurer requested evidence of insurability. (Id. at pp. 936–937.) When the
husband died soon thereafter, a letter from the employer stated the employee
had $250,000 in coverage, but when she submitted a claim to the insurer, the
insurer confirmed there was no statement of health on file and refused to pay
more than $30,000 (the $20,000 the employee had first elected plus an
annual increase). (Id. at p. 937.)
      Salyers held the insurer waived the evidence of insurability
requirement by accepting her premiums without asking her to provide a
statement of health. (Salyers, supra, 871 F.3d at p. 938.) Finding the
employer acted as the insurer’s agent on the facts of that case, the court
concluded, “The deductions of premiums, [the insurer] and [employer’s]
failure to ask for a statement of health over a period of months, and [the
employer’s] representation to Salyers that she had $250,000 in coverage were
collectively ‘so inconsistent with an intent to enforce’ the evidence of
insurability requirement as to ‘induce a reasonable belief that [it] ha[d] been

                                       15
relinquished.’ See Intel Corp. [v. Hartford Accident & Indem. Co. (9th Cir.
1991)] 952 F.2d [1551,] 1559; see also Gaines [v. Sargent Fletcher, Inc. Grp.
Life Ins. Plan (C.D.Cal. 2004)] 329 F.Supp.2d [1198,] 1222. Accordingly, [the
insurer] waived the evidence of insurability requirement, and it cannot
contest coverage on that basis.” (Salyers, at p. 941.)
      Salyers noted that “[s]everal district courts in our circuit have held that
waiver ‘cannot be used to create coverage beyond that actually provided by an
employee benefit plan’ ” (citing Flynn v. Sun Life Assur. Co. (C.D.Cal. 2011)
809 F.Supp.2d 1175, 1187 (Flynn) and Yale v. Sun Life Assur. Co. (E.D.Cal.,
Oct. 31, 2013, No. 1:12-cv-01429-AWI-SAB) 2013 WL 5923073, p. *13
(Yale))—a principle analogous to the one Dones relies upon here. Salyers
disagreed with the application of this principle to the facts of that case: “But
where, as here, premium payments have been accepted despite the plan
participant’s alleged noncompliance with policy terms, “giving effect to the
waiver . . . does not expand the scope of the ERISA plan; rather it provides
the plaintiff with an available benefit for which he paid.” (Salyers, at p. 941,
fn. 4, quoting Gaines v. Sargent Fletcher, Inc. Grp. Life Ins. Plan, supra, 329
F.Supp.2d at p. 1222 (Gaines).)
      Gaines, similarly, found the insurer waived, and was estopped from
asserting, the right to deny benefits under a group life insurance plan based
on the employee’s failure to provide evidence of good health when he applied
for coverage. (Gaines, supra, 329 F.Supp.2d at pp. 1204, 1221–1223.) There,
neither the insured nor any of his employer’s other employees were informed
that evidence of good health was a precondition to coverage, the plan
language was ambiguous, and the insurer accepted the insured’s premium
payments without indicating any information was missing. (Id. at pp. 1203,
1208–1209.)

                                       16
      Yale, one of the cases Salyers disagreed with and also one of those
LINA relies upon for the proposition that the County’s deduction of premiums
does not operate to create coverage under a policy where it would not
otherwise exist, distinguished Gaines in declining to find waiver of an
evidence of insurability requirement. (Yale, supra, 2013 WL 5923073, at
pp. *1–*13.) In Yale, the enrollment form stated evidence of insurability was
required for coverage in the amount the employee selected, but premiums
were deducted based on that amount despite her failure to provide the
information. (Id. at pp. *4, *6.) Yale held the insurer did not waive the
precondition to coverage because the premium deductions resulted from an
administrative billing error, the insurer’s conduct did not conclusively
demonstrate the “intentional relinquishment of known right” required for
waiver, and finding waiver in the absence of ambiguity in the policy would
violate the rule that waiver cannot be used to create coverage. (Id. at pp. *6,
*10–*11, *13.) The court rejected an estoppel theory because the
unambiguous requirement of evidence of insurability precluded reasonable
reliance on the insurer’s conduct to indicate it was excusing compliance with
the requirement. (Id. at p. *15.) 4

      4 Flynn, supra, 809 F.Supp.2d 1175, the other case Salyers disagreed
with, involved an employee who never became insured under a life insurance
policy because he never completed his employer’s enrollment process and in
fact cancelled his application; although premiums had been deducted from
his paycheck prior to his cancellation, they were never sent to the insurer and
were returned to the employee by the employer. (Flynn, at pp. 1179–1181,
1188.) The court stated the principle that “concepts of waiver or estoppel
cannot be used to create coverage beyond that actually provided by an
employee benefit plan” as one of its reasons for rejecting an argument that
the insurer and employer, sued by the employee’s widow, “waived or were
estopped from asserting certain arguments advanced in their opening briefs
and at trial, because they were not advanced as a basis for denial of her claim
or upholding that claim determination on appeal.” (Id. at p. 1187.) The court
                                      17
      Schonbak v. Minnesota Life (S.D.Cal., Dec. 28, 2017) 2017
WL 10591660 (Schonbak), another of LINA’s examples of cases rejecting
claims of waiver based on employers’ deduction of premiums for life
insurance, involved an employee who received notice directly from the
insurer that his application for supplemental life insurance had been denied
due to his medical history but whose employer erroneously deducted
premium payments for the declined insurance. Distinguishing Salyers,
Schonbak held the record did not show an intentional relinquishment by the
insurer of its right to require evidence of insurability, as the insurer denied
the application for insurance and was unaware the employer was deducting
premium payments, the employer’s conduct could not be attributed to the
insurer because it did not have actual or apparent authority, and the
deductions were due to administrative error. (Schonbak, at pp. *3–*4.)
      In Affonso v. Metropolitan Life Ins. Co. (N.D.Cal., Apr. 26, 2012) 2012
WL 1496192, the employee enrolled in a group life insurance plan after being
advised by her employer’s benefits representative that she was eligible for
coverage of up to $1 million; a premium payment was deducted from her
paycheck, she was told the insurance amount had been accepted and
coverage was in force, and this confirmation was subsequently provided in
writing. (Id. at p. *1.) Under the policy terms, however, the employee was
limited to $500,000 coverage and, based on this limitation, after her death
the insurer denied payment exceeding $500,000. (Ibid.) Affonso rejected
claims of waiver and estoppel to assert the coverage limitation based on
evidence the employee’s enrollment documents stated the limitation, the

did not specify the basis for the waiver argument, but the facts that the
employee affirmatively cancelled his application for insurance before it was
processed and no premiums were paid to the insurer clearly distinguish
Flynn from the present case.

                                       18
summary plan description stated that in case of conflict, the terms of the plan
documents controlled over other materials and verbal representations, and
the letter confirming the employee’s benefits stated that any inconsistency
would be governed by the plan document. (Id. at pp. *5–*6.)
      Kwok v. Metropolitan Life Ins. Co. (9th Cir. 2001) 7 Fed.Appx. 709,
rejected waiver and estoppel claims based on the employer having deducted
two premium payments despite knowing the employee was not “actively at
work,” as required for a life insurance policy to take effect. The employer had
informed employees that the insurance was to replace a different life
insurance policy as of a specified date for all employees “actively at work on
that date (or on the first day of the month following a return to work).” (Id.
at p. 711.) Kwok had completed an enrollment card stating the applicant had
to be actively at work on the effective date in order to be covered, and
defining “actively at work” to mean “ ‘performing my full-time regularly
scheduled duties,’ ” and had signed a certification that he had read this
information and understood the requirement. (Ibid.) His last day of work
preceded the effective date, he died shortly after that date, and while the new
insurer denied coverage, benefits were paid by the previous insurer. (Ibid.)
In these circumstances, the Ninth Circuit held there was no “element of
misconduct by the insurer or detrimental reliance by the insured.” (Ibid.)
      One thing is clear from all these cases: At least in the context of
determining the effect of preconditions to effective coverage, waiver and
estoppel are questions of fact. The federal cases, including those LINA relies
upon, were decided on motions for summary judgment or after trials, not on
the pleadings. (Salyers, supra, 871 F.3d 934 [trial]; Schonbak, supra, 2017
WL 10591660 [summary judgment]; Yale, supra, 2013 WL 5923073 [trial];
Affonso v. Metropolitan Life Ins. Co., supra, 2012 WL 1496192 [summary

                                       19
judgment]; Gaines, supra, 329 F.Supp.2d 1198 [summary judgment]; Kwok v.
Metropolitan Life Ins. Co., supra, 7 Fed.Appx. 709 [summary judgment].)
Waiver and estoppel are normally questions of fact, and LINA’s cases do not
support a conclusion that these doctrines are inapplicable in the present case.
We decline to hold that principles of waiver and estoppel cannot establish the
existence of an effective contract of insurance as a matter of law.
                                        B.
      This leaves the question whether the second amended complaint
sufficiently alleged causes of action for breach of contract against LINA. As
we have said, Dones’s waiver and estoppel arguments are based primarily
upon conduct by the County, which Dones maintains was acting as the
insurer’s agent.
      In Elfstrom v. New York Life Ins. Co. (1967) 67 Cal.2d 503 (Elfstrom),
the California Supreme Court “held as a matter of law that ‘the employer is
the agent of the insurer in performing the duties of administering group
insurance policies.’ (Id. at p. 512.)” (Metropolitan Life Ins. Co. v. State Bd. of
Equalization (1982) 32 Cal.3d 649, 659, quoting Elfstrom, at p. 659.) Among
the considerations Elfstrom discussed in reaching this conclusion and
rejecting the view that the employer acts as agent of the employee, the court
found “most persuasive” that “the employee has no knowledge of or control
over the employer’s actions in handling the policy or its administration. An
agency relationship is based upon consent by one person that another shall
act in his behalf and be subject to his control. (Edwards v. Freeman (1949) 34
Cal.2d 589.) It is clear from the evidence regarding procedural techniques
here that the insurer-employer relationship meets this agency test with
regard to the administration of the policy, whereas that between the
employer and its employees fails to reflect true agency. The insurer directs

                                        20
the performance of the employer’s administrative acts, and if these duties are
not undertaken properly the insurer is in a position to exercise more
constricted control over the employer’s conduct. [¶] . . . . [I]t would be
inconsistent with the actual relationship of the parties and would do violence
to the traditional concept of agency to hold that the employees rather than
the insurer control and direct the employer’s acts in administering a policy of
group insurance.” (Elfstrom, at pp. 513–514.) Accordingly, “the employer’s
errors in administration are attributable to the insurer.” (Id. at p. 505;
Amberg v. Bankers Life Co. (1971) 3 Cal.3d 973, 979.)
      Dones alleged that the County “was acting as agent for LINA in the
administration of the Master Policy at all times,” as well as alleging acts
constituting such administration, such as informing Johnson of available
options, communicating with her about and confirming her selections,
deducting premium payments from her paycheck and transmitting them to
LINA. These allegations, on their face, are sufficient to allege agency under
Elfstrom. And they are further supported by one of the attachments to the
second amended complaint (exhibit R), a May 8, 2018 letter from Cigna
Group Insurance denying Dones’s appeal, which stated that the County chose
to self-administer the master policy and therefore was responsible for
ensuring coverage elections were processed in accordance with the terms and
conditions of the policy and the policy’s effective date provision had been
satisfied, for maintaining “employee-level detail and coverage data,” and for
timely and accurately remitting premiums.
      LINA attempts to distinguish Elfstrom on the grounds that the insured
in that case did not fail to satisfy a condition to coverage such that “it was
undisputed that the supplemental coverage never existed,” and that the
Elfstrom court emphasized the record did not indicate the insured knew or

                                       21
suspected she was not eligible for insurance, whereas here Johnson “was
informed about the Policy’s Active Service requirement—such that she knew
the supplemental coverage would not take effect until she returned to Active
Service.”
      LINA’s first purported distinction is both factually erroneous and
irrelevant. As to the facts, the insurer in Elfstrom disclaimed coverage on the
ground that the insured was not eligible for insurance because she did not
satisfy the policy requirements for minimum weekly hours worked and
monthly earnings. (Elfstrom, supra, 67 Cal.2d at p. 507.) And while it is
undisputed that Johnson was informed the policy had an “active service”
requirement, Dones clearly disputes whether Johnson was aware and
understood the meaning of the requirement. In any event, Johnson’s
eligibility for the insurance, while critical in other respects, is irrelevant to
the question whether the County was acting as LINA’s agent in
administering the insurance policy.
      LINA further argues that Dones only alleged in conclusory fashion that
the County acted as LINA’s agent and failed to plead facts establishing the
existence of an agency relationship. But “[a]n allegation of agency is an
allegation of ultimate fact that must be accepted as true for purposes of
ruling on demurrer. (Skopp v. Weaver (1976) 16 Cal.3d 432, 437.)” (City of
Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 212; Meyer v.
Graphic Arts International Union (1979) 88 Cal.App.3d 176, 178–179.) The
cases LINA offers as holding that a plaintiff “must allege facts demonstrating
the principal’s control over its agent”—Garlock Sealing Technologies, LLC v.
NAK Sealing Technologies Corp. (2007) 148 Cal.App.4th 937, 964, and
Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 541—do
not support the proffered proposition. Both cases discuss requirements for

                                        22
proof of an agency relationship. Neither says anything about pleading
requirements to withstand demurrer.
      LINA next points to language in the policy disclaiming an agency
relationship with the County: “The Employer and Plan Administrator are
agents of the Employee for transactions relating to insurance under the
Policy. The Insurance Company is not liable for any of their acts or
omissions.” “The Employer is acting as an agent of the Insured for
transactions relating to this insurance. The actions of the Employer shall not
be considered the actions of the Insurance Company.” “No agent may change
the Policy or waive any of its provisions.”
      This language is not determinative. In determining whether an agency
relationship exists, “[t]he declarations of the parties in the agreement
respecting the nature of the relationship created thereby are not controlling.”
(Nichols v. Arthur Murray, Inc. (1967) 248 Cal.App.2d 610, 612–613;
Patterson v. Domino’s Pizza, LLC (2014) 60 Cal.4th 474, 501 [“the parties’
characterization of their relationship in the franchise contract is not
dispositive”]; Kuchta v. Allied Builders Corp. (1971) 21 Cal.App.3d 541, 548
[although franchise agreement stated no agency relationship created,
declarations of the parties not controlling]; 3 Am.Jur.2d (2013) Agency, § 18,
pp. 463–464 [“The manner in which the parties designate the relationship is
not controlling, and if an act done by one person in behalf of another is in its
essential nature one of agency, that person is the agent of such other
notwithstanding that he or she is not so called”].) Moreover, contractual
provisions conflicting with Elfstrom must be viewed as invalid. (Pacific Std.
Life Ins. Co. v. Tower Industries, Inc. (1992) 9 Cal.App.4th 1881, 1891.)

                                       23
                                       C.
      Having concluded Dones could not rely on theories of waiver and
estoppel as a matter of law, the trial court did not address whether the
second amended complaint otherwise sufficiently alleged the elements of
waiver and/or estoppel. LINA does not directly address this issue, although
the emphasis in its brief on notice to Johnson of the “active service”
requirement makes clear its view that Johnson could not have reasonably
relied on any communication or conduct by LINA or the County to indicate
she had operative insurance coverage.
      Dones alleged that Johnson enrolled in supplemental life insurance
coverage online; received confirmation from that she had enrolled in this
benefit; had premium payments deducted from her paycheck and, when her
paycheck was insufficient to cover the premiums, was directed to and did pay
out of pocket. Johnson was never informed of any information missing from
or other problem with her enrollment, and in fact was informed that nothing
further was needed, despite LINA’s and County’s knowledge that she was on
medical leave and the insurance policy would not take effect as long as she
was on leave; was unaware of any requirement that she return to work in
order to make the insurance she was paying for effective; was capable of
returning to work after the policy effective date; and would have returned if
she had known of the requirement. These allegations are sufficient to
support the claim of an “intentional relinquishment or abandonment of a
known right” (Bickel v. City of Piedmont, supra, 16 Cal.4th at p. 1048)
through conduct “ ‘ “so inconsistent with an intent to enforce the right as to
induce a reasonable belief that such right has been relinquished” ’ ” (Lynch v.
California Coastal Com., supra, 3 Cal.5th at p. 475) required to establish
waiver against LINA. The same allegations support the required elements of

                                       24
equitable estoppel that LINA was apprised of the facts and acted in such a
way that Johnson had a right to believe the insurer intended her to rely upon
the assurance that coverage was in place. The other elements of estoppel,
Johnson’s ignorance of the true state of facts and reliance, are alleged and, as
we will discuss, not conclusively refuted by the documents attached to the
second amended complaint, LINA’s arguments to the contrary
notwithstanding.
      LINA emphasizes that Johnson was notified by the brochure, the online
enrollment form and other documents that the supplemental life insurance
would become effective on January 1, 2017, only for employees in “active
service.” Most of the references to “active service,” however, do not define the
term. The exception is the eBenefits Information Sheet that appears as part
the online enrollment form: As earlier indicated, the eBenefits Information
Sheet states that an employee is considered in “active service” if he or she is
“actively at work,” meaning “performing [his or her] regular occupation for
the Employer on a full-time basis, either at one of the Employer’s usual
places of business or at some location to which the Employer’s business
requires [him or her] to travel” or “[t]he day is a scheduled holiday, vacation
day or period of Employer approved paid leave of absence, other than
disability or sick leave after 7 days.”
      It appears from exhibit B, however, that the eBenefits Information
Sheet was not part of the online enrollment form itself but rather on another
screen, apparently accessible available by clicking a button on the enrollment
form.5 The exhibit, therefore, demonstrates only that the definition was

      5The first page of exhibit B begins with headings, “2017 Benefits
Enrollment” and “Supplemental Life Insurance,” sets forth Johnson’s name
and salary, describes the insurance benefit and offers a list of available
options for coverage amounts with directions to select one. The next three
                                          25
accessible to Johnson, not that she actually saw it or knew of it. The policy
itself defines “active service” as “actively at work,” but Dones alleged that
Johnson was not provided a copy of the policy.
      Contrary to LINA’s assumption, it is not apparent to us that “active
service” has a single unambiguous meaning such that Johnson necessarily
must have known she was not in “active service” because she was on medical
leave of absence. For example, it would not necessarily be unreasonable for
an employee, on medical leave but continuing to receive a paycheck, to
understand “active service” as a contrast to retirement rather than to a
temporary leave of absence.
      LINA and the County both point out that earlier versions of the
complaint alleged Johnson received a notice stating that “if the employee was
not actively at work, the coverage would take effect when the employee
returned to active service.” The second amended complaint, by contrast,
alleges it is “unknown” whether this contractual provision was included in
the documentation Johnson received, further alleging that the prior
allegation was “mistaken,” and “after further review of documents . . .
appears to be unfounded.”
      LINA and the County view the change in allegations as insufficiently
explained and, therefore, evidence the second amended complaint is a sham
pleading. Under the sham pleading doctrine, “if a verified complaint contains
allegations fatal to a cause of action, a plaintiff cannot cure the defect by
simply omitting those allegations in an amended pleading without

pages of exhibit B are paginated “1, 2, 3,” each page with a footer indicating
“eBenefits Information Sheet.” Midway down page 3 is a link to “Return to
Your Annual Benefits Open Enrollment Event” followed by the direction, “If
you are ready to make your 2017 benefit choices, close this screen, make your
election and click ‘Continue’ to resume your enrollment in eBenefits.”

                                        26
explanation.” (JPMorgan Chase Bank, N.A. v. Ward (2019) 33 Cal.App.5th
678, 690 (JPMorgan); Smyth v. Berman (2019) 31 Cal.App.5th 183, 195–196
(Smyth).) “But amendment in this manner is allowed where a plaintiff
clearly shows that the earlier pleading is the result of mistake or
inadvertence.” (JPMorgan, at p. 690.) “[T]he sham pleading doctrine ‘cannot
be mechanically applied.’ (Avalon Painting Co. v. Alert Lumber Co. (1965)
234 Cal.App.2d 178, 185.) It ‘is not intended to prevent honest complainants
from correcting erroneous allegations or prevent the correction of ambiguous
facts.’ (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 751.) Instead ‘the rule
must be taken together with its purpose, which is to prevent [an] amended
pleading which is only a sham, when it is apparent that no cause of action
can be stated truthfully.’ (Callahan v. City and County of San
Francisco (1967) 249 Cal.App.2d 696, 699; see McGee v. McNally (1981) 119
Cal.App.3d 891, 897) [where omission did not ‘impugn[ ] the credibility of
appellants’ cause of action,’ amendment should have been allowed].)” (Ibid.)
      We are not convinced the sham pleading doctrine should be applied
here. While the earlier allegation weakened Dones’s case by acknowledging
Johnson received information that more directly indicated the insurance
would not go into effect if she remained on a leave of absence, it was not so
conclusive as to be necessarily fatal to the cause of action, and the
amendment did not alter the fundamental facts upon which the claim was
based. (Smyth, supra, 31 Cal.App.5th at p. 196 [plaintiff whose claim
depended on when tenancy ended first alleged termination of lease in 2015,
then later alleged continuation under oral extension].) Nor was the
explanation for the claim necessarily implausible. In Smyth, for example, the
plaintiffs alleged they did not initially allege an oral lease extension because
they first found documentary evidence of the extension after the earlier

                                       27
complaint was filed, but the plaintiff who was allegedly party to the oral
extension would have known about it regardless of any memorializing
documentation. (Smyth, at p. 196.) Here, Dones alleged that further review
of documents indicated Johnson may not have received a notice he had
previously alleged she received. This explanation lacked detail, but it was
not inherently implausible.
      Clearly, there are factual questions as to what Johnson knew or should
have known about the active service requirement and whether the conduct of
LINA and the County supported a reasonable expectation that the
supplemental insurance was in place and effective. We offer no opinion as to
whether Dones will be able to prove his case. We conclude only that his
allegations of waiver and estoppel are sufficient to withstand demurrer.
                                       II.
      Dones argues the County is liable for the death benefit due under the
supplemental insurance policy both as agent for LINA and directly, under a
theory of implied contract. As to the former, Dones argues that while an
agent is not personally liable for breach of contract by a disclosed principal,
the agent is liable where the principal was not disclosed and here, Johnson
was informed the coverage would be provided by Cigna, not LINA. The
County is liable under a theory of implied contract, Dones maintains, based
on its conduct in deducting premiums and notifying Johnson she was covered
despite its awareness of her employment status.
                                        A.
      Although the second amended complaint sufficiently alleged the
County acted as LINA’s agent in administering the life insurance policy for
purposes of determining LINA’s liability, whether the County can be held
liable is a different question. “[A]n agent is ordinarily not liable on the

                                       28
contract when he acts on behalf of a disclosed principal.” (Stoiber v.
Honeychuck (1980) 101 Cal.App.3d 903, 929; Filippo Industries, Inc. v Sun
Ins. Co. (1999) 74 Cal.App.4th 1429, 1442.)
      Dones argues that the County is liable for the supplemental life
insurance benefit here because it did not disclose the principal for whom it
was acting in offering the insurance: The eBenefits Information Sheet stated
the supplemental life insurance coverage would be provided by Cigna, but in
fact the policy was issued by LINA.
      Dones’s argument is based on principles stated in W.W. Leasing
Unlimited v. Commercial Standard Title Ins. Co. (1983) 149 Cal.App.3d 792,
795–796: “ ‘In order for an agent to avoid personal liability on a contract
negotiated in his principal’s behalf, he must disclose not only that he is an
agent but also the identity of his principal, regardless of whether the third
person might have known that the agent was acting in a representative
capacity. It is not the third person’s duty to seek out the identity of the
principal; rather, the duty to disclose the identity of the principal is on the
agent. The disclosure of an agency is not complete for the purpose of
relieving the agent from personal liability unless it embraces the name of the
principal; without that, the party dealing with the agent may understand
that he intended to pledge his personal liability and responsibility in support
of the contract and for its performance. Furthermore, the use of a tradename
is not necessarily a sufficient disclosure of the identity of the principal and
the fact of agency so as to protect the agent against personal liability.’
(3 Am.Jur.2d Agency, § 320, pp. 676–678, and see the authority there
collected.)”
      The rationale for imposing liability under a contract on the agent for an
unidentified principal is “to make sure that a party entering a contract knows

                                        29
precisely with whom it is dealing and protects a party from unknowingly
being required to do business with an entity incapable of meeting its
contractual obligations.” (UBS Securities, Inc. v. Tsoukanelis (S.D.N.Y. 1994)
852 F.Supp. 244, 247–248.) “When a third party has notice that an agent
deals on behalf of a principal but does not have notice of the principal’s
identity, it is not likely that the third party will rely solely on the principal’s
solvency or ability to perform obligations arising from the contract. Without
notice of a principal’s identity, a third party will be unable to assess the
principal’s reputation, assets, and other indicia of creditworthiness and
ability to perform duties under the contract. If an agent provides
reassurances about the principal’s soundness only generally or describes the
principal, the third party will be unable to verify such claims without notice
of the principal’s identity.” (Rest.3d Agency, § 6.02, com. b., p. 30.)
      Application of these principles in the present case would make no
sense. As an employee purchasing life insurance through a group plan
offered by her employer, Johnson was not in the same position as an
individual negotiating a commercial transaction with the agent for a seller of
goods, lessor of property or the like. Johnson did not directly enter into a
contract with LINA; if the insurance policy became effective, she became a
party to it pursuant to the terms of an existing master contract between
LINA and County (through the Group Insurance Trust for Employers in the
Public Administration Industry). Johnson did not negotiate her contract of
insurance or choose which company to deal with; she chose only whether to
take advantage of the insurance benefit offered by her employer. She could
not plausibly have viewed her selection of the life insurance benefit as a
contract for the County itself to provide the actual insurance: The County is
not an insurer.

                                         30
      Moreover, the second amended complaint alleges that LINA is a
subsidiary of Cigna. Indeed, the correspondence by which Board approved
the insurance benefits to be offered to County employees for 2017 and 2018 is
on CIGNA letterhead.6 It does not appear there was anything deceptive
about the County’s identification of the insurance carrier. If Johnson’s
insurance policy went into effect, the entity liable for improper denial of
benefits would be LINA, not the County.
                                         B.
      Dones also argues the County is directly liable on a theory of implied
contract. The second amended complaint alleges the action for breach of
implied contract against both LINA and the County. Drawing on the
principle that “the very heart” of an implied contract “is an intent to promise”
(Division of Labor Law Enforcement v. Transpacific Transportation Co.
(1977) 69 Cal.App.3d 268, 275), Dones argues the County “evidenced an
intent to promise over and over, with each paycheck which informed
[Johnson] that the benefits were in effect and with its demand for additional
premiums (which she paid) when the paycheck would not cover them.”
Without further specifying the terms of the alleged implied contract, Dones
argues the existence of such a contract is a question of fact and the County is
estopped from “denying the policy.”
      “A contract is either express or implied. (Civ. Code, § 1619.) The terms
of an express contract are stated in words. (Civ. Code, § 1620.) The existence
and terms of an implied contract are manifested by conduct. (Civ. Code,
§ 1621.) The distinction reflects no difference in legal effect but merely in the
mode of manifesting assent.” (1 Witkin, Summary of Cal. Law (10th ed.
2005) Contracts, § 102, p. 144.) Accordingly, a contract implied in fact

      6   See footnote 7, post, at page 32.

                                         31
“consists of obligations arising from a mutual agreement and intent to
promise where the agreement and promise have not been expressed in
words.” (Silva v. Providence Hospital of Oakland (1939) 14 Cal.2d 762, 773.)
      “It is settled that the mode of contracting vested in a state agency is the
measure of its power to contract and a contract made in disregard of the
established mode is invalid.” (Seymour v. State of California (1984) 156
Cal.App.3d 200, 203; G. L. Mezzetta Inc. v. City of Am. Canyon (2000) 78
Cal.App.4th 1087, 1093–1094 (Mezzetta) [“because the statutes in question
specifically set forth the ways in which the City may enter into contracts, any
other methods of contract formation—even though not explicitly prohibited
by the statutes—are invalid”].) Section 3.64.030 of the County’s
Administrative Code provides, “The [Board] shall approve health and welfare
benefit plans for coverage of eligible persons and their spouses (or domestic
partners effective 2/1/96) and eligible dependents.” Documents the trial court
took judicial notice of establish that the County human resources services
recommended the Board approve specified benefits including the
supplemental life insurance benefit, and the Board did so.7

      7 On December 5, 2016, the interim director of the County’s human
resources services recommended that the Board “[a]pprove the offering of
CIGNA Basic Life and Voluntary Supplemental Life and AD&D, Short and
Long Term Disability Insurance plans and rates, effective January 1, 2017
through December 31, 2018” and “[a]uthorize the President to sign the 2017
contract amendments for CIGNA Basic Life and Voluntary Supplemental
Life and AD&D, Short and Long Term Disability Insurance plans and rates,
effective January 1, 2017 through December 31, 2018.” A November 5, 2016
letter on CIGNA letterhead confirming “the County of Alameda’s acceptance
of Cigna’s Group Term Life, AD&D and Disability renewal rates effective
January I. 2017,” was signed “Accepted” by Supervisor Scott Haggerty on
January 4, 2017, and “Approved as to Form” by County counsel.

                                       32
      Dones did not allege that the Board authorized any life insurance
benefit other than that negotiated by CIGNA and the County’s human
resources services. The approved benefit was life insurance provided by
LINA to County employees pursuant to the master policy between LINA and
the County. As addressed above, Dones alleged that the County’s conduct
and representations, in its capacity as agent for LINA, waived or estopped
LINA from asserting its right to enforce the policy’s active service
precondition to coverage. But Dones has not explained how he alleged, or
could allege, an implied contract for the County to provide life insurance in
any manner other than through the policy issued by LINA, under which
benefits, if owed, are payable by LINA, not the County.
      Dones’s argument that “ ‘[a] county may be bound by an implied
contract under California law if there is no legislative prohibition against
such arrangements, such as a statute or ordinance’ ” (San Mateo Union High
School Dist. v. County of San Mateo (2013) 213 Cal.App.4th 418, 439 quoting
Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52
Cal.4th 1171, 1176) is true as an abstract proposition, but ignores the
County’s Administrative Code. By requiring the Board’s approval of
employee benefit plans, the Administrative Code necessarily prohibits
provision of employee benefits not approved by the Board. (See Mezzetta,
supra, 78 Cal.App.4th at p. 1094 [statute and municipal code provisions
requiring mayor to sign written contracts, giving city manager same
authority as mayor to sign such contracts when approved by city council and
requiring city attorney to approve the form of contracts implicitly require
that all city contracts be in writing, not oral].)8 In requiring the Board to

      8Dones takes issue with the County’s characterization of the
deductions from Johnson’s paycheck for supplemental life insurance
premiums as the “mistake of a clerk in the County’s payroll or benefits
                                       33
approve employee benefit plans, the County’s Administrative Code ensures a
number of individuals will be involved in making a decision which will affect
the lives of County employees. “ ‘ “No single individual has absolute
authority to bind the [County].” ’ ” (Mezzetta, supra, 78 Cal.App.4th at
p. 1094, quoting First Street Plaza Partners v. City of Los Angeles (1998) 65
Cal.App.4th 650, 669.) Conduct by a County employee such as setting up
payroll deductions and issuing confirmations of open enrollment benefit
elections cannot operate to create an implied contract for provision of benefits
in a manner contrary to legislative constraints.
      Dones’s resort to estoppel fares no better. Aside from the absence of
allegations that the Board approved provision of life insurance benefits to
Johnson other than those available through the LINA policy, or that a
contract for the County itself to provide life insurance existed, equitable
estoppel “ ‘ “ordinarily will not apply against a governmental body except in
unusual instances when necessary to avoid grave injustice and when the
result will not defeat a strong public policy. [Citations.]” [Citation.]’ ”
(Schafer v. City of Los Angeles (2015) 237 Cal.App.4th 1250, 1262, quoting
Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1315.) When
equitable estoppel is asserted against the government, in addition to the
basic elements of equitable estoppel described earlier, “the court must weigh
the policy concerns to determine whether the avoidance of injustice in the

department.” Dones asserts the complaint did not allege a mistake but
rather alleged “the County knew of [Johnson’s] employment status and took
the premiums and informed her she had the benefit anyway”; LINA and
County maintain “mistake,” meaning an inadvertent taking of “misguided or
wrong” action, is appropriate because Dones did not allege the County
intentionally deducted premiums “as part of a scheme to deceive Johnson.”
The disputed characterization is not relevant for purposes of this opinion.

                                        34
particular case justifies any adverse impact on public policy or the public
interest.” (Schafer, at p. 1261.)
      The trial court found the second amended complaint did not plead the
requisite level of injustice necessary for equitable estoppel against the
County, “only vaguely claiming plaintiff was ‘significantly harmed’ and was
forced to ‘[retain] legal counsel.’ (SAC ¶¶ 94, 97.)” The two paragraphs cited
by the trial court appear in the third cause of action for breach of the implied
covenant of good faith and fair dealing, which is alleged against LINA alone.
Also under the third cause of action, Dones alleges that LINA’s unreasonable
conduct caused him to lose the supplemental benefit of $230,000 for which he
and Johnson paid, and to suffer “extreme emotional anguish and significant
financial hardship . . . according to proof.”
      The loss of a significant amount of expected income is, of course, of
considerable consequence to Dones. Like the trial court, however, we are
convinced it does not rise to the level of injustice required for equitable
estoppel against a governmental entity. A voluntary, employee-paid
supplementary life insurance policy for which Johnson paid premiums for at
most seven months is simply not the unusual case of grave injustice in which
estoppel against the government can succeed.9
      Additionally, “[e]stoppel against the government may be applied ‘only
in the most extraordinary case where the injustice is great and the precedent

      9 Dones’s equitable estoppel argument is based almost entirely on
Alameda County Deputy Sheriff’s Assn. v. Alameda County Employees’
Retirement Assn. (2018) 19 Cal.App.5th 61, in which, he says, the County
“ ‘argue[d] strenuously’ the same arguments it makes in the present case and
each was rejected.” This case was recently reversed by the California
Supreme Court, which rejected the equitable estoppel claim. (Alameda
County Deputy Sheriff’s Assn. v. Alameda County Employees’ Retirement
Assn. (2020) 9 Cal.5th 1032, 1071–1074.)

                                        35
set by the estoppel is narrow.’ ” (Clary v. City of Crescent City (2017) 11
Cal.App.5th 274, 285, quoting Smith v. County of Santa Barbara (1992) 7
Cal.App.4th 770, 775.) Permitting a claim of estoppel against the County
based on its administration of an employee’s voluntary supplemental life
insurance application as alleged here would set a potentially broad precedent,
undermining the public policy served by limiting the County’s contractual
liability to contracts entered in accordance with legislatively prescribed
procedures. The County’s role with respect to the life insurance policy was as
agent for LINA; Dones’s claim, if any, is against LINA.
                                   DISPOSITION
      The judgment is affirmed as to the County. As to LINA, the judgment
is reversed, the order sustaining the demurrer without leave to amend is
vacated and the matter is remanded to the trial court for further proceedings
consistent with this opinion.

                                       36
                                            _________________________
                                            Kline, P.J.

We concur:

_________________________
Stewart, J.

_________________________
Miller, J.

Dones v. Cigna Life Insurance Company of North America et al. (A157662)

                                       37
Trial Court:                Alameda County Superior Court

Trial Judge:                Hon. Paul D. Herbert

Attorneys for Appellant:    Turner Friedman Morris & Cohan
                            Jonathan M. Deer

                            Blakeman Law
                            Benjamin Blakeman

Attorneys for Respondent:   Moscone Emblidge & Reubens
                            G. Scott Emblidge
                            Erin H. Reding

                            Meserve Mumper & Hughes
                            Nicole Y. Blohm
                            Charles K. Chineduh

                             38