Opinion
CV 13-04822 DMG (Ex)
01-26-2015
CAROLANN BENNETT, Plaintiff, v. AMERICAN GENERAL LIFE INSURANCE COMPANY, Defendant.
AMENDED ORDER RE CROSS MOTIONS FOR PARTIAL SUMMARY JUDGMENT [52, 54]
DOLLY M. GEE, UNITED STATES DISTRICT JUDGE
This matter is before the Court on the parties' cross-motions for partial summary judgment. [Doc. ## 52, 54.] The Court held a hearing on the motions on January 9, 2015. Having duly considered the parties' written submissions and oral argument, the Court now renders its decision.
I.
FACTUAL BACKGROUND
The Court first addresses Defendant American General Life Insurance Company's motion for partial summary judgment. In doing so, the Court sets forth the material facts and views all reasonable inferences to be drawn from them in the light most favorable to Plaintiff Carolann Bennett, the non-moving party.
The parties raise evidentiary objections to declarations and exhibits filed by the opposing party. Some of the objections pertain to evidence that the Court need not consider in order to decide the instant motions, and therefore the Court need not rule on such objections. The Court addresses the remaining objections as necessary in the fact and discussion sections, infra. To the extent that the parties have objected on the ground of relevance to facts the Court discusses below, their objections are overruled.
A. The Policy
Defendant issued Policy No. MM0373691 (the “Policy”) on December 17, 2002.(Plaintiff's Statement of Uncontroverted Facts and Conclusions of Law (“P's Statement”) ¶ 1 [Doc. # 59-6]; see Declaration of Jack B. Winters, Jr. (“Winters Decl.”) ¶ 2, Exh. 1 (“Policy”) [Doc. # 54-3].) Plaintiff was the sole named beneficiary, and Joel R. Bennett (the “Insured”) was the named insured, of the Policy. (See Winters Decl. ¶ 2, Exh. 1 (“Policy”).) The annual premium payments on the Policy were $4,530, but the Policy allowed for premiums to be paid other than annually. (P's Statement ¶¶ 2, 3; see Winters Decl. ¶ 2, Exh. 1 (“Policy”).)
Plaintiff clarifies that the policy was issued by Old Line Life Insurance Company but that AGLIC assumed liability for Old Line.
The Policy contains the following provisions:
• Default: “Any premium, after the first, not paid on or before the due date will be in default. Such due date will be the date of default.” (P's Statement ¶ 5; Winters Decl. ¶ 2, Exh. 1 (“Policy”).)
• Grace period: “A 31 day grace period, without interest charge, is allowed for the payment of each premium after the first. This policy will stay in force during this period. If the premium is not paid before the end of the grace
period, insurance will end and this policy will lapse.” (P's Statement ¶ 6; see Winters Decl. ¶ 2, Exh. 1 (“Policy”).)
• Reinstatement: “If this policy lapses, it may be reinstated within five years after the date of default. We will require the insured to submit evidence of insurability which is satisfactory to us. Reinstatement will also be subject to payment of the premium for the grace period with interest at the rate of 6% per year computed annually plus the premium due for the current policy month.” (P's Statement ¶ 7; see Winters Decl. ¶ 2, Exh. 1 (“Policy”).)
• Integration/Waiver: “The entire contract consists of this policy, and riders and endorsements, the attached copy of the original application any amendments or supplemental applications....This policy may not be changed, nor may any of our rights or requirements be waived, except in writing by one of our authorized officers.” (See Winters Decl. ¶ 2, Exh. 1 (“Policy”).)
In 2006, the Insured requested monthly billing via Electronic Funds Transfer (P's Statement ¶ 10; see Declaration of M. Sepanski (“Sepanski Decl.”) ¶ 1, Exh. 1 (“January 4, 2006 Electronic Funds Authorization”) [Doc. # 52-4].) On November 10, 2008, the Insured asked to switch from Electronic Funds Transfer payments to receiving paper bills and paying monthly premiums by check. (P's Statement ¶ 11; see Sepanski Decl. ¶ 2, Exh. 2 (“November 10, 2008 Notification and Request”).) On the same day, the Insured informed American General of a change of address. (P's Statement ¶ 12; see Sepanski Decl. ¶ 2, Exh. 2 (“November 10, 2008 Notification and Request”).)
B. American General's Procedures
Defendant automatically generated monthly Notice of Payment Due approximately twenty-two days before the due date. (P's Statement ¶ 13; see Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”) [Doc. # 58]; Declaration of Jessica L. Wilson (“Wilson Decl.”) ¶ 2, Exh. 1 (Sepanski Depo at 50:25-51:8, 53:20-54:14, 62:5-15) [Doc. # 52-2].) A Notice of Payment Due would not generate, however, until the previous month's premium had been received. (See Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691); Wilson Decl. ¶ 2, Exh. 1 (Sepanski Depo. at 137:12-138:10, 73:8-75:9).) Defendant also automatically generated Reminder Notices approximately twenty days after a premium due date if a premium payment has not been received by that time. (P's Statement ¶ 15; see Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”); Wilson Decl. ¶ 2, Exh. 1 (Sepanski Depo. at 50:25-51:8, 62:1664:15).) If a Notice of Payment Due was not automatically generated because the prior month's premium has not been received, a separate Reminder Notice will not be generated. (See Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691); Wilson Decl. ¶ 2, Exh. 1 (Sepanski Depo. at 62:21-63:5).)
Thirty-one days after the due date, the grace period ends and the policy lapses according to the contract. (See Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”).) If a past due premium payment is received and applied within thirty days after the contractual lapse of the Policy, the Policy is automatically reinstated by the system without any underwriting. (See Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”); Wilson Decl. ¶ 2, Exh. 1 (Sepanski Depo. at 69:23-70:16, 141:23144:10).) Full reinstatement is required if a past due premium payment is not received within 71 days of the due date. (See Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”).)
Plaintiff disputes the existence of any “automatic reinstatement” right or process under the Policy's terms. Instead, Plaintiff points to the Policy's provision requiring, in the event of a lapse, that “the insured . . . submit evidence of insurability which is satisfactory to us.” (P's Statement ¶ 7; see Winters Decl. ¶ 2, Exh. 1 (“Policy”).) Defendant asserts that the automatic reinstatement period exists, but that it is an internal procedure and is non-contractual. (See Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”).)
Finally, according to Defendant, a Termination Letter is automatically generated thirty days after the Policy's lapse. (See Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”); Wilson Decl. ¶ 2, Exh. 1 (Sepanski Depo. at 50:2-51:8, 71:10-16).)
C. Termination of the Policy
On April 25, 2011, Defendant sent a Notice of Payment Due to the Insured with a due date of May 17, 2011. (P's Statement ¶ 20; see Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 40:24-25, 63:2-6, 66:1-3); Wilson Decl. ¶ 5, Exh. 4 (“April 25, 2011 Notice of Payment Due”).) The premium payment due on May 17, 2011 was credited on June 2, 2011. (P's Statement ¶ 21; Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”).)
On June 2, 2011, Defendant sent a Notice of Payment Due with a due date of June 17, 2011 to the wrong address. (P's Statement ¶¶ 22, 38; Wilson Decl. ¶ 6, Exh. 5 (“April 25, 2011 Notice of Payment Due”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 40:24-25, 66:1-8).) The Insured did not make the payment by June 17, 2011. (P's Statement ¶ 23; see Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”).) On July 7, 2011, Defendant sent a Reminder Notice to the Insured about the premium payment that was due on June 17, 2011. (P's Statement ¶ 24; see Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”); Sepanski Decl. ¶ 6, Exh. 5 (“July 19, 2011 Letter Sent to Joel Bennett Corp DBPP”).) The premium payment that was due on June 17, 2011 was credited on July 13, 2011. (P's Statement ¶ 25; see Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”).)
On July 13, 2011, Defendant sent a Notice of Payment Due to the Insured for the premium payment that was due on July 17, 2011. (P's Statement ¶ 26; see Sepanski Decl. ¶ 7, Exh. 6 (“July 22, 2011 Letter Sent to Joel Bennett Corp DBPP”).) The Insured did not make the payment by July 17, 2011. (P's Statement ¶ 27; see Sepanski Decl. ¶ 6, Exh. 5 (“July 19, 2011 Letter Sent to Joel Bennett Corp DBPP”).) A day later, the July 7, 2011 Reminder Notice for June's payment was returned because the Insured's mail forwarding service had expired and Defendant had not received notice of the Insured's change of address from the Insured or Plaintiff. (P's Statement ¶ 28; see Sepanski Decl. ¶ 6, Exh. 5 (“July 19, 2011 Letter Sent to Joel Bennett Corp DBPP”).) On July 19, 2011, Defendant re-sent the July 7, 2011 Reminder Notice for June's payment to the Insured with a cover letter informing Insured that his address had been updated based on information received from the United States Postal Service. (P's Statement ¶ 29; see Sepanski Decl. ¶ 6, Exh. 5 (“July 19, 2011 Letter Sent to Joel Bennett Corp DBPP”).)
On July 20, 2011, the July 13, 2011 Notice of Payment Due for the July payment due was also returned to Defendant because Insured's mail forwarding service had expired. (P's Statement ¶¶ 30, 31; see Sepanski Decl. ¶ 7, Exh. 6 (“July 22, 2011 Letter Sent to Joel Bennett Corp DBPP”).) Two days later, Defendant re-sent the July 13, 2011 Notice with the cover letter described supra. (P's Statement ¶¶ 30, 31; see Sepanski Decl. ¶ 7, Exh. 6 (“July 22, 2011 Letter Sent to Joel Bennett Corp DBPP”).) On August 7, 2011, Defendant sent a Reminder Notice to the Insured for the premium payment that was due on July 17, 2011. (P's Statement ¶ 32; see Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 67:15-22).)
The premium payment that was due on July 17, 2011 was credited on August 23, 2011-after the expiration of the grace period but within the time period allowed for automatic reinstatement. (See Sepanski Decl. ¶ 4, Exh. 3 (“CFO Fixed Premium Traditional Life Policy - Direct Bill Lapse Processing”); Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”); Wilson Decl. ¶ 2, Exh. 1 (Sepanski Depo. at 141:17-144:10).)
On August 23, 2011, Defendant sent a Notice of Payment Due to the Insured for the premium payment due on August 7, 2011. (P's Statement ¶ 34; see Wilson Decl. ¶ 8, Exh. 7 (“August 23, 2011 Notice of Payment Due”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 73:15-74:12).) Defendant claims the Insured never made the premium payment due on August 17, 2011, while Plaintiff asserts the payments were tendered on November 29, 2011. (See Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”); Winters Decl. ¶ 22, Exh. 21 (“Reinstatement Application and Payment”).)
For the life of the Policy, the due date for premiums was on the seventeenth: December 17 of each year when premium payments were paid annually; the seventeenth of every third month when payments were quarterly; and the seventeenth of each month when payments were monthly. (P's Statement ¶ 36; see Sepanski Decl. ¶ 12, Exh. 10 (“Premium History for Policy No. MM0373691 from December 17, 2002 to August 23, 2011”); Wilson Decl. ¶ 11, Exh. 10 (“Notices of Payment Due For Premiums Due Between September 17, 2009 and April 17, 2011”).)
The Policy lapsed on September 17, 2011. (See Sepanski Decl. ¶ 5, Exh. 4 (“Premium History for Policy No. MM0373691”).) Defendant sent a Termination Letter to the Insured on October 16, 2011. (P's Statement ¶ 38; see Wilson Decl. ¶ 9, Exh. 8 (“October 16, 2011 Notice of Termination”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 74:15-21).)
D. Denial of Reinstatement
Bennett applied for reinstatement on November 29, 2011. (P's Statement ¶ 39; see Declaration of Kathy Maio (“Maio Decl.”) ¶ 2, Exh. 1 (“Joel R. Bennett's Reinstatement Application”) [Doc. # 52-3].) On his application, he checked “Yes” to the question: “Have you ever been diagnosed as having, been treated for, or consulted a health care provider for heart disease, heart attack, chest pain, irregular heartbeat, high cholesterol, high blood pressure or other disorders of the heart?” (P's Statement ¶ 40; see Maio Decl., Exh. 1 (“Joel R. Bennett's Reinstatement Application”).) Defendant also obtained Bennett's medical records from his doctor. (P's Statement ¶ 41; see Maio Decl. ¶ 3, Exh. 2 (“Medical Records”).) His medical records indicated a calcium score of 1127.2, which Defendant construed to mean that Bennett was “considered to have high risk for a cardiovascular event.” (See Maio Decl. ¶ 3, Exh. 2 (“Medical Records”).)
Defendant did not obtain the Insured's full medical records. (See Winters Decl. ¶ 40, Exh. 39 (Maio Depo. at 186:5-11).) Furthermore, Defendant decided to withdraw the Insured's request for a further medical examination, not to ask for any more medical records, not to refer the matter to a medical director for medical review, and not to complete the underwriting requirements. (See Winters Decl. ¶ 43, Exh. 42 (Thornton Depo. at 36:5-39:13).)
Purportedly because of this medical history, Defendant sent Bennett a letter declining his request for reinstatement on February 27, 2012. (P's Statement ¶ 44; see Sepanski Decl. ¶ 8, Exh. 7 (“February 27, 2012 Letter to Joel Bennett Corp DBPP”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 81:16-82:20).) The letter stated, “You also have the right to provide us with a concise statement requesting that we correct, amend or delete any information with which you disagree that is contained in your file.” (P's Statement ¶ 45; see Sepanski Decl. ¶ 8, Exh. 7 (“February 27, 2012 Letter to Joel Bennett Corp DBPP”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 81:16-82:20).)
On March 13, 2012, Bennett sent a letter to Defendant requesting information about the denial of reinstatement and authorizing Defendant to release medical information to Dr. Mazouz. (P's Statement ¶ 46; see Sepanski Decl. ¶ 9, Exh. 8 (“March 13, 2012 Letter to American General”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 86:18-23).) On March 23, 2012, Defendant sent a letter to Bennett informing him that the requested medical information had been released to Dr. Mazouz. (P's Statement ¶ 48; see Sepanski Decl. ¶ 9, Exh. 8 (“March 13, 2012 Letter to American General”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 86:18-23).) Bennett did not request that any information in his file be corrected and did not provide any additional medical information to American General. (P's Statement ¶ 49; see Sepanski Decl. ¶ 11; Maio Decl. ¶ 4.)
Bennett died on October 8, 2012. (P's Statement ¶ 50.) Prior to initiating this lawsuit, Plaintiff never informed Defendant of the Insured's death and never filed a claim for benefits under the Policy. (P's Statement ¶ 51.)
Plaintiff objects to this fact for lack of foundation and relevance. [Doc. # 59-7.] Because the Court includes this fact merely as background information, and not because the date of the Insured's death has legal relevance, the objection is OVERRULED.
II.
LEGAL STANDARD
Summary judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); accord Wash. Mut. Inc. v. United States, 636 F.3d 1207, 1216 (9th Cir. 2011). Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.
The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 323. Once the moving party has met its initial burden, Rule 56(c) requires the nonmoving party to “go beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,' designate ‘specific facts showing that there is a genuine issue for trial.'” Id. at 324 (quoting Fed.R.Civ.P. 56(c), (e) (1986)); see also Norse v. City of Santa Cruz, 629 F.3d 966, 973 (9th Cir. 2010) (en banc) (“Rule 56 requires the parties to set out facts they will be able to prove at trial.”). “[T]he inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
A court presented with cross-motions for summary judgment should review each motion separately, giving the nonmoving party for each motion the benefit of all reasonable inferences from the record. Center for Bio-Ethical Reform, Inc. v. Los Angeles County Sheriff Dep't, 533 F.3d 780, 786 (9th Cir. 2008), cert. denied, 555 U.S. 1098, 129 S.Ct. 903, 173 L.Ed.2d 108 (2009). The Court must consider all evidence submitted by both parties when ruling on cross-motions for summary judgment. Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001).
III.
DISCUSSION
A. Defendant's Motion for Partial Summary Judgment
Defendant moves for summary judgment as to Plaintiff's claims for breach of contract and breach of the implied covenant of good faith and fair dealing.
1. Standing
As an initial matter, Defendant argues that Plaintiff lacks standing to bring suit both in her individual capacity and as a successor-in-interest to the Insured.
A plaintiff must establish Article III standing by satisfying a three-part test: (1) the plaintiff “must have suffered an injury in fact-an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical”; (2) “there must be a causal connection between the injury and the conduct complained of,” i.e., “the injury has to be fairly traceable to the challenged action of the defendant, and not the result of independent action of some third party not before the court”; and (3) “it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.” San Luis & Delta-Mendota Water Auth. v. Salazar, 638 F.3d 1163, 1169 (9th Cir. 2011) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)) (internal quotation marks omitted), cert. denied, 132 S.Ct. 498, 181 L.Ed.2d 388 (2011).
Prudential requirements for standing include: (1) whether plaintiff's alleged injury falls within the “zone of interests” protected by the statute or constitutional provision at issue; (2) whether the complaint amounts to generalized grievances that are more appropriately resolved by the legislative and executive branches; and (3) whether the plaintiff is asserting his or her own legal rights and interests, rather than those of third parties. See Desert Citizens Against Pollution v. Bisson, 231 F.3d 1172, 1179 (9th Cir. 2000); Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 100, 99 S.Ct. 1601, 60 L.Ed.2d 66 (1979); Powers v. Ohio, 499 U.S. 400, 410, 111 S.Ct. 1364, 113 L.Ed.2d 411 (1991).
Under California law, both the parties to an insurance contract and third-party beneficiaries of the contract are entitled to enforce the contract. See Cal. Civ. Code § 1559 (“A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.”). It is undisputed that Plaintiff was the only named beneficiary of the Policy. A third party beneficiary lacks standing to sue, however, where her rights have not vested prior to a contract being modified or rescinded. See Karo v. San Diego Symphony Orchestra Ass'n, 762 F.2d 819, 821 (9th Cir. 1985) (citing Cal. Civ. Code § 1559).
Defendant contends that because the contract terminated before the Insured died, Plaintiff's rights did not vest, and thus she lacks standing to sue in her individual capacity. Under California law, however, when coverage lapses for nonpayment, a life insurance policy with a reinstatement provision is not void but is only suspended. See Ryman v. Am. Nat. Ins. Co., 5 Cal.3d 620, 631, 96 Cal.Rptr. 728 (1971) (“During the period in which reinstatement is possible the policy is not void but merely suspended. The right to revive the policy by reinstatement is a valuable contractual right, the consideration for which is found in the premiums paid and to be paid under the original policy ....”). Here, under the Policy's terms, the Insured had five years to apply for
reinstatement, a period which did not end prior to his death. Thus, the contract was not rescinded at the time of default, and Plaintiff has standing to sue in her individual capacity. See Flintkote Company v. General Accident Assurance Company, 410 F.Supp.2d 875, 884 (N.D. Cal. 2006) (the court found that “[w]hether the Insured or Plaintiff failed to comply with some term of the policy, such as the requirement to make payments, is of course relevant to the ultimate question of defendants' liability,” but “[t]he fact that defendant has an affirmative defense which may undermine liability, however, is irrelevant to the question of plaintiff's standing to litigate issues prefatory to establishing ultimate liability.”).
Defendant argues that because the Insured's reinstatement application was denied, the five-year reinstatement period is no longer relevant to determining whether reinstatement is “possible” under Ryman. Such a conclusion would deprive any beneficiary of an insurance contract terminated before the named Insured's death the opportunity to challenge the denial of reinstatement. Thus, the Court finds the five-year period allowed for application for reinstatement under the Policy's terms to be “the period in which reinstatement is possible” under Ryman.
Defendant also argues that Plaintiff lacks standing to bring these claims as a successor-in-interest to Joel R. Bennett, since he was not the owner of the Policy but merely the named insured and the measuring life. Defendant contends that a trust named The Joel R. Bennett D.B.P.P. was the owner of the insurance policy. (See Wilson Decl. ¶¶ 5-11, Exhs. 4-10 (“Policy, the Policy Application, and Related Correspondence”).) Plaintiff claims to have never seen evidence of the trust's existence, however, and to the extent that such a trust existed, all rights would have vested in Plaintiff upon her husband's death. (See Declaration of Carolann Bennett ¶ 2 [Doc. # 59-3].) The appointment of a successor trustee, however, is regulated by the probate code, Cal. Prob. Code § 15660, and no court has yet appointed such a trustee. Thus, Plaintiff lacks standing to sue as successor-in-interest.
2. Breach of Contract Claim
Defendant next moves for summary judgment on Plaintiff's breach of contract claim. “[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811, 821, 124 Cal.Rptr.3d 256, 263 (2011) (citing Reichert v. Gen. Ins. Co., 68 Cal. 2d 822, 830, 69 Cal.Rptr. 321 (1968)). Defendant contends that Plaintiff cannot establish the second through fourth elements of a breach of contract claim. (Mot. at 7.)
a. Termination of the Policy
i. Plaintiff's Performance or Excuse for Nonperformance
It is undisputed that the Insured did not pay the premium due on August 17, 2011 by the due date (SAC ¶ 35), thus failing to perform under the contract. Therefore, in order to establish the second element of her breach of contract claim, Plaintiff must demonstrate an excuse for nonperformance.
First, Plaintiff argues that Insured's nonperformance should be excused because of Defendant material breach of its obligation to provide Notices of Payment Due before each due date, Reminder Notices when payment was not received, and notice of pending lapse or termination. (Opp'n at 9, 10.) The problem with that argument, however, is that Defendant was not contractually required to send notices. Nowhere in the contract did Defendant agree to send notices. Moreover, the Policy's explicit integration clause forecloses parol evidence. See A. Kemp Fisheries, Inc. v. Castle & Cooke, Inc., Bumble Bee Seafoods Div., 852 F.2d 493, 495 (9th Cir. 1988) (finding that if a contract is integrated-i.e., a complete and final embodiment of the terms of an agreement-parol evidence cannot be used to add to or vary its terms). Plaintiff also argues that Defendant assumed the obligation to send notices through a contract modification. The Policy, however, allows for modifications only if authorized in writing by one of the company's authorized officers, and there is no evidence in the record that any of Defendant's officers modified the contract in writing to assume a contractual obligation to send notices. Plaintiff contends that Defendant waived this written modification requirement when Defendant permitted the Insured to switch to direct billing from automatic withdrawals without getting authorization in writing. Setting aside whether one example is sufficient to constitute a waiver, the switch in billing methods was not a contract modification, as the contract never obligated the Insured to pay via automatic withdrawals in the first place. Thus, even after granting all reasonable inferences in Plaintiff's favor, the Court cannot find, based on the record, that Defendant waived the written modification requirement. Plaintiff's contract modification argument therefore fails.
Plaintiff's reliance on Stewart v. Life Insurance Company of North America, 388 F.Supp.2d 1138 (E.D. Cal. 2005), is inapposite. In Stewart, the court stated that Cal. Ins. Code § 500 required an insurer that has, as a regular course of conduct, sent renewal premium notices to an insured, and intends to discontinue that practice, to notify the insured of its intention not to send such notices. Here, Plaintiff has not alleged that Defendant intended to discontinue, or previously discontinued, sending notices, but rather that Defendant did not generate notices until the prior month's premium had been paid.
Second, Plaintiff argues that Defendant's acceptance of premiums after the due date constitutes waiver that should excuse her nonperformance. “To constitute a waiver there must be an existing right, a knowledge of its existence, and an actual intention to relinquish it, or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished.” Silva v. Nat'l Am. Life Ins. Co., 58 Cal.App.3d 609, 615, 130 Cal.Rptr. 211 (1976). Plaintiff contends that Defendant waived its right to timely payment because it always accepted payments made beyond the grace period, thus leading the Insured to reasonably believe it would never enforce the automatic forfeiture provision of the Policy. California courts have recognized that “a past course of conduct of acceptance by the insurer of payments of premiums after the grace period may establish a waiver by the insurer of the right to declare a forfeiture for failure to pay premiums exactly at the stipulated time.” McCary v. John Hancock Mut. Life Ins. Co., 236 Cal.App. 2d 501, 508, 46 Cal.Rptr. 121 (1965). Such a waiver is established when the insurer's prior conduct has reasonably led the insured to believe that payments made within a reasonable time after the grace period would be accepted. Id. Moreover, courts have generally applied this rule in favor of the insured: “[w]hether a waiver has occurred is usually a question of fact the determination of which, if supported by substantial evidence, will not be disturbed on appeal, unless the only inference which can be drawn from the evidence is to the contrary.” Id.
Here, Defendant twice accepted premiums that were paid after the due date-both times within the thirty-day automatic reinstatement period-over the course of a ten-year policy. Even when the facts are viewed in the light most favorable to Plaintiff, no reasonable jury could find that two instances of accepting a premium payment after the expiration of the grace period, but during the automatic reinstatement period, over the course of ten years would lead the Insured to reasonably believe that Defendant had relinquished its right to timely payments. See McCary, 236 Cal.App. 2d at 505 (waiver found where six of the twelve premiums due during the one-year period prior to the termination of the policy were paid and accepted by the defendant after the expiration of the 31-day grace period); Turner v. Redwood Mut. Life Ass'n of Fresno, 13 Cal.App. 2d 573, 579 (1936) (waiver found where only four of the monthly premiums made over the six-year duration of the policy were timely paid); Vinther v. Sunset Mut. Life Ins. Co., 11 Cal.App. 2d 118, 120 (1936) (waiver found where only the first out of eleven premium payments were paid on time and there was no grace period provision); Nelson, 131 Cal.App. 669, 671 (1933) (waiver found where at least seven payments prior to the last were made after the termination date). This is particularly true in this case where, in the first instance of late payment, the payment had been made within the grace period but was returned due to fraud issues with the Insured's bank, and where, in the second instance, Plaintiff actually believed the payment had been made within the grace period.
Because it is undisputed that Plaintiff failed to perform, and Plaintiff has not proffered sufficient evidence to establish a genuine issue of material fact with respect to an excuse for nonperformance, summary judgment is granted to Defendant on the breach of contract claim for terminating the Policy.
ii. Defendant's Breach
It is undisputed that the Insured did not perform when he failed to pay the August 17, 2011 premium payment. It is further uncontroverted that the Policy allowed for termination if a premium was not paid by the due date or within the applicable grace period. As discussed supra, Defendant did not waive this right. Thus, Defendant's termination of the Policy for failure to make a timely premium payment does not constitute a breach of contract.
Plaintiff argues, however, that Defendant was estopped from asserting the timely payment provision. The doctrine of equitable estoppel provides that “a person may not deny the existence of a state of facts if he intentionally led another to believe a particular circumstance to be true and to rely upon such belief to his detriment.” People v. Castillo, 49 Cal.4th 145, 156 n.10, 109 Cal.Rptr.3d 346 (2010). California courts have held that in order for equitable estoppel to apply, the following four elements must be met: “(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 has 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.” Id.
Plaintiff claims Defendant knew the Insured misunderstood which premium was due, and intentionally misled and failed to warn the Insured about amounts due and applicable grace periods because the Notice of Payment Due for the August 17, 2011 payment was not generated until August 23, 2011. (SAC ¶¶ 45-46.) No reasonable jury could conclude, however, that Defendant intended to mislead the Insured about which premium was due, when it was due, or how long the grace periods were. Notices are generated automatically upon payment of the previous month's premium payment. Here, the Notice for the August 17, 2011 payment was not generated until August 23, 2011, after the due date, because the Insured had failed to make the previous month's premium payment on time-not because Defendant intended to mislead the Insured into defaulting on his payments. Furthermore, the Notice clearly stated that the payment was due on August 17, 2011 and informed the Insured that the Policy would lapse if the payment was not made within the applicable grace period.
Nor can Plaintiff raise a genuine issue of triable fact that the Insured was ignorant of the true state of facts-i.e., that a payment had been due on August 17-when premium payments had been due on the 17th, whether payable annually, quarterly, or monthly, since the inception of the Policy ten years ago. Moreover, all of the Premium and Reminder Notices over the life of the policy contained the applicable due date and a warning that if payment was not received by the end of the grace period, the Policy would lapse. Finally, a reasonable factfinder could only conclude that the payment Insured made on August 16, 2011 was for the July 17, 2011 premium payment, given that Insured noted this fact on the Notice of Payment Due for the July 17, 2011 premium. (See Wilson Decl. ¶ 7, Exh. 6 (“August 7, 2011 Notice of Payment Due”); Wilson Decl. ¶ 4, Exh. 3 (Bennett Depo. at 67:15-68:5).)
Because Plaintiff has not proffered evidence sufficient to raise a genuine issue of material fact with respect to the second and third elements of estoppel, Defendant cannot be shown to have breached the contract in terminating the Policy. As a result, summary judgment is granted to Defendant on the breach of contract claim for terminating the Policy.
b. Denial of Reinstatement
Apart from the termination of the Policy, Plaintiff asserts Defendant's refusal to reinstate the Policy as a separate basis for her breach of contract claim. With respect to the Insured's performance, Bennett performed when he sought reinstatement within five years of the termination of the Policy. But to establish that Defendant breached the contract by failing to reinstate the Policy, Plaintiff must show (1) evidence of insurability satisfactory to a reasonable insurer, and (2) that Defendant's denial of reinstatement was arbitrary or capricious. BGI Life Inc. v. Am. Gen. Life Ins. Co., 581 Fed.Appx. 630, 632 (9th Cir. 2014).
Defendant claims it based its decision not to reinstate the Policy on new information in the Insured's medical records about his cardiovascular condition, which precluded the Insured from qualifying as insurable in the same risk class as before the termination. Viewing the facts in the light most favorable to Plaintiff, however, a reasonable jury could find that, despite his elevated calcium score, the Insured had provided “evidence of insurability satisfactory to a reasonable insurer.” Though the higher calcium score may have precluded the Insured from obtaining insurance at the same level as ten years prior when he first attained the Policy, nothing in the terms of the Policy indicates that reinstatement requires the Insured to be insurable at the same level as when the Policy was first obtained. Rather, the express terms of the Policy requires only evidence of “insurability” satisfactory to a reasonable insurer.
Moreover, Plaintiff has provided some evidence that Defendant did not act in accordance with its own procedures during the reinstatement process, raising a reasonable inference that Defendant acted in bad faith. Defendant decided to withdraw the Insured's request for a further medical examination, not to ask for any more medical records, not to refer the matter to a medical director for medical review, and not to complete the underwriting requirements. Drawing all reasonable inferences from these facts in favor of the non-moving party, the Court finds that there is a triable issue of fact as to whether Defendant acted unreasonably in failing to review the Insured's reinstatement application thoroughly before denying it.
As a result, summary judgment is DENIED as to the claim that Defendant breached the contract when it declined to reinstate the Policy.
3. Breach of the Covenant of Good Faith and Fair Dealing
Plaintiff claims that Defendant breached the implied covenant of good faith and fair dealing when it terminated the Policy and refused to reinstate the Policy.
In every insurance contract is an implied covenant of good faith and fair dealing that neither party will do anything that will injure the right of the other to receive the benefits of the agreement. See Amadeo v. Principal Mut. Life Ins. Co., 290 F.3d 1152, 1158 (9th Cir. 2002). “The responsibility of the insurer to act in good faith ‘is not the requirement mandated by the terms of the policy itself' but is imposed by law, breach of which sounds in tort notwithstanding that the denial of benefits may also constitute breach of the contract.” Id. (citing Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 108 Cal.Rptr. 480, 510 P.2d 1032 (1973)). “In the context of an insurance policy, [t] he terms and conditions of the policy define the duties and performance to which the insured is entitled.” Kransco v. Am. Empire Surplus Lines Ins. Co., 23 Cal.4th 390, 400, 97 Cal.Rptr.2d 151, 2 P.3d 1 (2000) (citation and internal quotation marks omitted).
Under California law, a breach of the implied covenant of good faith and fair dealing in the insurance context has two elements: “(1) benefits due under the policy must have been withheld, and (2) the reason for withholding benefits must have been unreasonable or without proper cause.” Love v. Fire Ins. Exchange, 221 Cal.App.3d 1136, 1151, 271 Cal.Rptr. 246 (1990). Liability for breach of the implied covenant turns on whether the insurer's alleged refusal or delay was unreasonable. See Chateau Chamberay Homeowners v. Associated Int'l Ins. Co., 90 Cal.App.4th 335, 346, 108 Cal.Rptr.2d 776 (2001). “[T]he precise nature and extent of the duty imposed by [the] implied promise will depend on the contractual purposes, and therefore if there is no potential for coverage under the policy, a claim for bad faith cannot be brought.” Amadeo, 290 F.3d at 1158 (internal citation and quotation marks omitted).
As discussed supra, Plaintiff's claim for breach of contract on the basis of the termination of the Policy does not survive summary judgment, but her claim for breach of contract on the ground that Defendant wrongly failed to reinstate the Policy remains. Thus, there is potential for coverage under the policy, and Plaintiff may bring a claim for bad faith. Moreover, as discussed above, the Court has found, based on evidence proffered by Plaintiff, that there is a triable fact as to whether Defendant acted in bad faith when it failed to act in accordance with its own reinstatement review procedures when it denied reinstatement of the Policy.
Defendant's motion for summary judgment on the breach of the implied covenant claim therefore is GRANTED to the extent it is premised on the termination of the Policy, but DENIED insofar as it is based on the denial of Policy reinstatement .
D. Plaintiff's Motion for Partial Summary Judgment
For the same reasons that Defendant is entitled to partial summary judgment as to Plaintiff's claims for breach of contract, Plaintiff is not. Accordingly, Plaintiff's motion for partial summary judgment is DENIED as to these claims.
For the reasons discussed supra, Plaintiff has raised a genuine dispute of material fact as to whether Defendant breached the contract when it refused to reinstate the Policy. Viewing the evidence in the light most favorable to Defendant does not alter this result. On the other hand, a reasonable jury could conclude that the Insured was uninsurable at the time he applied for reinstatement. Because a genuine dispute of material fact exists on this issue, Plaintiff's motion for partial summary judgment is DENIED as to the claims predicated on the theory that a contract breach occurred when Defendant refused to reinstate the Policy.
IV.
CONCLUSION
In light of the foregoing:
1. Defendant's motion for partial summary judgment is GRANTED as to Plaintiff's claim for breach of contract based on the termination of the Policy but DENIED as to Plaintiff's claim for breach of contract based on Defendant's denial of reinstatement;
2. Defendant's motion is otherwise DENIED; and
3. Plaintiff's motion for partial summary judgment is DENIED.
IT IS SO ORDERED.