Opinion
NOT TO BE PUBLISHED
Contra Costa County Super. Ct. No. C05-01687
Pollak, J.
Plaintiff Patricia Mackey challenges the dismissal of her complaint seeking a declaration that she is entitled to the benefits of a life insurance policy issued by defendant American General Life Insurance Company (American General) on the life of her deceased husband. We conclude the court properly granted summary judgment dismissing the complaint.
FACTS AND PROCEDURAL BACKGROUND
At age 65, Douglas Mackey purchased a term life insurance policy from American General with a death benefit of $54,000. His wife Patricia was named as sole beneficiary. The policy was issued on May 1, 1988, with an original termination date of May 1, 1998. The policy granted Douglas, as the owner of the policy, an “exchange privilege” giving him the right, until he reached “Policy Age 75” on May 1, 1998, to convert the term policy to a permanent policy upon written application and payment of the required premium.
Because the Mackeys share the same family name, we refer to them by their given names.
Approximately two years before the end of the initial 10-year term, Douglas obtained an endorsement to the term policy effective May 1, 1996. The endorsement extended the term of the policy to May 1, 2003, the policy anniversary nearest the insured’s 80th birthday. The endorsement noted, however, that the time within which to apply for a new permanent policy was unchanged: “The Owner will continue to be entitled to exercise the Exchange Privilege of the policy until the policy anniversary nearest the insured’s 75th birthday.” The term policy contained no provision requiring American General to provide additional written notice to the insured before expiration of the exchange privilege. Douglas never requested to exercise the exchange privilege.
The final premium on the term policy was paid in October 2002, which extended coverage through May 1, 2003. Shortly before the term policy was due to expire, American General sent Douglas a letter, dated March 26, 2003, notifying him that the coverage provided by the term policy contract would expire on May 1, 2003. The letter also stated: “Our company has an ongoing interest in your financial security and has various products to meet the needs of you and your family. This may be the ideal opportunity to review your insurance program, including any conversion privilege that may be available at this time. [¶] We appreciate the confidence you have shown in us and we thank you for your business. If you have any questions, please contact our Customer Service Center . . . or your Servicing Agent or Agency,” the State Bar of California. Patricia did not know whether her husband received this letter but acknowledged at her deposition that if the letter had been sent to her husband, she probably would not have been aware of it. Douglas died on August 22, 2003.
On August 10, 2005, Patricia filed a complaint on a Judicial Council form asserting a cause of action for “declaratory relief” but requesting damages in the amount of the death benefit of $54,000. She alleged that American General refused to pay her the death benefit under the policy on the ground that the policy had expired. After answering the complaint and conducting limited discovery, American General moved for summary judgment, contending that the policy had terminated before the insured’s death.
On appeal, American General argues for the first time that the summary judgment should be affirmed on the ground that Patricia’s claim for declaratory relief may not be granted because she is seeking a declaration regarding “past wrongs.” While we agree that declaratory relief is not appropriate, despite the designation of the cause of action the complaint prays for damages of $54,000 allegedly due under the policy. Dismissal of the complaint on the ground that declaratory relief does not lie is not warranted. (See Slobojan v. Western Travelers Life Ins. Co. (1969) 70 Cal.2d 432, 435-436.)
Patricia did not dispute the provisions of the term policy or its termination before the death of her husband. She opposed the motion on the sole ground that American General “had a duty to notify” the insured in advance of the expiration of the exchange privilege, which was “a question of custom and practice in the industry and is a matter of good faith which is written into every policy of insurance.” In support she submitted a declaration by Mark Colbert, assertedly an expert in the field of life insurance, who expressed the following opinion: “It is not unusual for a term life insurance policy to have a ‘Guaranteed Right of Exchange or Conversion Privilege’ whereby it can be converted from term to permanent (Whole or Universal Life) by a certain time, or that the privilege will be lost when the insured reaches a certain age. It is custom and practice in the industry, however, that a notice will be sent some weeks or months prior to the insured’s reaching said age, alerting the insured to the fact that the privilege will be lost if the insured chooses not to convert the policy. This is especially important in the case of these Exchange Privileges in that they normally involve elderly people with failing memories and abilities.”
Patricia also submitted her own declaration in which she stated that her husband believed the term policy was in full force and effect before his death, and had previously told her the policy would be payable on his death. She asserted, “We had not received any warning in the weeks or months prior to the event that the ‘Guaranteed Right of Exchange or Conversion Privilege’ was in danger of being lost by lapse of time, and we did not discuss that event although we did discuss such matters as a matter of course; on information and belief neither of us recognized that the cut-off date was approaching or had passed.” She noted that although her husband had been an attorney, he had no expertise in the area of insurance law.
In reply, American General argued that no policy provision required it to remind the insured that the exchange privilege would expire and that, to the extent plaintiff was asserting a breach of the duty of good faith and fair dealing, American General had no extra-contractual duty to provide a reminder notice. American General also filed objections to the declarations of Colbert and Patricia. It argued that Colbert’s declaration contained insufficient facts to establish his qualifications as an expert in life insurance and that Patricia’s statements were inadmissible hearsay.
After taking the matter under submission, the trial court granted American General’s motion for summary judgment. The court found that “[t]he undisputed facts establish that the subject term life insurance policy expired by its own terms on May 1, 2003,” and that “American General had no legal or contractual duty to notify Douglas Mackey in 1998 of the impending expiration of the exchange provision in the subject term life insurance policy.” The court also sustained American General’s objections to the declarations of Colbert and Patricia. A judgment of dismissal was then entered and Patricia filed a timely notice of appeal.
DISCUSSION
“Summary judgment is an appropriate vehicle to determine coverage under an insurance policy when it appears there is no material issue of fact to be tried and the sole issue before the court is one of law.” (Pepper Industries, Inc. v. Home Ins. Co. (1977) 67 Cal.App.3d 1012, 1017.) We review the trial court’s decision de novo. (Id. at p. 1018.)
Patricia argues that the trial court erred in refusing to consider Colbert’s declaration which, she asserts, establishes a duty of the insurer to give advance notice of the expiration of the exchange privilege. She argues extensively that the trial court abused its discretion in rejecting Colbert’s qualifications. We shall assume without deciding that Colbert’s background and experience in the insurance industry were sufficient to permit him to testify to customs and practices in the field of life insurance. Consideration of his opinion, however, does not affect the conclusions reached by the trial court.
In order to prevail on the theory that the insurer failed to observe a custom of the industry, the insured “must establish . . . not only that such a custom exists, but also that such custom has the binding force of a contract.” (Hanley v. Marsh & McLennan, etc., Ltd. (1941) 46 Cal.App.2d 787, 797.) “In the absence of such . . . proof, it is quite clear that whether such a custom exists or not is immaterial. Unless it had the binding force of a contract, such a custom would lie in the field of ethics and not in the field of contracts.” (Id. at pp. 797-798.) The term policy in this case contains no provision requiring the insurer to give advance notice of the expiration of the exchange privilege. Colbert did not state that any terms of the American General policy are understood within the industry to obligate the insurer to give such notice, nor did he or could he opine that the policy should be interpreted contrary to the plain meaning of its terms. Whether the policy’s provisions encompass a requirement for advance notice of the impending expiration of the exchange privilege is a question of contractual interpretation for the court “about which expert opinion testimony is inappropriate.” (Cooper Companies v. Transcontinental Ins. Co. (1995) 31 Cal.App.4th 1094, 1100.)
Patricia’s position is that although no provision of the policy requires that notice be given that the exchange privilege is about to expire, “such a requirement is written into the policy as a matter of law.” She cites no authority for this proposition, and Colbert’s assertion that it is customary to give such notice provides none. “[U]sage and custom may be introduced as an instrument of interpretation but may not be used to create a contract.” (Hanley v. Marsh & McLennan, etc., Ltd., supra, 46 Cal.App.2d at p. 798.) “[C]ustom and usage is only an instrument of contractual interpretation [citations], which may not be used to create a contract.” (Hayward Tamkin & Co. v. Carpenteria Inv. Co. (1968) 265 Cal.App.2d 617, 623, citing Ghiselin v. John Hancock etc. Ins. Co. (1947) 79 Cal.App.2d 438, 441 & Peiser v. Mettler (1958) 50 Cal.2d 594, 610.) Nor can such a contractual duty be found in the covenant of good faith and fair dealing. “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made. [Citations.] The covenant . . . cannot ‘ “be endowed with an existence independent of its contractual underpinnings.’ ” [Citations.] It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350; see also Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 461-462 [insurer’s obligation to pay claim not altered by alleged industry practice of awaiting conclusion of pending workmen’s compensation proceeding before paying or denying claim].)
Even if a requirement of advance notice of the expiration of the exchange privilege could be implied, the insurer’s failure to give such notice would not extend the insurance coverage, but would only extend the time within which the insured could exercise the exchange privilege. (See Daniels v. Equitable Life Assurance Society (1981) 123 Cal.App.3d 467, 471-473.) But the right to exercise the exchange option expired upon Douglas’s death and could not be invoked by the beneficiary to recover benefits under the lapsed term policy. (Id. at p. 474.) “Were the rule otherwise, no element of risk would be involved—a concept completely at variance with the nature of insurance as protection against risk. Also, a contrary rule would permit abuse against which there would be little if any defense. To illustrate, assume Lawyer ‘A’ has a $100,000 life insurance policy with a state bar plan; during his life the insurance company offers a conversion privilege whereby anyone in the plan, for an additional premium and by notifying the company, may convert to an increased amount, e.g., $500,000 without additional medical examination; the conversion period is to be open until April 1 of the same year; ‘A’ dies on March 1 without making an election to convert or evidencing any intent to do so. Can his widow compel the insurance company to pay $500,000 instead of $100,000 by claiming merely that ‘A’ intended to or was going to so elect, and therefore, she should have the right to make such election in his place? It does not take much imagination to realize that such claims would be made in every case where a member of such group insurance plan died without making such an election under a limited conversion program.” (Ibid.)
Patricia contends that her own declaration raises a triable issue of fact as to whether her husband would have exercised his right to convert the policy if he had been given advance notice of the expiration of the exchange privilege. She ignores the trial court ruling, sustaining American General’s objections to her declaration. In the absence of any argument that the trial court erred in striking her assertions, Patricia cannot now rely upon them to raise a triable issue of fact. Moreover, even if considered, the assertions would not raise a triable question of material fact. “Whether a party had a reasonable expectation of coverage is an issue of law, not one of fact.” (Schrillo Co. v. Hartford Accident & Indemnity Co. (1986) 181 Cal.App.3d 766, 776; see Suarez v. Life Ins. Co. of North America (1988) 206 Cal.App.3d 1396, 1406.) In evaluating this issue, “[a] party’s subjective intent cannot be used to create an ambiguity or a material factual issue.” (Havstad v. Fidelity National Title Ins. Co. (1997) 58 Cal.App.4th 654, 661.) The term policy unambiguously provided that it would pay death benefits only while the policy was in force. Consequently, Patricia’s assertions regarding her husband’s subjective belief that the policy was in force and would provide benefits upon his death were immaterial. (Pacific Indemnity Co. v. Fireman’s Fund Ins. Co. (1985) 175 Cal.App.3d 1191, 1203.)
Patricia contends that her husband “never practiced in the area” and had no “special expertise” in insurance law, but that assertion also fails to raise a triable issue. “It is a general rule that the receipt of a policy and its acceptance by the insured without an objection binds the insured as well as the insurer and [the insured] cannot thereafter complain that he did not read it or know its terms. It is a duty of the insured to read his policy.” (Taff v. Atlas Assur. Co. (1943) 58 Cal.App.2d 696, 703; see Clement v. Smith (1993) 16 Cal.App.4th 39, 45 [“an insured cannot remain intentionally ignorant of the terms of his or her policy”]; Hertz Corp. v. Home Ins. Co. (1993) 14 Cal.App.4th 1071, 1075, fn. 2 [“when a policy contains sufficiently clear language, it matters not that the insured in fact failed to read it”].) Patricia proffered no evidence from which a jury could reasonably infer that her husband did not know or had no reason to know the dates of the expiration of the exchange privilege and the termination of the policy. Nor did she proffer evidence that her husband’s failure to apply for the exchange privilege was attributable to the conduct of American General or its agents. She presented no evidence that American General or its agents misled the insured or misrepresented the nature of the term insurance coverage, the exchange privilege, or the expiration date after which he was precluded from exercising the exchange privilege. And, there is no proffered evidence that American General or its agents knew or should have known that the insured would not examine or be familiar with the terms of his policy. (Taff v. Atlas Assur. Co., supra, at p. 703.)
Because Douglas’s term policy expired before his death, no statutory or contractual basis exists upon which to predicate a recovery in favor of Patricia as the beneficiary under the policy. Patricia failed to raise any issue of material fact warranting a trial. The court below properly granted summary judgment in favor of American General.
DISPOSITION
The judgment is affirmed.
We concur: McGuiness, P. J., Siggins, J.