In determining whether there has been a modification of the terms of the policy by subsequent agreement, or a waiver of the forfeiture incurred by the nonpayment of the premium on the day specified, the test is whether the insurer, by his course of dealing with the insured, or by the acts and dealings of his authorized agents, has induced in the mind of the insured an honest belief that the terms and conditions of the policy, declaring a forfeiture in event of nonpayment on the day and in the manner prescribed, will not be enforced, but that payment will be accepted on a subsequent day or in a different manner; and when such belief has been induced, and the insured has acted on it, the insurer will be estopped from insisting on the forfeiture." [ Pastucha v Roth, 290 Mich. 1, 9; 287 N.W. 355 (1939), quoting Wallace v Fraternal Mystic Circle, 121 Mich. 263, 269; 80 N.W. 6 (1899).] Therefore, for equitable estoppel to apply, plaintiff must establish (1) that the defendant's acts or representations induced plaintiff to believe that the policy was in effect at the time of the accident, (2) that the plaintiff justifiably relied on this belief, and (3) that plaintiff was prejudiced as a result of his belief that the policy was still in effect.
The doctrine of estoppel or waiver has been used in this state to defeat an insurer's claim that the insured forfeited his policy for nonpayment of a premium. In Pastucha v Roth, 290 Mich. 1, 9; 287 N.W. 355 (1939), our Supreme Court, citing Staffan v Cigarmakers' International Union of America, 204 Mich. 1, 7-8; 169 N.W. 876 (1918), stated: "We are of opinion that the facts in this case bring it clearly within the rule laid down in Wallace v Fraternal Mystic Circle, 121 Mich. 263, 269 [80 N.W. 6 (1899)], wherein we quoted with approval the following:
Nevertheless, plaintiff's argument stems from the doctrine of waiver, which states that the payment of past due premiums extends a policy purchased before loss beyond the lapse date when the payment was accepted by the insurer in a manner that induces the insured to believe he is still covered. Pastucha v Roth, 290 Mich 1, 9-10; 287 NW 355 (1939); Glass v Harvest Life Ins Co, 168 Mich App 667, 670; 425 NW2d 107 (1988). In explaining the doctrine, one Court noted, "[a]n insurer which unconditionally accepts a premium with knowledge of a loss may be found to have waived its right to assert the policy lapse."
Grosse Pointe Park, 473 Mich at 204. In Morales, our Supreme Court held that an insurance company may not rely on a policy provision where its failure to previously enforce the provision "'induced in the mind of the insured an honest belief that the [relevant] terms and conditions of the policy . . . [would] not be enforced[.]'" 458 Mich at 298, quoting Pastucha v Roth, 290 Mich 1, 9; 287 NW 355 (1939) (citations omitted). In Pastucha, the Court held that by accepting late premium payments in the past, the defendant-insurer waived its right to later decline coverage on the grounds of that the plaintiff did not timely pay his premium.
Among the jurisdictions following this interpretation are Florida, (Malone v. Costa, 151 Fla. 144, 9 So.2d 275 (1942), New Jersey, (Nuzzi v United States Casualty Co, 122 N.J.L. 249, 1 A.2d 890 (1938), New York, (Goodier v. National Surety Co, 125 Misc. 65, 210 N.Y.S 88 (1925), (Bakker v. Aetna Life Insurance Co (1933), 148 Misc. 162, 265 N.Y.S 231, affd 240 App. Div. 880, 267 N.Y.S 956, affd 264 N.Y. 150, 190 N.E. 327, Gaouette v. Aetna Life Ins Co, 253 App. Div. 388, 2 N.Y.S.2d 497 (1938) * * *. "A Michigan case cited by defendants, Pastucha vRoth, 290 Mich. 1 [ 287 N.W. 355] (1939), held that a limitation of `bodily injury liability' applied to the aggregate amount of both injured son's recovery and the father's claim for expenses. One limit per son was allowed.
This notion gains particular force when viewed in light of the hackneyed but oft-quoted judicial maxim that the language of an insurance policy should be strictly construed against the writer and the policy should be interpreted in favor of the insured. Hilburn v Citizens' Mutual Automobile Ins Co, 339 Mich. 494; 64 N.W.2d 702 (1954); Pastucha v Roth, 290 Mich. 1; 287 N.W. 355 (1939). The Wisconsin Supreme Court has stated the proposition well:
It is also well-settled that an insurer may be bound by the acts of a duly-authorized agent acting within the scope of his or her authority. See Pastucha v Roth, 290 Mich. 1, 11-12; 287 N.W. 355 (1939) (an insurer's general agent has the authority to waive strict conditions); Dobranski v Lincoln Mut Cas Co, 275 Mich. 1, 7; 265 N.W. 507 (1936) (agent only had authority to bind insurer because insurer granted agent the power to do so); Rice v Fidelity & Cas Co of New York, 250 Mich. 398, 400-402; 230 N.W. 181 (1930) (evidence that insurer's authorized agent represented to insured that the policy had been renewed was sufficient to bind insurer); cf. House v Billman, 340 Mich. 621, 626-627; 66 N.W.2d 213 (1954) (agent had limited authority and could not waive conditions stated in the policy).
Since the notice provision is for the protection of the insurer, Exo v. Detroit Automobile Inter-Insurance Exchange, 259 Mich. 578; 244 N.W. 241 (1932), it follows that the insurer can waive the adequacy of the notice. Pastucha v. Ross, 290 Mich. 1; 287 N.W. 355 (1939), see Anno: Liability insurance: clause with respect to notice of accident or claim, etc., or with respectto forwarding suit papers, 28 ALR2d 443, 487. [95 Mich. App. 130.] We believe that a similar principle should apply to the case at bar.
Since the notice provision is for the protection of the insurer, Exo v Detroit Automobile Inter-Insurance Exchange, 259 Mich. 578; 244 N.W. 241 (1932), it follows that the insurer can waive the adequacy of the notice. Pastucha v Ross, 290 Mich. 1; 287 N.W. 355 (1939), see Anno: Liability insurance: clause with respect to notice of accident or claim, etc., or with respect to forwarding suit papers, 18 ALR2d 443, 487. Defendant's letter of March 9, 1977, appeared to acknowledge its liability, or at least did not dispute it. While we do not conclude that defendant must establish prejudice in order to require strict enforcement of the notice provision, compare, Wendel v Swanberg, 384 Mich. 468; 185 N.W.2d 348 (1971), we note that all of the purposes for which statutory notice is intended have been either met or waived in the instant case. Accordingly, the lower court's judgment of no cause of action in favor of defendant should be reversed and plaintiffs' complaint reinstated for a decision on the merits.
Rather, this is a case dealing with: * * * the effect of the failure to pay the premium when due. . . .Allstate Ins. Co. v. Snarski, 435 N.W.2d 408, 411-12 (Mich.App. 1988) (discussing Pastucha v. Roth, 287 N.W. 355 (Mich. 1939) (citing, inter alia, Jones v. Preferred Bankers' Life Ass. Co., 79 N.W. 204 (Mich. 1899))).Cf.