Opinion
B200379
8-8-2008
ANTON AMBROSE, Plaintiff and Appellant, v. FARMERS NEW WORLD LIFE INSURANCE COMPANY, Defendant and Respondent.
Niddrie, Fish & Buchanan, Martin N. Buchanan; Girardi & Keese, Thomas V. Girardi and Keith D. Griffin for Plaintiff and Appellant. Fulbright & Jaworski, Peter H. Mason and Ryan T. McCoy for Defendant and Respondent.
Not to be Published
Dr. Anton Ambrose sued Farmers New World Life Insurance Company (Farmers) for breach of contract and related claims. He alleged that Farmers failed to pay him the full $500,000 death benefit to which he was entitled when his wife, Beulah Ambrose, passed away after her life insurance application was approved but before her policy was formally issued and delivered. Farmers moved for summary judgment, arguing that a provision in Mrs. Ambroses life insurance application limited Farmers liability to $50,000 if Mrs. Ambrose died before issuance and delivery of her policy. The trial court granted Farmers motion and entered judgment against Dr. Ambrose. We reverse.
BACKGROUND
On November 16, 2004, Mrs. Ambrose signed part one of an application for $500,000 of term life insurance with Farmers at the office of Farmers insurance agent Nick Mascis. The application named her husband, Dr. Ambrose, as the primary beneficiary. At the same time, Mascis collected from Mrs. Ambrose the first premium payment on the policy for which she was applying. Mrs. Ambrose completed and signed part two of her application on November 24, 2004.
The signature page of part one of the application included the following provisions under the heading "Temporary Insurance Agreement": "If the Temporary Insurance Eligibility Question is answered `Yes, Temporary Insurance coverage is not available to any person named in this Application for Life Insurance. No premium may be collected and no insurance coverage is in force until and unless a policy has been issued and the first premium has been paid. [¶] I (we), as Policy Owner(s), understand and agree that Temporary Insurance coverage is limited to $50,000 or the amount applied for (excluding Accidental Death Benefit), whichever is less, and that this limitation applies to the Primary Proposed Insured and Additional Proposed Insured named in this Application for Life Insurance and any children to be covered under a Childrens Insurance Rider. [¶] If the Primary Proposed Insured, Additional Proposed Insured, and children to be covered under a Childrens Insurance Rider, named in this Application for Life Insurance, meet the eligibility requirements for temporary coverage, as listed on page 9 of this Application for Life Insurance, (we) acknowledge that I (we) have received a copy of the Temporary Insurance Agreement which outlines the terms and conditions of coverage." Mrs. Ambrose answered "No" to the "Temporary Insurance Eligibility Question," meaning that she was medically eligible for temporary insurance.
By answering "No," Mrs. Ambrose stated that in the last two years she had not received any treatment or medication for, or been diagnosed as having any kind of, cancer or tumor, stroke, drug or alcohol dependency, or any disease or disorder of the heart, liver, or kidney.
The "Temporary Insurance Agreement" (TIA) provides that, if age and medical eligibility requirements are met, the coverage takes effect when the applicant signs the application and submits the initial premium. The TIA further provides (subject to certain qualifications that are not relevant here) that coverage ends when either "the life insurance policy takes effect," the applicant receives notice that the application has been declined, or the applicant cancels the application.
Farmers underwriter approved Mrs. Ambroses application on December 21, 2004. The application was then sent to Farmers policy issuance department, which issued the policy on December 27, 2004. On December 26, 2004, after her application was approved but before her policy was issued, Mrs. Ambrose died in the tsunami that struck Sri Lanka.
Farmers took the position that because the policy had not been issued when Mrs. Ambrose died, she was covered only by the TIA, which was limited to $50,000. On August 8, 2005, Farmers tendered to Dr. Ambrose a check for $51,181.41, representing the $50,000 benefit under the TIA plus interest and a premium refund. Dr. Ambrose never cashed or deposited the check.
On December 6, 2005, Dr. Ambrose filed suit against Farmers and Mascis, claiming that he was entitled to the full $500,000 death benefit under the policy for which Mrs. Ambrose applied and was approved. The operative first amended complaint alleges claims for breach of contract, breach of the covenant of good faith and fair dealing, fraud, intentional and negligent infliction of emotional distress, and negligence. Farmers moved for summary judgment, arguing inter alia that it had fully performed its obligations under the TIA and had paid Dr. Ambrose all of the benefits to which he was entitled.
The trial courts docket reflects that Dr. Ambrose dismissed his claims against Mascis without prejudice on January 18, 2007.
The trial court granted Farmers motion and entered judgment against Dr. Ambrose on all claims. The court concluded that because of the $50,000 limitation on the signature page of part one of Mrs. Ambroses application, Dr. Ambrose was not entitled to the full $500,000 death benefit. Dr. Ambrose timely appealed.
STANDARD OF REVIEW
We review the trial courts ruling on a motion for summary judgment de novo. (Buss v. Superior Court (1997) 16 Cal.4th 35, 60.)
DISCUSSION
Dr. Ambrose argues on appeal that the $50,000 limitation applies only to the TIA, not to the mandatory full coverage to which Mrs. Ambrose was entitled pursuant to Insurance Code section 10115 once her application was approved. We agree that the $50,000 limitation applies only to the TIA, not to the mandatory coverage under section 10115.
All subsequent statutory references are to the Insurance Code.
Section 10115 provides as follows: "When a payment is made equal to the full first premium at the time an application for life insurance other than group life insurance is signed by the applicant and either (1) the applicant received at that time a receipt for said payment on a form prepared by the insurer, or (2) in the absence of such a receipt the insurer receives the said payment at his home office, branch office, or the office of one of its general agencies, and in either case the insurer, pursuant to its regular underwriting practices and standards, approves the application for the issuance by it of a policy of life insurance on the plan and for the class of risk and amount of insurance applied for, and the person to be insured dies on or after the date of the application, on or after the date of the medical examination, if any, or on or after any date specially requested in the application for the policy to take effect, whichever is later, but before such policy is issued and delivered, the insurer shall pay such amount as would have been due under the terms of the policy in the same manner and subject to the same rights, conditions and defenses as if such policy had been issued and delivered on the date the application was signed by the applicant. The provisions of this section shall not prohibit an insurer from limiting the maximum amount for which it may be liable prior to actual issuance and delivery of the policy of life insurance either to (1) an amount not less than its established maximum retention, or to (2) fifty thousand dollars ($50,000), if a statement to this effect is included in the application."
By its terms, section 10115 provides for mandatory full coverage in certain circumstances, i.e., "when a prospective insured makes a first premium payment concurrently with the submittal of an insurance application and either receives a form receipt for the premium or the insurer receives the payment at its home office, and the insurer approves the application for the class of risk and amount applied for, [and] the applicant dies on or after the date of the application" but before the policy is issued and delivered. (Hodgson v. Banner Life Ins. Co. (2004) 124 Cal.App.4th 1358, 1372.) The insurer can limit its liability to $50,000, however, "if a statement to this effect is included in the application." (§ 10115.)
Dollar amounts aside, the coverage mandated by section 10115 is distinct from coverage under an express agreement for temporary insurance. Coverage under section 10115 is triggered whenever the statutory requirements are met, even if the insurer does not expressly offer any temporary insurance at all. Conversely, if the insurer does expressly offer temporary insurance, its requirements may differ from the requirements for mandatory coverage under section 10115. (Cf. Hodgson v. Banner Life Ins. Co., supra, 124 Cal.App.4th at pp. 1372-1373 [when mandatory coverage is triggered under section 10115, "[t]his obligation is imposed by law" and is independent of the parties contract-based "reasonable expectation"].)
The terms of the TIA in this case illustrate the point. Section 10115 provides coverage only if the application is approved for the class of risk and amount applied for; the TIA provides coverage even if the application is ultimately declined. The TIA provides coverage only if the applicant is more than 15 days and less than 70 years old when the application is signed; section 10115 includes no such limitation. The TIA provides coverage only if the applicants medical history meets certain requirements; again, section 10115 includes no such limitation. For all of these reasons, applicants can be covered by either the TIA, the mandatory coverage under section 10115, or both, depending on the circumstances.
For example, an applicant who in the last two years has received treatment or medication for any disease or disorder of the heart, liver, or kidney is ineligible for coverage under the TIA. (See footnote 1, ante.) But no evidence in the record indicates that such an applicant could not apply for life insurance, be approved, and thus be subject to mandatory coverage under section 10115.
Farmers concedes that "the undisputed facts of this case satisfy the requirements for mandatory coverage under [s]ection 10115." By statute, Mrs. Ambrose was consequently entitled to the full $500,000 of coverage for which she applied and was approved, just "as if [her] policy had been issued and delivered" (§ 10115), unless Farmers limited its liability.
The question before us, then, is whether the $50,000 limitation on the signature page of part one of Mrs. Ambroses application applies to the TIA, the statutorily mandated coverage under section 10115, or both. We conclude that it applies to the TIA alone.
The interpretation of an insurance policy is a question of law, which we review de novo. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18; Brodkin v. State Farm Fire & Casualty Co. (1989) 217 Cal.App.3d 210, 216.) We see no way of reading the $50,000 limitation as applying to the mandatory coverage under section 10115. The limitation appears under the heading "Temporary Insurance Agreement." It provides that the applicant "understand[s] and agree[s] that Temporary Insurance coverage is limited to $50,000 or the amount applied for . . ., whichever is less." The next sentence refers the applicant to "the Temporary Insurance Agreement which outlines the terms and conditions of coverage." By its plain language, then, the limitation applies only to the "Temporary Insurance" that is provided under the terms of the "Temporary Insurance Agreement."
Farmers arguments for a contrary conclusion are not persuasive. Farmers supplemental brief on the issue says nothing about the language of the limitation or how it could be interpreted as applying not only to the TIA but also to the mandatory coverage under section 10115. Instead, Farmers asserts that the $50,000 limitation "complied with [s]ection 10115." The assertion is true but irrelevant. The $50,000 limitation certainly does comply with section 10115, in that it does not violate section 10115—section 10115 does not prohibit an insurer from offering temporary insurance on whatever terms the insurer chooses, including a $50,000 limitation on the death benefit. But Farmers use of such a limitation in its TIA does not show that the limitation also applies to the mandatory coverage under section 10115. It does not, under any reasonable reading of the limitations language.
Farmers also argues that because both the TIA and section 10115 provide coverage during the period from approval of the application to issuance of the policy, the $50,000 limitation applies to both the TIA and section 10115. That inference is invalid. Although the time periods covered by the TIA and section 10115 do overlap, it does not follow that the $50,000 limitation applies to both the TIA and the mandatory coverage under section 10115. Rather, the limitation could apply to either the TIA, the mandatory coverage under the statute, or both. By its express terms—which Farmers never discusses—the limitation applies to the TIA alone.
If Farmers wishes to limit its liability under section 10115 to $50,000, then Farmers must inform its applicants that that is what it is doing. (§ 10115 [mandatory coverage can be limited to $50,000 "if a statement to this effect is included in the application"].) That is, Farmers must state in the application that if the applicant dies before the policy is issued and delivered, then coverage is limited to $50,000 even if the application is approved. Because Farmers has not done so, it has not limited its liability under section 10115.
To summarize: (1) The undisputed facts establish that Mrs. Ambrose met the requirements for mandatory coverage in the full amount of $500,000 under section 10115; (2) as a matter of law, the $50,000 limitation on the signature page of part one of Mrs. Ambroses application applied to the TIA alone and not to the mandatory coverage under section 10115; and (3) the undisputed facts establish that Farmers did not pay Dr. Ambrose the full $500,000 death benefit. The trial court therefore erred when it concluded that the undisputed facts showed Farmers had paid Dr. Ambrose all of the benefits to which he was entitled. Because the remainder of the trial courts reasoning rested on that faulty conclusion, the judgment must be reversed in its entirety on that basis alone. It is therefore unnecessary for us to address the parties other arguments.
We decide only that the trial court erred when it concluded that Farmers had paid Dr. Ambrose all of the benefits to which he was entitled. We express no opinion on the other arguments that Farmers advanced in the trial court concerning Dr. Ambroses various causes of action (e.g., that the claim for intentional infliction of emotional distress fails because there is no evidence of outrageous conduct), and Farmers remains free on remand to move for summary judgment or summary adjudication on those grounds or others.
DISPOSITION
The judgment is reversed. Appellant shall recover his costs of appeal.
We concur:
MALLANO, P. J. NEIDORF, J.