Summary
In Glass v Harvest Life Ins Co, 168 Mich. App. 667, 670; 425 N.W.2d 107 (1988), the decedent's brother directed his wife, after the decedent's death, to mail a predated check to the defendant insurer in order to cover a late life insurance premium.
Summary of this case from Liberty Mutual Insurance v. Michigan Catastrophic Claims Ass'nOpinion
Docket No. 89082.
Decided February 3, 1988.
Bauckham, Reed, Lang, Schaefer, Sparks Rolfe, P.C. (by Philip D. Schaefer and Lynda E. Thomsen), for plaintiff.
Foster, Swift, Collins Coey, P.C. (by James D. Adkins), for defendant.
This case arises out of a life insurance policy issued by defendant Harvest Life Insurance Company to Ronnie Glass, now deceased, as the insured, naming his wife, plaintiff Gayle Glass, as the beneficiary. The policy was issued on February 5, 1981, with annual premiums due on February 7. The policy provided for a grace period of thirty-one days after the premium due date. If the insured died during the grace period, the proceeds were still payable. If the premium was not paid by the end of the grace period, the policy was to be terminated as of the premium due date.
In 1984, the decedent failed to remit his annual premium. Following expiration of the grace period, defendant sent a letter to the decedent explaining that the policy would be continued if the premium was paid and the enclosed "Late Payment" card was signed. This offer was valid for twenty days following expiration of the contractual grace period. Execution of the card certified that the insured was alive.
During the period of the late payment offer, plaintiff received a phone call from defendant urging her to continue the policy by taking advantage of the offer. Plaintiff indicated she would probably send the check at the first of the month (April 1). The caller responded that plaintiff should send the late payment card with the check. On March 29, 1984, the day after the late payment offer expired, two of defendant's agents visited the Glass residence. They called to inquire about the premium and, if possible, pick up the check. Plaintiff again indicated that the check would be sent the first of the month.
Decedent died March 30, 1984, without the premium having been paid. On March 31, 1984, the decedent's brother called the defendant's agent and informed him of the death. The local agent communicated this fact to his manager. It is disputed whether the agent then knew that the premium was still unpaid and whether the agent suggested that the check be sent in.
Decedent's brother directed his wife to mail a predated check of March 21, 1984, to defendant in payment of the premiums owing on both his policy and that issued to the decedent. Defendant cashed the check and recorded both policies as current. Defendant did not forward the documents to its customer service department for review as was its practice when a premium was postmarked more than thirty-one days after the due date.
On May 17, 1984, plaintiff claimed the benefits of the policy. Defendant denied plaintiff's claim in July. Plaintiff brought suit for wrongful retention of the insurance benefits. Defendant moved for summary disposition. MCR 2.116(C)(8) and (10). Plaintiff opposed the motion and prayed alternatively that summary disposition be granted in her favor. MCL 2.116(I)(2). The trial court granted defendant's motion and dismissed the suit.
A
Plaintiff contends that the court erred in concluding that any extension of the grace period was conditional. We disagree.
The policy terminated when the decedent failed to pay the premium within the contractual grace period. Fowler v United Benefit Life Ins Co, 300 Mich. 329, 342; 1 N.W.2d 561 (1942). Defendant made the decedent a special offer which would allow uninterrupted coverage if the premium was paid and the late payment card executed by March 28, 1984. This special offer expired without either condition being met. There is no evidence that the agents who contacted the plaintiff agreed to extend the grace period or to permit decedent's acceptance of the special offer without execution of the late payment card.
B
Plaintiff contends that the court erred in concluding that the doctrine of waiver by acceptance was inapplicable. We agree.
Waiver is the intentional relinquishment of a known right. Weller v Manufacturer's Life Ins Co, 256 Mich. 532, 536; 240 N.W. 34 (1932). An insurer which unconditionally accepts a premium with knowledge of a loss may be found to have waived its right to assert the policy lapse. Weller, supra; Farmers' Mutual Fire Ins Co v Bowen, 40 Mich. 147 (1879). The doctrine applies to an insurer who, with knowledge of the insured's death, accepts and retains a premium tendered to cover the loss. Ramirez v Metropolitan Life Ins Co, 580 P.2d 1136 (Wy, 1978). The premium must be promptly returned upon learning that death preceded payment.
Defendant knew the policy had lapsed and knew on March 29, 1984, that the late payment offer had expired without acceptance by plaintiff. Defendant's agent was informed of the insured's death on March 31, 1984. Defendant received the predated premium on April 3, 1984, deposited it without the normal review process being followed, and made no investigation until plaintiff's claim was submitted. On this record defendant waived its right to assert the policy lapse.
Reversed and remanded for entry of a judgment for the plaintiff.