Frink v. River Source Life Insurance Company

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Amy Frink, No. CV-20-01327-PHX-DLR 10 Plaintiff, ORDER 11 v. 12 River Source Life Insurance Company, 13 Defendant. [15] 16 Before the Court are the parties’ motions for summary judgment (Docs. 59, 60) 17 which are fully briefed. For the reasons set forth herein, Plaintiff’s motion is denied and 18 Defendant’s motion is granted in part and denied in part.1 19 I. Background 20 Plaintiff purchased a disability insurance policy (“Policy”) from Defendant on July 21 15, 2010. Thereafter, the premiums were due annually on July 15th. The Policy provided 22 an additional 31-day grace period for payment of the premium before the Policy would 23 lapse. Additionally, Defendant had internally instituted an extended grace period, which 24 automatically reinstated a lapsed policy if the premium was received within 60 days of the 25 premium due date. With Plaintiff’s Policy, the extended grace period would expire on 26 September 13th. [27] 1 Oral argument is denied because the issues are adequately briefed, and oral 28 argument will not aid the Court’s decision-making. See Fed. R. Civ. P. 78(b); LRCiv. 7.2(f). 1 The Policy’s “Reinstatement” provisions provided Plaintiff six months after a lapse 2 to submit a reinstatement application along with the past-due payment. Defendant 3 thereafter would have 45 days to approve or disapprove the application: 4 If Your policy terminates because a premium is not paid by the end of the grace period You may apply to reinstate the policy 5 at any time until the first unpaid premium is 6 months overdue. 6 In order to reinstate this policy, 2 requirements must be met. They are: [7] 1. You must submit a reinstatement application with evidence 8 of Your insurability and the full amount of overdue premium; and [9] 2. We must approve the reinstatement application. [10] If We approve the reinstatement application, this policy will be 11 reinstated as of the date of our approval. If We do not approve or disapprove the reinstatement application within 45 days 12 from the date We receive Your reinstatement application and overdue premium, this policy will be reinstated on the 45th 13 day. [14] (Doc. 59-1 at 19.) [15] Defendant’s practice regarding payments made after the 60-day grace period, at its [16] discretion, was to automatically reinstate some policies but not others. If Defendant [17] decided to automatically reinstate a policy, it did not require a reinstatement application [18] and did not return the premium payment. On the other hand, if Defendant decided not to [19] automatically reinstate a policy, within 45 days of the late payment, Defendant would [20] return the late premium payment and request the insured to submit a reinstatement [21] application. [22] Historically, Plaintiff had been a late premium payor, never making a timely [23] payment in the 10 years she held the Policy. In 2017, Plaintiff paid 13 days after the [24] contractual grace period. In 2018, Plaintiff’s payment was made on September 6, 15 days [25] after the contractual grace period and 6 days after the extended “Due Date” as expressed [26] in the “Final Payment Notice” that year. Plaintiff’s late payments were always accepted [27] without lapse, and without explanation for the lack of enforcement of the contractual lapse [28] date. 1 In 2019, Defendant sent Plaintiff a “Payment Notification” advising her that her 2 annual premium “Due Date” was July 15, 2019. Sending a “Payment Notification” was 3 Defendant’s practice. Plaintiff failed to make her premium payment on time. The 4 contractual grace period ended on August 15, 2019. Defendant did not lapse the Policy 5 effective August 15, 2019. Instead, as was its practice, Defendant sent Plaintiff a “Final 6 Payment Notification” informing her that payment must be received by August 30, 2019, 7 or the Policy would lapse. There was no explanation why the deadline was moved to 8 August 30. However, the true deadline, according to Defendant’s internal policy, was 9 September 13, 2019. 10 Defendant received Plaintiff’s check, which was dated September 13, 2019, on 11 September 23, 2019.2 Defendant cashed the payment and held the money in “suspense,” 12 while allocating the money to Plaintiff’s account, but not applying it to the premium. 13 Defendant treated the Policy as void for non-payment after September 13, 2019. On 14 September 27, Defendant wrote Plaintiff confirming receipt of her late premium payment 15 and explaining that the payment would not be applied because the Policy had lapsed. The 16 letter instructed Plaintiff that she could apply to reinstate the Policy and that a reinstatement 17 application was required to restore her coverage under the Policy. Plaintiff disputes having 18 received the letter. 19 On October 21, Plaintiff had a stroke and was hospitalized. The next day, Plaintiff’s 20 husband spoke to Defendant’s insurance agent who informed him that the Policy had lapsed 21 and that a letter requesting a reinstatement application had been sent to her. The agent re22 sent the reinstatement application, but Plaintiff never submitted it. Defendant tendered 23 Plaintiff’s late premium back to Plaintiff on November 1, 2019. 24 II. Legal Standard 25 Summary judgment is appropriate when there is no genuine dispute as to any [26] 2 Although Plaintiff alleges that she paid her premium on September 13, 2019, by 27 ACH transfer (Doc. 60 at 4), the record cited for that fact does not support it. The record shows Plaintiff paid by check and that it was Defendant’s practice to deposit checks the 28 date they were received. Plaintiff’s premium payment check was deposited on September 23, 2019. (Doc. 60-8 at 13.) 1 material fact and, viewing those facts in a light most favorable to the nonmoving party, the 2 movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). A fact is material 3 if it might affect the outcome of the case, and a dispute is genuine if a reasonable jury could 4 find for the nonmoving party based on the competing evidence. Anderson v. Liberty Lobby, 5 Inc., 477 U.S. 242, 248 (1986); Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054 , 1061 6 (9th Cir. 2002). 7 III. Discussion 8 Plaintiff argues that Defendant’s past acceptance of premium payments after the 9 contractual grace period without terminating the Policy or requiring a reinstatement 10 application amounts to waiver or estoppel. Plaintiff further argues that Defendant’s 11 notifications of the final due dates were illusory, amounting to a waiver of strict 12 performance under the contract, because Defendant accepted late payments in the past, 13 beyond the contractual grace period, without explaining to Plaintiff its real deadline. 14 Plaintiff argues accepting late payments without explanation was waiver by conduct, and 15 that Defendant intended to relinquish its contractual right to receive premium payments by 16 31 days after July 15. 17 Waiver generally is a question of fact to be determined by the trier of fact. Jones v. 18 Cochise Cnty., 187 P.3d 97, 105 (Ariz. Ct. App. 2008). Waiver by conduct occurs when 19 the acts of an opposing party are inconsistent with an intention to assert the right in 20 question. Russo v. Barger, 366 P.3d 577, 580 (Ariz. Ct. App. 2016). 21 It is a general rule that, where a custom of dealing develops between an insurer and the insured whereby the policy 22 provision requiring prompt payment of premiums is not enforced, the insurer is precluded from insisting upon strict 23 compliance with the terms of the policy providing for payment of premiums on a date certain without first giving the insured 24 notice thereof within a reasonable time previous thereto. The cases adhering to this rule do so either on the basis of waiver 25 or estoppel, but the result is the same. [26] Hagin v. Fireman's Fund Ins. Co., 353 P.2d 1029, 1031-32 (Ariz. 1960). [27] The elements of equitable estoppel are “‘conduct by which one . . . induces another [28] to believe and have confidence in certain material facts, which inducement results in acts 1 in reliance thereon . . . which cause injury to the party thus relying.’” Sahlin v. Am. Cas. 2 Co. of Reading Pa., 436 P.2d 606, 608 (Ariz. 1968) (alterations in original) (quoting 3 Builders Supply Corp. v. Marshall, 352 P.2d 982, 985 (Ariz. 1960)). 4 Defendant’s acceptance of premium payments for the past two years after the 5 contractual 31-day grace period is evidence of waiver of the premium payment deadline. 6 Whether Defendant’s conduct was clearly inconsistent with an intention to assert the right 7 to insist on a timely payment is a question of fact because a factfinder hearing this evidence 8 could reasonably find in favor of either party. Whether Defendant’s conduct induced 9 Plaintiff to believe and have confidence that she could pay her premium as late as 10 September 23, and that she relied on that fact when she failed to pay earlier, is a question 11 of fact. 12 In support of its argument against waiver and estoppel, Defendant cites Sereno v. 13 Lumbermens Mut. Cas. Co., 647 P.2d 1144 (Ariz. 1982), but that case is inapplicable. It 14 makes a distinction between the effect of prior conduct of accepting late checks when 15 dealing with a delinquent payment on an existing policy and delinquent payments on a 16 renewal. Here, the Policy was an existing policy with a premium due date that Defendant 17 had not consistently enforced. Sereno recognizes the distinction: 18 The company can, by accepting delinquent payments on an existing policy, be estopped, either by the policy or its conduct, 19 from imposing the late payments as a bar to coverage. The renewal of a policy is a different matter. The insured must 20 follow the specific provisions of the policy concerning renewal. In the instant case, the notice of July 1978 was an 21 offer to renew or continue. By failing to pay the first installment of the renewal premium, the Serenos did not accept 22 that offer and the policy terminated automatically[.] [23] 647 P.2d at 1146-47 . 24 Whether the “Final Payment Notice” was adequate notice to Plaintiff that strict 25 performance had been reinstated also is a question of fact. “Once strict performance of the 26 contract has been waived as to timely payment, a clear and definite notice to the buyer 27 followed by allowance of reasonable time to bring payments up to date would be necessary 28 in order to reinstate the forfeiture clause of the contract.” Kammert Bros. Enterprises, Inc. 1 v. Tanque Verde Plaza, Co., 428 P.2d 678, 682 (Ariz. 1967). Defendant’s “Final Payment 2 Notice,” without explanation, moved the due date to August 30, 2019. That due date is not 3 consistent with the contractually established deadline and with the prior notice. Moreover, 4 Defendant sent Plaintiff similar notices in the past, yet still accepted payment after that 5 date. A factfinder reasonably could find for either party on this issue.3 6 Defendant is entitled to summary judgment, however, on Plaintiff’s claim that the 7 Policy was automatically reinstated, pursuant to the terms of the Policy and/or A.R.S. § 208 1348(A). Plaintiff’s theory hinges on the argument that she did not receive the September 9 27, 2019 letter. Plaintiff argues that there is no evidence that the letter was mailed and that 10 receipt, as opposed to mailing, is required by the statute. 11 Regarding the transmittal requirements of the conditional receipt, the statute 12 provides that it must be issued. It does not say received. Although the deposition testimony 13 of Defendant’s Operations Director established that he did not have personal knowledge or 14 memory of the letter being mailed, the rules of evidence do not require that. His declaration 15 establishes Defendant’s ordinary practice for mailing letters such as the September 27, 16 2019 letter, and the processing notes indicate that a letter had been mailed to Plaintiff. This 17 evidence is admissible as business records of Defendant. See Fed. R. Evid. 406, 803(6). 18 Although Plaintiff asserts that she did not receive the letter, receipt is not required under 19 the statute. Her testimony of non-receipt, in light of Defendant’s evidence of mailing, is 20 not sufficient to raise a question of fact as to whether the letter was mailed. 21 Further, the undisputed facts establish that Plaintiff had notice of the reinstatement 22 requirement within the 45-day statutory timeframe through conversations the agent, Eric 23 Fairbanks, had with Cliff Frink between October 22 and October 24. In those 24 conversations, the two discussed the lapse of the Policy due to non-payment, the September 25 27 letter concerning Defendant’s request for a reinstatement application, and Plaintiff’s 26 3 Defendant argues that the internal corporate policy of accepting late premiums is for the good of the customer and therefore cannot be found to be waiver. However, 27 Defendant cites no Arizona authority that holds waiver cannot be found if the allegedly inconsistent conduct benefits the opposing party. In any event, Defendant is in the business 28 of selling insurance. It benefits Defendant to maintain a policy it has sold and to receive a premium payment, even if late. ability to apply. 2 Finally, Defendant did not keep Plaintiff's premium payment for 45 days after 3|| receipt. Plaintiffs allegation that she paid her premium on September 13, 2019, by ACH 4|| transfer is not supported by the evidence. Unrebutted evidence shows that the check was 5|| received by Defendant on September 23, 2019. It was returned on November 1, 2019, 39 6|| days after receipt. The requirements for automatic reinstatement set forth in the Policy and 7\| in A.R.S. § 20-1348(A) are not met. There has been no reinstatement of the Policy pursuant 8 || to the terms of the policy or pursuant to A.R.S. § 20-1348(A). 9 Based on the Courts ruling regarding waiver and estoppel, Plaintiffs claims of || breach of contract and/or anticipatory repudiation are not ripe for resolution. 11 IT IS ORDERED that Defendant’s motion for summary judgment (Doc. 59) is 12 || GRANTED IN PART and DENIED IN PART, and Plaintiff's motion for summary 13} judgment (Doc. 60) is DENIED, as explained herein. 14 IT IS FURTHER ORDERED that the parties appear for a telephonic trial 15 || scheduling conference on February 11, 2022, at 2:15 p.m. Call-in instructions will be || provided via separate email. 17 Dated this 31st day of January, 2022. [19] 20 {Z, 21 _- {UO 22 Upited States District Judge [28] -7-