ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
The parties have filed cross-motions for summary judgment or in the alternative, for adjudication of specific issues, in this diversity action to recover benefits under a life insurance policy. After consideration of the papers and the arguments at the October 30, 1996 hearing, the Court enters the following Order.
BACKGROUND
This case involves a life insurance policy (“Policy”) issued on the life of Michelle Klotz (“Michelle”), wife of the Plaintiff, Thomas Klotz (“Thomas”). On or about April 20, 1993, the Old Line Life Insurance Company of America (“Old Line”) issued to Michelle the Policy insuring her life for $125,000, with Thomas designated as the primary beneficiary. Michelle signed up for the Policy through a local insurance agent, Anthony Mosel (“Mosel”).
Premiums were due on or before the 20th day of each month, followed by a 31-day grace period for payment during which the Policy remained in effect. Michelle paid her first $20.84 premium on April 20, 1993. The Policy specifies that “premiums are payable at 01 month intervals from 4/20/93,” and, on another page of the contract, that “[wjith our consent, premiums may be paid at other intervals.” A section of the contract captioned “Premium Payment” specifies the date of default:
---- Any premium, after the first, not paid on or before its due date will be in default. Such due date will be the date of default.
The section captioned “Grace Period” indicates the date on which insurance would cease for nonpayment of premium:
A 31-day grace period, without interest charge, is allowed for the payment of each premium after the first. This policy will stay in force during this period. If the premium is not paid by the end of this period, insurance will cease.
Timely monthly payments continued through automatic check drafts from the Klotzes’ joint bank account through August 20, 1994. After Michelle moved out of the family home in late July 1994, Thomas closed
Because the joint checking account had been closed, the automatic check draft for the September 20, 1994 premium did not go through. On September 27, 1994, Old Line mailed Michelle a “Notice of Returned Pre-Authorized Check Dated September 20, 1994,” asking Michelle to “[pjlease mail your payment of $20.84 by October 20, 1994 to insure continuation of your valuable insurance coverage.” 1 On October 16, 1994, Michelle complied with the letter and sent to Old Line the September premium payment. At this point, the next premium was due on October 20, 1994. Counting 31 days (the grace period) from October 20,1994, the date of automatic lapse for nonpayment of the October premium would occur November 20, 1994.
On October 28, 1994, Michelle spoke with Agent Mosel and requested that Old Line bill her directly, rather than through automatic drafts. On November 3,1994, Old Line sent Michelle a form letter which provided her with the paperwork for relaunching automatic monthly drafts from her new checking account. The form letter stated, “If we do not hear from you, this policy will be placed on a direct billing so that processing may continue.” Michelle never responded to the invitation to begin automatic check drafts, and thereafter, Old Line, consistent with the terms in the letter, placed Michelle on direct billing. Kenneth J. Griesemer, Old Line senior vice president and treasurer, explained that Old Line then placed Michelle on direct billing, which required quarterly payments. Griesemer Declaration at 3. Old Line never provided Michelle with information relating to the schedule, due dates, or grace periods under the new quarterly billing system.
On November 28, 1994, eight days after the automatic lapse of the Policy, Old Line sent a bill to Michelle captioned “Notice of Payment Due on October 20,1994.” The bill indicated $65.00 due for “03 MONTHS PREMIUM,” but it failed to specify which three months it covered, when the payment was due, or the term of the grace period. The letter did not indicate that the Policy had automatically lapsed or had been terminated. A line of copy on the bill read, “We appreciate the opportunity to participate in your financial planning needs.” Michelle never submitted a payment in response to this bill.
On December 29, 1994, Old Line mailed to Michelle a “NOTICE OF TERMINATION.” The letter was never received by Michelle, who had been murdered by her boyfriend on December 29, 1994. The Termination letter stated:
We have not received the October 20,1994 premium and the grace period has expired. As of that date, your policy has no cash value and is terminated. PLEASE CONTACT U.S. FOR INFORMATION ON REINSTATING YOUR POLICY.
Within a week of Michelle’s death, Thomas sought to collect under the policy. Old Line refused to pay benefits to Thomas on the grounds that the Policy had automatically lapsed prior to Michelle’s death. Griesemer Dec. at 4. Thomas then initiated this action to recover the insurance proceeds.
DISCUSSION
1. The Cross Motions for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure states that judgment shall be rendered “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). Where the parties have filed cross-motions for summary judgment, the court must consider each motion separately to determine whether any genuine issues of material fact exist.
Starsky v. Williams,
Applying the law to the undisputed facts, this Court must now determine the following: (1) whether the Policy had lapsed; (2) if the Policy had lapsed, whether Old Line by its conduct had waived the right to declare an automatic lapse; and (3) if there is no waiver, whether Old Line is estopped from declaring the policy automatically terminated. In short, the issue in both motions for summary judgment is whether the Policy remained in force on the date of the decedent’s death.
A. Policy Lapse
An express provision of an insurance contract stipulating that a default in payment renders the policy void or causes it to lapse is valid, and a default in such payment ordinarily forfeits the policy where statutory provisions are not violated.
Scott v. Federal Life Ins. Co.,
B. Waiver
Plaintiff contends, however, that Old Line, by its conduct in the months of November and December, 1994 waived its right to declare the Policy automatically terminated.
California courts have consistently held that negotiations with an insured after an automatic lapse may under some circumstances operate as a waiver.
Silva v. National American Life Insurance Company of California,
An insurer waives its right to enforce a forfeiture when it assesses payment of the premium despite a default which would otherwise create a forfeiture.
Murray v. Home Benefit Life
Ass V
The November 28, 1994 bill, the first bill Old Line sent Michelle after Old Line switched her to direct quarterly billing, was dated eight days after the November 20, 1996 automatic lapse. Like the Murray letter, Old Line’s November 28, 1994 bill requested past-due payments: the bold caption across the top of the page read “Notice of Payment Due October 20, 1994,” the body of the notice stated a “Total Due” of $65.00, and a pre-addressed payment coupon appeared at the bottom of the page. Therefore, under the authority of Murray, Old Line waived its right to declare an automatic forfeiture.
Old Line’s pattern of misleading and equivocal communications bolsters this finding of waiver.
See Pierson v. John Hancock Mutual Life Insurance Co.,
Furthermore, Old Line itself equivocates as to whether Michelle was obligated to pay quarterly or monthly premiums in late 1994. While Griesemer did declare that Old Line had placed Michelle on a quarterly payment plan, Old Line also contends that the October premium was due October 20, 1994, the November premium due November 20, 1994, and the December premium due December 20, 1994. Griesemer Dec. at 4-5; Joint Separate Statement of Undisputed Material Facts in Support of Cross-Motions for Summary Judgment at 7-9. These monthly due dates are inconsistent with a plan calling for quarterly payments.
The circumstances surrounding the November 28, 1994 bill reveal two additional examples of equivocal and misleading communications. First, Old Line captioned the November 28 bill “Notice of Payment Due October 20, 1994.” However, if the bill represents a request for a quarterly payment, the payment could not have been due on October 20, 1994, weeks before Old Line switched Michelle to quarterly billing. And if the bill represents a request for three separate monthly premiums, as Old Line asserts that it does, this Court has yet another basis for a finding of waiver. According to Old Line’s own evidence, the November 28, 1994 bill covered two past-due premiums (due October 20, 1994 and November 20, 1994) and one premium not yet due (due December 20, 1994). Old Line’s Separate Statement of Undisputed Facts at 5. By demanding payment of the December 20, 1994 premium, a payment not yet due, Old Line waived its right to declare a forfeiture. A demand for a premium subsequent to a premium in default waives forfeiture for nonpayment of prior premium. Couch on Insurance § 32:310 at 626 (2d ed.1985).
Old Line strongly urgés that
Silva v. National American Life Insurance Company of California,
In the event that any doubt remains as to the propriety of finding a waiver in this case, it is worth emphasizing that evidence tending to show waiver is favorably regarded by the California courts. Forfeiture of a policy will be avoided on any reasonable showing.
Pierson v. John Hancock Mutual Life Insurance Co.,
One important question remains: when did Old Line’s waiver of its right to cancel the insurance coverage lapse?
Where the conduct of the insurance company may be considered as a waiver of the forfeiture that would otherwise arise on nonpayment of premium when due, the law permits payments to be made until definite notice is given that failure to pay will work a forfeiture. Thus, where a company extends credit to the insured for payment of premium, it has no right to declare a forfeiture of the policy except after putting the insured in default by giving him or her the appropriate notice.
39 Cal. Jur.3d Insurance Contracts § 257 (1996).
Therefore, the waiver ended on the day when Michelle received notice of the termination. Because Michelle had died prior to receipt, the Policy remained in effect on the day she died. This court therefore GRANTS summary judgment in favor of Plaintiff Thomas Klotz.
C. Estoppel
Because this Court has found a waiver, it is not necessary to address the issue of es-toppel.
D. Punitive Damages
Plaintiff requests punitive damages of $50,-000 in his Complaint. Plaintiff, however, offers no evidence tending to show oppressive, fraudulent, or malicious conduct by Old Line. Furthermore, due to the complexity of the facts and the law in this case, it is unlikely that any bad faith can be shown. Plaintiffs request is therefore DENIED.
CONCLUSION
Based on the reasons set forth above, the Court GRANTS Plaintiffs motion for summary judgment without allowance for punitive damages, and DENIES Defendant’s motion for summary judgment.
Defendant is hereby ORDERED to pay Plaintiff the amount of $125,000 plus interest, less the amount owed for the October, November, and December premiums, $65.00. 3
IT IS SO ORDERED.
Notes
. This letter incorrectly states that Michelle had to pay the premium by October 20, 1994 in order to maintain her insurance coverage. Under the Policy's 31-day grace period provision, the final date for payment of the September 20 premium fell on October 21, not October 20, 1994.
. A grace period, in insurance law, is "a period beyond the due date of premium (usually 30 or 31 days) during which insurance is continued in force and during which the payment may be made to keep the policy in good standing.” Black’s Law Dictionary 697 (6th ed.1990).
. The “Payment of Proceeds” section of the Policy states:
The face amount will be paid to the beneficiary immediately upon receipt of due proof of death of the insured if death occurs prior to the expiry date. If death occurs in the grace period of an unpaid premium, an amount equal to the premium for one month will be deducted from the proceeds.