*1 No. 23205. In Bank. 28. Aug. [S.F. 1975.] SMITH,
DELORES Administratrix, etc., J. and as Individually Plaintiff and Appellant,
WESTLAND LIFE COMPANY, INSURANCE
Defendant and Respondent.
Counsel Donald P. McCullum and Charles O. Triebel for Plaintiff Appellant. *3 Hancock,. Pascoe, Cullinan, John R. Rothert & Burns and Cushing, Cullinan, Hancock & Rothert for Defendant and Respondent.
Opinion
SULLIVAN, J. J. Plaintiff DeloresSmith this action as brought Smith, Jr., widow and administratrix of the estate of Solomon against $10,000 Westland Life Insurance to recover under (Westland) Company1 a life insurance contract the life of her allegedly insuring husband at the time of his death. Westland denied liability, claiming no contract of insurance was in effect at the died. After a time Smith trial, the court entered defendant Westland in favor of nonjuiy judgment Plaintiff against plaintiff. appeals. 8, 1963, Evans,2 The facts of the case are not in On Reed dispute. April Westland, a for called on Solomon Smith at his home for soliciting agent him a life insurance At this Smith purpose selling policy. meeting, life basic agreed purchase following coverage: $3,000, insurance in the amount of (2) mortgage security protection $8,000, the amount of accidental death benefits in the amount of $3,000 and a waiver for in the event of total provision that, Evans informed Smith a based on his and his disability. being age risk, $14.66. standard for such would be monthly premium terms, Satisfied with these Smith an signed appropriate application Evans. Smith the first month’s and received prepared from a Evans conditional sometimes referred to as a “binder.” receipt,3 Evans, Westland, 1Plaintiff named' Reed as a defendant for originally soliciting agent vyas However, in the suit. action dismissed as to Evans the sustaining plaintiff’s Evans without leave to amend of the latter’s demurrer. The for dismissal was that ground incurred no on the contract of the action since he personal liability basis forming as an for Westland in the matter here involved. acting only agent Marshall, Smith, 2At time his with Evans was Robert W. meeting employed by Jr., a for Westland. general agent 3This conditional as follows: receipt provided “It is understood and that the to on the reverse side of referred agreed is made and conditions: accepted subject following that on “1. That if the at its Home Office after shall be satisfied investigation Company hereof, insurance, whichever the date or on the date of the medical examination for such and the Evans delivered the premium payment signed application Westland, Marshall, Jr., who W. Robert general agent employer, Westland in turn submitted them to the insurance began company. for the above to determine whether Smith was eligible investigation coverage. Westland, Smith was examined
About April request doctor who transmitted to Westland a medical indicating report time, an At the same Westland Smith was a “first class” risk.4 requested Smith’s employment, investigative report by independent agency finances, health and habits of this was received by living; 1963. April *4 of Smith’s
Westland the completed thereupon processing 24, 1963, insurance which and on issued to him a April policy for “modified” the for the coverage applied by eliminating provisions accidental death benefits and for waiver of in the of total event premium $19.23 and month. The the to disability, by per increasing premium reason Westland for these was that Smith’s given by changes employ- ment as a railroad laborer was considered to be hazardous. Marshall, with
Westland delivered the to its agent, policy general it would not take effect until Smith had instructions signed the amendment to the changes proposed application specifying and rate had received a and Westland copy later, under the and entitled for insurance was insurable each proposed person for and for the amount rules and standards to insurance on the applied plan Company’s for each rates age person proposed at the corresponding Company’s published insurance, such for shall reason of [except the insurance payment protection applied the date hereof or event, (16) of the take effect from as otherwise in item provided application] examination, the amount is later. In any date such medical whichever from the is limited to the extent the terms of this of insurance effective under receipt becoming Insured, the total liability Company that in the event of the death of the Proposed $250,000 in force and accidental death benefit exceed inclusive of life insurance shall not has than the full first the date of the If less with the on application. Company date but effective on said shall become been such insurance nevertheless paid, protection the for which to at the end of period shall be deemed and only expire rata basis. such insurance on a tendered hereunder amount would check, is not draft or order money given “2. That if any shall be void. on paid presentation, within sixty Company is not “3. That if said approved accepted effective, hereof, become for shall not date then insurance from the days the amount in the return of be returned. Any delay and the amount tendered shall shall not be construed as application.” tendered he would indicate whether doctor to examining form 4The required report “medium,” class,” or health risk. as a “first “poor” the applicant categorize $4.57 the first with an additional amended together month’s premium. to Smith’s home
Evans, went promptly soliciting agent, Smith to him for his informing submitted approval, modified policy, to and of Westland’s the increased unwillingness monthly premium or a waiver accidental death benefits for either issue a providing policy to as amended and refused to Smith refused policy accept premium. him; he left, Evans with additional taking policy pay premium. said Smith about refunding nothing terminating negotiations Marshall, of these events Evans informed employer, salesman, latter, call Smith and that the a more experienced suggested him as modified. tiy persuade accept After a number unsuccessful Marshall finally arranged attempts, visit Smith at his on the home 1963. He May again evening submitted Smith and proposed policy explained changed The latter once refused to execute the amended provisions. again or to the additional the conversa- pay premium. Concluding told tion Marshall Smith that he had would refunded.5 *5 died in an
On the Smith automobile following May morning, later, one or returned accident. Informed of the death two Marshall days Smith’s and that the refund Westland company policy requested On Westland its máiled to Smith residence May 29, 1963, $14.66. in the sum On check was July plaintiff appointed 20, 1963, administratrix of husband’s estate. On December she her Westland death and of benefits notified of Smith’s demanded payment refused to under form for. Westland originally policy applied that no in force at the time make insurance.was any payments, asserting of Smith’s death. This action followed. as we have related
The trial court found the facts to substantially the first above and concluded that conditional for them and outright testified that cases in which applicant 5Marshall in rejected Westland a which he would send him check issue a declined to policy, company generally at the time he informed to the in refund of his would deliver premium applicant bench, However, which Westland in cases such as the one at of the rejection. applicant made, and would be issued unless to have an amendment no refund askirig simply and it to the of the amended was returned refused delivery policy until company. 8, 1963, delivered to Smith oh a created April provisional contract insurance on his life. granting temporary Westland, its decision in favor of the court ruled as a rendering of law matter a contract of insurance is terminated temporary upon the insurance and the rejection application by giving notice thereof to the insured. In so the court return held ruling, Smith was condition by precedent effective termination of his coverage, spite fact that Westland 'a was under contractual to refund the obligation if it declined to issue desired this rule policy.6 Applying law,7 basic of contract the court further concluded that principles Westland’s' issuance of in different form than that described in Smith’s constituted both a rejection counteroffer which Smith On never accepted. basis, the court held that the insurance on Smith’s life was terminated to his death Westland’s effectively prior its notice of said to Smith through agents Evans and Marshall. was entered This Judgment accordingly. appeal followed. us, below,
Westland concedes before as it did in the court that under law, California Smith’s execution of the for insurance upon 8, 1963, and his of the first month’s April contemporaneous payment there was created a contract of premium, immediately insurance on his life with for. This contract is based applied of the conditional Smith for the language receipt given Under the terms of this if the premium payment.8 receipt, applicant paid insurance, time he would take *6 effect as of the date the or the date medical application examination, later, whichever was that the deter- provided company. 6Under of the conditional was paragraph obligated Westland to return the receipt, if it did and not the the approve accept within 60 from date days application (See ante.) thereof. fn. 7In that Westland had finding Smith’s the trial court the rejected application, law, law common rule of contract embodied in Civil Code section which requires an to be absolute and so that to the terms of acceptance any modify unqualified, attempt response rejection counterpro an a new offer in a of the offer and thereto constitutes posal. ante; 8See footnote see also Turner v. Investors Ins. & Co. Syndicate Annuity (1973) 33 47], in where similar a conditional [108 Cal.Rptr. language was held to a to rise contract of insurance the receipt give upon temporary receipt least, and of the or at of medical application the the payment premium, completion upon 425-427.) (Id., examination. at pp. on the was to the insurance he entitled mined that plan requested. 43 Cal.2d P.2d 633], Penn Mutual Ransom v. rise a a in an insurance held that such we “gives provision of the contract of insurance immediately be that the shall and that company proviso premium, at date that insured satisfied acceptable if becomes a to terminate contract creates company only right dissatisfied with the is issued.” (Id., risk before policy whether, Thus, us the case at bench is the sole issue confronting death, a termination of the above Smith’s Westland effected prior contract of insurance. temporary in the She must answered
Plaintiff that this negative. be. urges question of an amended the communi- that Westland’s issuance argues in an effort fact her Westland’s cation of this husband by agents him to the modified form of coverage, unaccompanied accept persuade to terminate the a return of were not sufficient paid, She of insurance her husband’s death. asserts contract temporary prior until that insurer does not terminate refund receives notice of both rejection- unequivocal As did his was not final and as Westland premium. rejection death, that refund Smith’s until after his contends plaintiff was still effect when her died. husband with, evidence to To note that the record contains substantial we begin death, Smith’s the trial court’s that before support finding evening Marshall, Westland, informed him through agent general to refund for and refused to issue promised policy applied Therefore, we of this must assume for appeal purposes of his notice of before he died Smith received unequivocal whether Our to this crucial therefore narrows point: application. inquiry actual can terminated (a) contract of only by to the insured for insurance communicated thereof and refund (b) notice payment. appropriate Ransom.9 Further- We left this unanswered in intentionally question found, to, more, have our has not been directed nor we attention any *7 determine this California decision authoritatively purporting reported therefore, whether, decide, some by 9In Ransom we stated: “We need not suggested as courts, the such a contract can be terminated actual only rejection application by 425.) (43 return of Cal.2d at the payment.” 118 we
issue.10 Nor do find in the substantial decisions of our sister guidance states.
We have been referred to decisions of sister states containing language
theories,
dicta
of a number of
from the view
largely
supportive
ranging
that termination occurs
the
uncommunicated
insurer’s
immediately upon
decision to
the
Leube v.
Ins. Co.
Prudential
(see
reject
e.g.,
76,
America
119
terminate
to
is
order
effectively
temporary
required
116
Co. America
v. Prudential Ins.
(1936)
Reck
(see
coverage
e.g.,
of
v.
777,
with
in Allen
N.J.L. 444
A.
cited
778],
Metropolitan
approval
[184
638,
The most
647]).
Ins. Co.
44 N.J.
A.2d
(1965)
frequently
[208
Life
of insurance
be that a
contract
stated rule
to
appears
temporary
to the
and notice thereof
terminated by rejection
39:207,
1962)
ed.
(2d
Couch on Insurance
§
(See
insured.
e.g.,
5:14,
562-563;
(1972)
Law
Life and Health Insurance
§
Meyer,
pp.
966-967;
126-127;
Insurance,
43 Am. Jur.2d
(3),
C.J.S. (1945)
§
pp.
pp.
accident,
life,
278-279; Anno.,
Insurance,
§
(1969)
Temporary
pp.
of
or issuance of
health insurance
policy
pending
Comment,
943, 982;
Insurance
The
2 A.L.R.2d
Receipts:
Life
523, 532;
63 Yale L.J.
Service
Binder (1954)
Non-Binding
Mystery of
P.2d
language receipt, its under intended condition prior liability *9 of the it could have used clear and approval application, easily Third, to indicate its intention. we concluded that unequivocal language at the time he ordinary person paying insurance and in return a which stated that receiving receipt coverage was to be of effective as the date of had a reasonable application, that he would secure the benefit of expectation immediate coverage. we noted the obvious the insurance Finally, advantage gained .by of the at the of time receiving payment applica tion. We therefore concluded that it would be unconscionable to allow insurer, who had from the of the first required applicant payment which the could premium, escape obligation coverage applicant assume that the insurer was reasonably expect thereby undertaking. Co., v. Penn (Ransom Mutual Ins. 43 Cal.2d All of supra, reasons, these which convinced us that “a contract insurance arose of the and the first upon [the receipt completed application insurer’s] us to hold (id.), that such is premium payment” similarly impel coverage not terminated until the receives from the insurer both a notice applicant of the of his and a refund of his rejection application
We turn examine the conditional in the language receipt instant case which as we have rise to a contract of explained “gives immediately upon receipt Co., . . .”. v. Penn (Ransom Mutual supra, 420, 424; see fn. It makes ante.) issuance of permanent policy under the terms specified subject company approval the insurer to refund the if it fails to obligates applicant’s premium within But the is silent as how and give days. when created its execution immediately coverage upon will, or be otherwise terminated if and when the insurer may, effectively This silence casts a shroud of over the rejects application. ambiguity it atof least three reasonable making receipt, susceptible interpretations: that is (1) terminated coverage automatically upon the insurer or without expiration days sooner; whichever is is acceptance rejection, terminated and notice thereof to the by rejection insured; not terminated until the receives both notice and a refund of the to which he is entitled terms of the We are resolve receipt.11 required most in favor of the insured. v. State Farm (Crane ambiguity strongly Fire Cas. Co. 5 Cal.3d & 115-116 485 P.2d Cal.Rptr. 10, ante, text each of these 11See footnote for authorities in support accompanying interpretations. Co. (1957) Mut. 1089]; 48 A.L.R.3d Ensign Pacific *10 v. Phoenix Constr. Cas. Co. Continental 884, 888 P.2d 488]; Cal.2d [306 v. 801, Ransom 914]; A.L.R.2d 423, P.2d 57 437 Co. 46 Cal.2d (1956) [296 425; 1 Co., at Couch 43 Cal.2d Mutual Ins. Penn p. supra, Life we hold 14:36, 616.) ed. 1959) Accordingly, § Insurance (2d p. for insurance that, here, received an where, as the insurer has it, thereafter decides reject with payment together created the contract insurance immediately (a) until is not terminated payment notice
insurer has by appropriate actually rejected refunded the insured and (b) communicated such rejection to the insured. the fact that also to reach this conclusion We have been persuaded have been who draft the conditional receipts companies thereunder aware of their obligation provide temporary have nevertheless failed 1954 when we decided Ransom. since They so to eliminate their in such as used patent receipts clarify language endure the resultant and have been content to seemingly ambiguities the line of an effort to avoid the litigation obligation imposed v. is authorities of which Ransom (See Thompson e.g., representative. Co., 904; Ins. 9 Cal.3d v. Western Occidental supra, Slobojan Life Co., 432; 70 v. Travelers Ins. Cal.2d supra, Young Metropolitan Life Life 382, 78 568]; Ins. Co. 272 453 (1969) Cal.Rptr. Cal.Rptr. [77 Cal.App.2d 257 399 Koorstad v. Nat. Ins. Co. (1967) Washington Cal.App.2d [64 Co., 238 v. Ins. 882]; Wernecke Fidelity supra, Cal.Rptr. Life Pacific 884; 223 Co. Brunt v. Occidental Ins. (1963) Cal.App.2d Life v. Grant 179 Insurance 492]; Company Cal.Rptr. Metropolitan [35 Life 307; Cir. 268 v. Insurance 1959) F.2d Wood (9th Metropolitan Life 371, 302 F.2d Cal. 193 affd. Cir. 1961) 1962) (N.D. (9th F.Supp. Company case, In the instant the conditional 802.) although receipt contemplated - defendant failed to as well application' include therein as to how or when the any express provisions in the event defendant terminated rejected circumstances, for which defendant such the ambiguity application. 1654; Code, v. must be resolved it. (Civ. § Thompson against responsible Co., 912; v. Western at Occidental Ins. 9 Cal.3d Slobojan supra, p. Life Co., 440; v. Penn Ransom Ins. 70 Cal.2d at Travelers supra, p. Co., 43 at Mutual Ins. Cal.2d p. supra, the conditional In addition to receipt, ambiguous language insurance, a contract of rationale of the case law supporting 122
rests the reasonable essentially upon principle effectuating v. Occidental expectations ordinary applicant.12 (Thompson Co., 911; 9 Cal.3d at v. Western Travelers supra, Slobojan Co., 440; 70 Cal.2d v. Zurich Insurance Co. 65 supra, Gray (1966) 263, 104, Cal.2d 419 P.2d 168]; Sabella Wisler [54 Cal.Rptr. 21, 689, Cal.2d 377 P.2d Steven & 889]; [27 Cal.Rptr. Fidelity Cal.2d 868-869 Casualty 377 P.2d [27 Cal.Rptr. Prickett v. 284]; Ins. Co. Ltd Royal 363 P.2d 86 A.L.R.2d
Cal.Rptr. 711]; Arenson v. Nat. *11 Automobile & Cas. Ins. Co. 45 Cal.2d 83 P.2d 816]; Co., Ransom v. Penn Mutual Ins. 43 425; Cal.2d at see also supra, p. Life Keeton, Insurance Law at Variance with Provisions Rights Policy 83 Harv.L.Rev. 969-972.)
In we Ransom that an the who recognized ordinary person pays at the time he for insurance is assuming applies justified will immediate or of whether not payment bring protection, regardless decides, the insurer the at 425.) risk. Cal.2d ultimately (43 accept p. cases have held the of and Subsequent layman’s complete expectation immediate of the to be so that if payment upon strong the insurer wishes to avoid its such it obligation providing protection must not use clear and its intent only unequivocal language evidencing to limit of the but must temporary coverage pending policy, also call such condition to the In attention limiting applicant.13 12This rationale is in with our on harmony observation a number of occasions that are contracts of policies generally adhesion—a term which a “refers to standardized contract one entirely by to the transaction for the prepared party other; contract, a due such acceptance between the draftsman and the second disparity power bargaining must be or party, by the second accepted rejected basis, ‘take it leave it’ without and under such party bargaining opportunity conditions that the ‘adherer’ cannot obtain the desired or service by save product Co., (Steven in the form v. & acquiescing agreement.” 58 Cal.2d Fidelity Casualty supra, 882; also, Co., 269-270; 65 at see v. Zurich Insurance p. Gray Cal.2d at supra, pp. Logan 528], v. John Hancock Mut. 41 Ins. 993 [116 Cal.App.3d Cal.Rptr. Life Co., v. and Ins. 272 at The Young Metropolitan supra, p. Cal.App.2d Life conditional which the terms of contracts of insurance fall receipts embody Co., within definition of (Allen adhesion'contracts. v. Ins. Metropolitan supra, 638, 644.) 208 A.2d Co., 13In v. Ins. Young Metropolitan supra, Cal.App.2d applicant for life insurance under a double in the event Young applied plan providing indemnity of accidental He death. at the and received time application conditional died which stated that if the applicant expressly unambiguously before the had would the benefits company approved policy, pay accidental death died before his provided by Young policy, including benefits. was The insurer that its under the liability claimed approved. limited the terms of the conditional by receipt. While court found that the made language receipt clearly it both of these absence the insurer that satisfied require- proof ments, have that the under a courts held coverage provided in the contract of insurance “is which acting ordinary layman, business, virtue of that course reasonably may ordinary expect and immediate transaction . . upon .”—namely, complete Co., v. (Wernecke Fidelity premium. payment Pacific 887; also at see Metropolitan supra, Cal.App.2d Young Co., & at Steven Casualty Fidelity supra, Co., 868-869.)14 at supra, pp.
When, therefore, bench, contract of in the case for insurance of an insurance arises the insurer’s receipt with the first expectation together payment, from two actually conjoined thereby given recognition emerges acts—his and his signing that he was words of Ransom “such a would assume person getting *12 v. Mutual
immediate insurance for his ...” Penn (Ransom money. Co., Ins. the This reasonable 424.) expectation supra, would, view, of such in our extend a continuance to part applicant for its until the had nullified the factors insurer two responsible existence—the for and notice of the rejection policy by of Unless the and the of a refund it. rejection, by premium the insurer intention refuse by permanent coverage] [to “manifestfs] time, . could return of the within a . . the reasonable premium applicant full under the liability policy, a condition to the insurer’s company the court precedent approval be liable to the full extent under that the must held nevertheless ruled company benefits, for, it the death unless satisfied burden the accidental including policy applied called to the the the were liability of provisions limiting company’s proving the read In so court or that the had them. holding, attention applicant’s reasoned that “the applicant the carrier tends by naturally an advance very premium acceptance of terminable. . . . it toward an immediate be understanding coverage though short, to the insurance constitutes payment the ordinary layman, payment premium for the fine print that he would read carefully and it is unlikely immediate protection, the carrier’s agent.” was the incentive do so by contained unless he given in receipt added; Co., (Id., at italics see also v. Ins. p. Fidelity supra, Wernecke Pacific 887.) at Cal.App.2d p. have that temporary California courts held of this 14On the basis same reasoning, was delivered to the never even where the conditional receipt exist in cases coverage may Co., 405.) at p. v. Nat. Ins. (Koorstad Cal.App.2d Washington supra, applicant. Rather, for initial with a the failure the to provide applicant agent’s in determining must be considered as one the factors which is seen merely in This is not itself circumstances. failure under the insured’s reasonable expectations that arises full and immediate coverage sufficient to insured’s destroy expectation of temporary not creation and hence does preclude upon payment Co., Nat. Ins. (Koorstad supra, such Washington protection. providing 405.) at (Reck assume that his insurance was effective.” v. Prudential Ins. Co. America, 184 A. cited with Allen supra, Metropolitan Co., A.2d supra,
A rule that such insurance can be terminated requiring only notice of and refund of the us to be not rejection premium appears but fair. It at once eliminates only logical uncertainty as to effective notice When insurer notifies controversy rejection. of his but does not refund his applicant rejection its action hand, is uncertain and On the one premium, confusing. notice of indicates that rejection permanent policy applicant issued; other, will on the retention of requested indicates that “the immediate insurance for his money” getting] [he at (Ransom, is still 424) This in which supra continuing. uncertainty finds himself can be dissolved termination applicant by conditioning on both notice of and refund of Such a rule will the same time far in risk unfairness to the go eliminating where the circumstances of his surrounding notification thereof him are disputed.
Our decision this rule is fortified the consideration adopt in Ransom that it unconscionable an insurance recognized to hold without “There is an company premiums providing coverage. obvious advantage obtaining payment when the is made. ...” v. Penn Mutual (Ransom *13 Co., 43 Cal.2d at of 425.) the the supra, causes p. Payment premium to believe he is covered and hence the reduces immediately likelihood that he will withdraw the the of application during period Co., v. Western Travelers Ins. investigation. (Slobojan supra, Life 441; Co., Cal.2d at Brunt v. Occidental Ins. p. supra, 186; Anno., life, accident, of health insurance Temporary pending 943, 946; or issuance A.L.R.2d policy Comment, Insurance The the Receipts: Mystery Non-Binding Binder, 63 Yale 524.) L.J. Furthermore if the supra, accepts company the and issues it is able to earn permanent policy, thereby the from earliest date (Comment, premiums possible. “Binding Receipts” in 7 Stan.L.Rev. 293-294.) event the any California has the use of the money during period investigation. life, accident, (Anno., or health insurance Temporary pending approval or 946.) issuance of A.L.R.2d policy, Having supra, advance, secured the benefits from in flowing acceptance premiums insurer not its terminate may resulting obligation provide temporary with a notice of interim without accompanying protection refund of the eliminating any expectation thereby applicant’s premium, v. Western he covered. the insured that remains on (Slobojan part Co., 440-441; Ransom v. Penn 70 Cal.2d at Travelers pp. supra, Co., 43 Cal.2d at Mutual supra, Here, case us. Smith in the before Such a rule is most appropriate rate which the for at a plan particular reference to Westland’s determined Smith’s presence, agent, month’s received rate charts. Smith first paid published under the rise to immediate interim plan giving he submitted to and described in his passed application. Subsequently the medical examination determining company. Upon requested for, Smith Westland did was not insurable under terms applied Rather, to so Smith. and direct reject notify agents “amended to take effect when issued an company simply policy,” At insured the amendment and the additional signed Smith, two with Evans and Westland’s subsequent meetings agents Marshall tried him to the modified Although persuade policy. accept occasions, sales efforts on both unsuccessful agents’ proved was not returned to the nor refund was a company, requested office, from Westland’s until after Marshall learned of forthcoming Smith’s death.
- Westland at least until concedes that continued temporary coverage the final between Smith and on the before Marshall meeting evening death, Smith’s when the first Marshall time indicated Yet we would be refunded. encounter substantial difficulty effective termination at this The evidence only presented finding point. of what at this crucial meeting question transpired of Westland’s Marshall. Smith’s testimony agent, testimony general lost. forever *14 with final encounter
Furthermore, of his Marshall’s description have at this no that Smith could to establish longer, point, deceased fails continued. that belief his a reasonable .coverage entertained temporary to sell had tried time Westland’s him was the second This agents modifica- refused to He had amended accept proposed flatly policy. Evans; refusal did his with at the first yet tions unqualified meeting could have Smith from deter again. trying company’s agents of what in sales efforts would spite assumed persist, reasonably Marshall told him.
At no time did Smith receive written notice of of his ofor termination of his insurance. Oral communi- cations between Smith and Westland’s were shrouded in agents generally terms of his of a with minor modifications. The acceptance conditional which formed the basis for this interim receipt no on the provided termination. Under enlightenment these' question circumstances, Smith could that his insur- reasonably expect ance remained in effect the course of his with during negotiations Westland’s and would continue in effect until he received the agents refund Marshall. there sufficient promised by Although may evidence that Smith received notice of the support finding death, to his the record is clear that he did not prior receive a refund of his before his fatal accident. We therefore conclude that at the time his death the afforded conditional effect, was in full force and and that is plaintiff entitled to its terms. recovery according
The is reversed and the cause remanded to the judgment trial court with directions to determine the amount to which is entitled plaintiff under the effect at death, the time of decedent’s to make and file of fact and conclusions law in findings with the conformity views herein and thereafter to enter expressed, judgment accordingly favor of defendant for the amount plaintiff of insurance so against determined. J., Tobriner, J., J., C. Mosk, concurred.
Wright, CLARK, J. I dissent.
The of the insurance more than one unequivocal rejection month after first month’s with the acceptance premium, coupled to return the reasonable promise premium, prevented any expectation continued was eliminated. coverage. Any ambiguity return of as a condition to terminate the By requiring policy, contravenes all majority authority considering question frustrates the obvious intentions of the parties.
A to terminate a contract is not party exercising right required return consideration the time (Civ. rescission. communicating Code, 1691, 1693; Neet v. Holmes 25 Cal.2d §§ P.2d McCall 854]; Court (1934) Cal.2d P.2d Superior *15 [36 A.L.R. Gantner 1019]; v. Johnson 274 869 (1969) Cal.App.2d [79
127 Williston, 480; Contracts, 12 ed. Rest., (3d Contracts 381]; § Cal.Rptr. Corbin, 607 et (1960) 5 108 et Contracts 1970) p. seq.) p. seq.; hold that return More insurance decisions specifically, of an insurance contract. not a condition cancellation precedent 786, 52 799 Co. (1959) v. Traders & General Insurance [345 (Jensen 497, 172 Cal. & R. Ins. Co. (1916) P.2d Otter Law U. 1]; & v. Mangrum 539; 7 1962) ed. (2d 498 et P. 17 Couch on Insurance 239]; [157 seq. 920, These authorities Williston, 605 et 1970) Contracts ed. (3d § seq.) make it clear that no premium’s requires abundantly public policy insurance; our return as a to cancellation of condition express precedent for the stricter standards no majority proposes public policy demanding termination insurance. implied temporary be of insurance that an
It is anomalous to hold
may
express policy
but
termination
alone
that
cancelled
notification
implied temporary
all
It is not
more.
authority
surprising
requires something
five decisions
apply
purporting
including
confronting
problem,
be
law,
terminated
has
California
may
recognized temporary
effective either
termination
without return of
becoming
premium,
determination to
the insurer’s uncommunicated
reject
Insurance
to the
on notice of rejection
applicant.
(Metropolitan Life
802,
F.2d
803
1962)
v. Wood
Cir.
302
(9th
apply
(purporting
Company
Cir.
Insurance
v. Grant (9th
California law); Metropolitan
Company
Life
Co.
307, 310
Nat. Ins.
268 F.2d
Koorstad v.
1959)
(same);
Washington
257
405
Wernecke
882];1
(1967)
[64 Cal.Rptr.
Cal.App.2d
Pacific
238
886-888
Ins. Co. (1965)
Cal.Rptr.
Fidelity
Cal.App.2d
[48
179, 186
223
(1963)
Ins. Co.
251];2Brunt
Occidental
Co.
Insurance
(1968)
Service v.
492];
Pyramid
Cal.Rptr.
[35
McLean v.
Kan. 196
P.2d
960];
Virginia
[440
Ins. Co.
431, 433];
S.E.2d
Littell v. Republic-Franklin
[180
N.C.App.
Leube v. Prudential Ins.
N.E.2d
585];
1 Ohio
[205
App.2d
Stonsz v.
78];
N.E.2d
America
147 Ohio St.
[72
403, 406, 107 A.L.R.
854;
v.
Starr Mutual
Co. New
York
Although that contended is a return condition premium’s necessary precedent to effective termination of insurance. temporary disclaimer,
Absent an insurance is express unequivocal temporary, from the of an This implied filing paying is so because and the a leads delivery premium reasonable man to he believe is insured at that moment. (Ransom Penn Mutual Insurance Co. 43 P.2d (1954) Cal.2d 633].) [274
Because insurance is ex- provided only impliedly—not should be when the fail pressly—-the circumstances implication rejected it. warrant The reason for insurance been implying temporary having terminated, the insurance itself should be terminated. one month’s Only case, been in the instant no reasonable basis premium having paid existed to that assume exceed the would Moreover, one-month the latter to Smith’s death. period, prior expiring once with to return a unequivocal rejection—coupled premium promise —is communicated no basis exists for applicant, believing 4The claims some “view that actual refund is majority authority (see, in order terminate required effectively Reck temporary coverage e.g., 778], with Prudential Ins. Co. America A. cited [184 N.J.L. 444 (Ante, 647]).” A.2d Allen v. Ins. Co. N.J. 294 Metropolitan [208 death. see also Neither case involved of an application prior Moreover, of return in Reck court refers to failure to speaking return than within “reasonable” time rise to insurance—rather giving before court with us: termination in force. The dealing in question already Allen, the Reck discussing fully although holding, approved principles 30], De No. America v. Chiaro rule, A.2d after N.J.Super. quoting “ from- case ‘if he the advance he the usual would premium, enjoy (208 is A.2d at rejected.'" cases until his either accepted protection Thus, 647-648.) the New view that Jersey nor dicta of supports neither pp. holding return condition termination of necessary precedent insurance. *17 it must—the insurer concedes—as will The continue. majority of Smith’s communicated application, unequivocally to return the premium.5 promised
I affirm the would judgment. J.,
McComb, Richardson, concurred. J., and states, ante, evidence to “the contains substantial majority 5The 117. record page death,. . . . trial Westland court’s that on before Smith’s evening support finding issue for and promised informed him that the refused to Therefore, we of this that before refund his must assume for appeal purposes he died Smith received notice of application.” unequivocal