Where a policy lapsed prior to a loss, and where the insureds and insurer knew the loss had occurred, questions of fact precluded summary disposition of the issue of whether the insurer reinstated the policy with – or without – a lapse in coverage. (Antonopoulos v. Mid-Century Ins. Co. (2021) 63 Cal.App.5th 580)
Facts
Ted and Susie Antonopoulos purchased a residence, and obtained a homeowner’s insurance policy from Mid-Century Insurance Company. For each of the next sixteen years, Mr. and Mrs. Antonopoulos paid the annual premium in two installments. They had a history of paying the premium in an untimely fashion, often allowing the policy to expire and then making a payment at or near the last possible day to maintain the policy without a lapse in coverage.
Early in 2017, Mid-Century offered a renewal of the policy for period from April 8, 2017 to April 8, 2018. As in the past, Mr. and Mrs. Antonopoulos opted to pay in two installments, with the first installment due on April 8, and the second installment due on August 8.
After Mr. and Mrs. Antonopoulos failed to pay the first installment when due,
Mid-Century sent an expiration notice stating that the policy had expired on April 8 due to nonpayment of premium but stating that Mr. and Mrs. Antonopoulos could maintain coverage beyond the expiration date if they paid the past-due amount by April 25. Mr. and Mrs. Antonopoulos paid the premium, and Mid-Century reinstated the policy.
Several months later, Mid-Century sent a bill for the second installment of the premium. This bill stated, in multiple places, that payment was due on August 8, but Mr. and Mrs. Antonopoulos failed to pay the premium when due. About two weeks later, Mid-Century mailed a “Notice of Cancellation of Insurance for Non-Payment of Premium.” The notice identified October 3 as the date of cancellation and stated, “We are cancelling this policy. Your insurance will cease on the Date of Cancellation shown above. [¶] The reason for cancellation is non-payment of premium. [¶] This is the only notice you will receive.” The notice stated that Mr. and Mrs. Antonopoulos could void the cancellation by paying the premium, plus a late fee, by September 11. However, Mr. and Mrs. Antonopoulos failed to make the payment and therefore, on October 3, Mid-Century cancelled the policy.
On October 9, six days after Mid-Century cancelled the policy, a wildfire destroyed Mr. and Mrs. Antonopoulos’ residence and most of their personal property. Either that day or the next, Mr. and Mrs. Antonopoulos notified Mid-Century of the loss. Over the next few days, Mr. and Mrs. Antonopoulos spoke with multiple individuals at Mid-Century, all of whom told Mr. and Mrs. Antonopoulos their loss was not covered because their policy had been cancelled.
By letter dated October 12, Mid-Century formally acknowledged receipt of Mr. and Mrs. Antonopoulos’ claim and informed them: “We have completed our coverage investigation and have determined your policy [was] cancelled for non-payment of premium effective October 3, 2017. Therefore, since the policy was not active at the time of this loss, we must respectfully disclaim coverage for this loss.” That same day, Mr. and Mrs. Antonopoulos made an electronic payment to Mid-Century for the premium. Mid-Century retained the premium and never returned it.
On October 17, Mid-Century sent a notice of “Home Insurance Reinstatement.” This notice listed the same policy number as the policy that was cancelled on October 3, but identified the policy’s effective date as October 12, which was after the recent cancelation date and after the fire. The notice also indicated the policy’s expiration date would be April 17, 2018 (i.e., nine days after the date the policy, as originally written, would have expired). Even though the fire already had destroyed most of Mr. and Mrs. Antonopoulos’ property, this notice of reinstatement listed coverage limits for the house, other structures and personal property. All of the limits were the same as they had been prior to the fire.
Mid-Century admitted it had reinstated the policy. However, Mid-Century maintained that the policy had lapsed for nine days and that, when Mid-Century reinstated the policy after the fire, Mid-Century simply had extended the original expiration date (April 8, 2018) by nine days (to April 17, 2018).
After the fire, and after Mid-Century reinstated the policy, Mid-Century sent several different declaration pages that had conflicting information about the effective date of the policy. One indicated that the renewal date was April 17, 2017 (i.e., nine days after the date the policy, as originally written, was renewed) and that the expiration date would be April 17, 2018 (i.e., nine days after the date the policy, as originally written, would have expired). Mid-Century maintained this conflicting information was simply the product of computer data inputting. However, Mr. and Mrs. Antonopoulos argued that this showed Mid-Century had altered the beginning and ending dates of the policy by nine days, and that the policy had not lapsed for nine days.
Mr. and Mrs. Antonopoulos sued Mid-Century, and both sides filed motions for summary judgment or, alternatively, summary judgment. The trial court denied Mid-Century’s motion in its entirety, and granted Mr. and Mrs. Antonopoulos’ motion for summary adjudication, finding that Mid-Century was obligated to provide coverage for the loss. Mid-Century appealed.
Holding
The Court of Appeal affirmed the order denying Mid-Century’s motion. However, the Court reversed the order granting Mr. and Mrs. Antonopoulos’ motion, because the Court found there was a triable issue about whether Mid-Century had waived its right to assert that Mr. and Mrs. Antonopoulos had forfeited coverage.
The Court noted that an insurer is entitled to reinstate a policy with or without a lapse period. Here, Mid-Century maintained that, when it reinstated the policy, it had done so subject to a nine-day lapse period (and simply had added extended the policy’s anniversary date by nine days).
The Court expressly rejected Mid-Century’s argument that, as a matter of law, an insurer could not reinstate a policy to apply retroactively to a loss that the insured knew already had occurred. The Court held that the “loss-in-progress” rule barred an insured from purchasing a new policy for a loss the insured knew already had occurred. However, the Court held the “loss-in-progress” rule did not bar an insured from seeking reinstatement of a policy that had lapsed prior to the loss, and did not bar an insurer from providing coverage for a loss the insured knew already had occurred.
The Court noted that, at least initially, Mr. and Mrs. Antonopoulos had forfeited their rights under the policy by failing to pay the second premium installment when due. But, according to the Court, there was a triable issue of fact as to whether Mid-Century waived Mr. and Mrs. Antonopoulos’ forfeiture. And, according to the Court, this issue of fact hinged upon Mid-Century’s intent.
Comment
This case makes it clear that, even if the insured and insurer know a loss already has occurred, the insured may seek – and the insurer may grant – reinstatement of a lapsed policy. According to the Court of Appeal, the “loss-in-progress” rule applies to an entirely new policy, but not to reinstatement of a policy the insured purchased prior to the loss. Instead, according to the Court, when an insured has forfeited coverage (by failing to pay premiums), the issue is whether the insurer subsequently waived the insured’s forfeiture.
Waiver (the voluntarily and intentional relinquishment of a known right) usually is a question of fact. In this case, various events created a question of fact about Mid-Century’s intent. For example, after the policy lapsed, and after Mr. and Mrs. Antonopoulos notified Mid-Century of the loss, Mid-Century accepted the entire second installment of the premium. Then, instead of adjusting and refunding the premium for the nine-day period of time, Mid-Century retained the premium and essentially extended the expiration date of the one-year policy by nine days. In addition, when Mid-Century reinstated the policy, Mid-Century issued a notice which listed coverage limits for property that Mid-Century already knew had been destroyed by the fire. According to the Court, these events created a question of fact about whether Mid-Century intended to reinstate the policy with – or without – a lapse in coverage.