In Dones v. Life Ins. Co. of North America (No. A157662, filed 10/7/20), a California appeals court held that whether an insurer had waived or was estopped to assert that an “active service” requirement prevented inception of coverage for an employee under a group life insurance policy provided by her employer presented triable issues of fact not subject to demurrer.
In Dones, Life Insurance Company of North America (LINA) issued a group life insurance policy to the Alameda County Sheriff’s Department. The deceased was a civilian employee who enrolled for the coverage online. She was on medical leave, remained on leave through the purported effective date of coverage, and died six months later. The premiums were paid out of her paycheck, and out-of-pocket when that became insufficient.
The insurance was provided under a master policy that was not distributed to enrolled employees, who were supposed to be given a certificate describing the coverage. The master policy stated: “If an Employee is not actively at work due to Injury or Sickness. . . . Coverage will become effective on the date the Employee returns to Active Service.” “Active Service” was defined as: “An Employee will be considered in Active Service with the Employer on a day which is one of the Employer’s scheduled work days if. . . 1. He or she is actively at work . . . . performing his or her regular occupation for the Employer on a full-time basis. . . .”
The limitation was referred to in various paper notices and places online, but not clearly spelled out. When the employee died, her beneficiary was advised that the coverage never took effect because she had not returned to active service, and her premiums would be refunded. In the ensuing breach of contract and bad faith lawsuit, the beneficiary alleged that the County was acting as agent for LINA in administering the policy; that she detrimentally relied on a confirmation she received that the insurance was in effect; and that by repeatedly deducting the premiums from her paycheck without notifying her of any deficiency in her application, the County, for itself and as agent for LINA, knowingly and voluntarily waived any requirement that the insured be actively at work for coverage to take effect.
The trial court sustained the County’s and LINA’s demurrers without leave to amend, holding that since it was admitted in the complaint’s allegations that the life insurance benefits would not go into effect until the employee returned to...
