United States Life Insurance v. Wilson
198 Md. App. 452 · 2011
Facts
Dr. John G. Griffith purchased a life insurance policy from United States Life Insurance Company (U.S. Life) in 1998, naming his wife, Elizabeth Wilson, as the primary beneficiary. The policy, administered by AMA Insurance Agency, Inc. (AMAIA), provided a $400,000 death benefit and a $250,000 accidental death benefit. Dr. Griffith made semiannual premium payments until he failed to pay the May 15, 2007 premium. AMAIA sent a "REMINDER NOTICE" stating full payment must be received within 60 days of the due date, implying an extended grace period until July 14, 2007. On July 23, 2007, Dr. Griffith electronically initiated a payment of the overdue premium to AMAIA, and his bank sent a check on July 25, 2007. On July 28, 2007, Dr. Griffith died in an accidental bike collision. AMAIA received the check on July 30, 2007, and rejected it, stating the payment was received after the grace period and requiring a reinstatement application, unaware of Dr. Griffith's death. Ms. Wilson's subsequent claim for benefits was denied by AMAIA.
Procedural history
Elizabeth Wilson filed a breach of contract action against U.S. Life and AMAIA in the Circuit Court for Baltimore City. The circuit court granted summary judgment in favor of Ms. Wilson. U.S. Life and AMAIA appealed this decision. This court affirmed the judgment against U.S. Life but reversed the judgment against AMAIA, remanding with instructions to enter judgment for AMAIA.
Issue
Was Dr. Griffith's life insurance policy in force when he died, specifically regarding whether the grace period was extended and if the policy was effectively reinstated before his death? Was AMAIA, as a third-party administrator, contractually liable for the policy benefits?
Holding
Yes, the policy was in force when Dr. Griffith died. The circuit court correctly ruled that the policy was in force against U.S. Life, but erred in ruling that AMAIA was contractually liable.
Rule
An insurance policy is a contract interpreted by its plain language to ascertain intent. A grace period can be extended by written notice stating the new end date, and a "REMINDER NOTICE" specifying payment within 60 days of the due date effectively extends it. Reinstatement clauses in life insurance policies, especially when allowing reinstatement without evidence of insurability within a specified period after the grace period, constitute an offer for a unilateral contract that is accepted by the insured's performance (payment of overdue premiums). The "mailbox rule" applies to determine when payment is made, meaning payment is effective when dispatched by the insured, not when received or negotiated by the insurer, even if initiated electronically and sent by a bank. An agent acting for a disclosed principal is not liable for the principal's contractual obligations unless expressly agreed.
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