United States: Sequeira v. Lincoln National Life Insurance Company

(Supplemental Life Insurance Policy Deemed Ambiguous Based on Whether Employee “Actually At Work” When He Died in a Hospital Bed of a Heart Attack)

In Sequeira v. Lincoln National Ins. Co., ____ Cal.App.4th ____ (August 31st, 2015), the California First District Court of Appeal reversed the trial court’s entry of summary judgment in connection with a widow’s claim for benefits under a supplemental life insurance policy based on ambiguity in connection with whether such policy was triggered due to the death of her husband while in the hospital, rather than actually at his place of employment.

The deceased, Donald Sequeira (“Sequeira”), had been employed with the City of Vacaville (the City) since approximately 1990. Defendant, Lincoln National Insurance Company (“Lincoln”), provided basic life insurance coverage to the City’s employees and also offered employees the option of purchasing supplemental coverage from Lincoln. On October 7, 2009, Sequeira completed an enrollment form for basic coverage as well an additional $275,000 in supplemental coverage. Sequeira designated his wife, Michelle Sequeira, as the primary beneficiary of both the basic and supplemental coverage. Sequeira made two premium payments for the supplemental coverage before the end of the year via paycheck deductions.

Lincoln issued the basic and supplemental policies to the City on January 1, 2010, for participating employees, including Sequeira. The parties agreed that the basic policy was in effect on January 1, 2010, and that plaintiff was entitled to benefits under that policy. Their dispute centered on whether plaintiff was entitled to benefits under the supplemental policy.

The supplemental policy contained the following eligibility provision:

“ELIGIBILITY

“If you are a Full-Time Employee and a member of an employee class shown in the Schedule of Insurance; then you will become eligible for the coverage provided by the Policy on the later of:

“(1) the Policy’s date of issue; or

“(2) the day you complete the Waiting Period.”

The supplemental policy defined a “Full-Time Employee” as an employee:

“(1) whose employment with the EMPLOYER is the employee’s principal occupation;

“(2) who is not a temporary or seasonal employee; and

“(3) who is regularly scheduled to work at such occupation at least the number of hours as shown in the Schedule of Insurance.”

On the same page as the eligibility provision, the supplemental policy contained the following provision regarding effectiveness:

“EFFECTIVE DATES OF COVERAGES

“Your insurance is effective on the latest of:

“(1) the first day of the Insurance Month coinciding with or next following the day you [4] become eligible for the coverage;

“(2) the day you resume Active Work, if you are not Actively at Work on the day you become eligible;

“(3) the day you make written application for coverage; and sign:

“(a) a payroll deduction order; or

“(b) an order to pay premiums from your Flexible Benefit Plan account, if Employer contributions are paid through a Flexible Benefit Plan; or

“(4) the first day of the Insurance Month following the date the Company approves your coverage, if evidence of insurability is required.” (Italics added.)

The parties agreed that Sequeira was eligible for coverage under the supplemental policy, but disagreed on whether the supplemental policy ever became effective as to Sequeira. The parties’ dispute centered on whether the “active work” requirement in paragraph (2) of the Effective Dates of Coverage provision required Sequeira to perform his work duties between January 1 and his death on January 6 in order for the supplemental policy to become effective. The terms “active work” and “actively at work” found in paragraph 2 are defined in the supplemental policy as follows:

“ACTIVE WORK OR ACTIVELY AT WORK means the full-time performance of all customary duties of an employee’s [5] occupation at the EMPLOYER’S place of business (or other business location to which the EMPLOYER requires the employee to travel.)”

The terms “Active Work” and “Actively at Work” are used in other parts of the supplemental policy. One such place is the waiting period provision, which states: “WAITING PERIOD: 30 days of continuous Active Work.”

The term “Active Work” also appears in the “Termination of Coverage” provision, which states:

“Ceasing Active Work terminates your eligibility. However, you may continue coverage as follows: … [¶] … [¶]

“(2) If you cease active work due to a temporary lay off, an approved leave of absence, or a military leave; then coverage may be continued:

“(a) for three Insurance Months after the lay off or leave begins;

“(b) provided premium payments are made on your behalf.”

Sequeira did not work on January 1, 2010, the day the supplemental policy was issued, because it was a paid holiday. He was hospitalized suddenly on Saturday, January 2nd and died on Wednesday, January 6. His cause of death was related to a viral infection in his heart. He did not report to work between January 1 and his death on January 6.

Subsequently, plaintiff submitted a claim to Lincoln for benefits under both the basic and supplemental policies. Lincoln paid benefits to plaintiff under the basic policy, but denied her benefits under the supplemental policy, reasoning that Sequeira never returned to work from December 30, 2009 prior to the effective date until his date of death. Therefore, Mr. Sequeira was never “actively at work” on or after the effective date of the policy so his coverage under this policy never became effective. The plaintiff filed a complaint against Lincoln National on August 31, 2010 alleging causes of action for breach of contract and bad faith based on its failure to pay benefits afforded by the supplemental life insurance policy. Plaintiff filed a motion for summary adjudication against Lincoln arguing that Lincoln owed her a duty under the supplemental policy to pay the $275,000 in benefits. In turn, Lincoln filed its own cross-motion for summary adjudication on the ground that it did not breach the supplemental policy by denying plaintiff benefits. The trial court denied plaintiff’s motion and granted Lincoln’s motion. For purposes of appeal, subsequently, the parties stipulated to a judgment in favor of Lincoln.

The trial court reasoned that coverage was not afforded under the policy because Mr. Sequeira was not “actively at work” because he was not on the job, at the time he died. As a result, although he met the eligibility requirements, the policy did not become effective as to him.

In reversing the trial court’s decision, the Court of Appeal held that the policy was ambiguous in connection with the meaning of “actively at work.” According to the Court of Appeal, such phrase could be interpreted to mean that the deceased need only be a full-time employee, rather than physically at work, at the time of death. In particular, the court noted that Lincoln’s interpretation of the policy bordered on nonsensical, given that an employee could die on the weekend and be denied coverage based on Lincoln’s interpretation of the phrase “actively at work.”

The Court of Appeal explained the ambiguity as follows:

We begin with the supplemental policy’s definition of “Active Work or Actively at Work” and conclude that it supports an interpretation referring to an employee’s full-time status, and not whether the employee is actually performing work. “Active Work or Actively at Work” is defined as “‘the full-time performance of all customary duties of an employee’s occupation at the EMPLOYER’S place of business.’” Lincoln focuses on the word “performance” and contends it refers to the execution of an action, as opposed to a particular status. (See Merriam-Webster’s 11th Collegiate Dict. (2007) p. 920 [defining “performance” as “the execution of an action”].) However, Lincoln’s argument ignores that the pertinent phrase is not just “performance,” but “full-time performance.” The word “full-time” is found elsewhere in the supplemental policy as part of the definition of “Full-time Employee.” The definition of “full-time” there does not depend on an employee being on the job at a given moment in time. Instead, it addresses whether an employee has another occupation, whether the employee is temporary or permanent, and the hours the employee is regularly scheduled to work—in other words, an employee’s status. Given this, a reasonable insured could interpret “full-time performance” in the definition of “Active Work or Actively at Work” to also refer to employment status, as opposed to actually being on the job at any given moment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions