United States Life Insurance Company v. Wilson
18 A.3d 110 (2011) 198 Md. App. 452 (2011)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under the common law 'mailbox rule,' the reinstatement of a lapsed insurance policy is effective upon dispatch of the premium payment by the insured, not upon receipt by the insurer. This rule applies even when the payment is initiated electronically but results in a physical check being sent by a third-party, such as a bank.
Facts:
- Dr. John G. Griffith held a life insurance policy from U.S. Life, administered by AMA Insurance Agency, Inc. (AMAIA), with his wife, Elizabeth Wilson, as the beneficiary.
- Dr. Griffith missed his semi-annual premium payment due on May 15, 2007.
- Following the missed payment, AMAIA sent Dr. Griffith a 'REMINDER NOTICE' stating that full payment must be received 'no later than 60 days from the due date' to assure active coverage, effectively extending the grace period to July 14, 2007.
- On July 23, 2007, Dr. Griffith used his online banking service to direct a payment for the overdue premium to AMAIA.
- Dr. Griffith's bank generated a paper check and, according to bank records, 'sent' it to AMAIA on Wednesday, July 25, 2007.
- On Saturday, July 28, 2007, Dr. Griffith was struck by a car and killed.
- AMAIA received the premium check, which was postdated for July 30, 2007, on that same date.
- On August 2, 2007, unaware of Dr. Griffith's death, AMAIA rejected the payment and returned the check, stating it was received after the grace period had closed.
Procedural Posture:
- Elizabeth Wilson sued U.S. Life and AMAIA for breach of contract in the Circuit Court for Baltimore City (trial court).
- Both parties filed cross-motions for summary judgment.
- The circuit court denied the defendants' motion and granted Wilson's motion, entering judgment in her favor for $650,000.
- The defendants filed a motion for reconsideration, which the court denied, and the court granted Wilson's motion to add pre-judgment interest.
- U.S. Life and AMAIA (appellants) filed a timely appeal of the circuit court's judgment to the Court of Special Appeals of Maryland, with Elizabeth Wilson as the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the common law 'mailbox rule' apply to the reinstatement of a lapsed life insurance policy, making the payment effective when it is dispatched by the insured's agent, rather than when it is received by the insurer?
Opinions:
Majority - Deborah S. Eyler, J.
Yes. The common law 'mailbox rule' applies, and therefore payment is effective upon dispatch, reviving the policy before the insured's death. The court reasoned that the policy's reinstatement clause constituted an offer for a unilateral contract, which the insured could accept by performing the single act of paying the overdue premium. The court determined that 'payment' under the policy terms did not mean 'receipt' or 'negotiation' by the insurer, as this would put the timing of acceptance outside the insured's control. Applying the mailbox rule, the acceptance (payment) was effective when it was put out of the offeree's possession and into the control of a third party for delivery. In this case, that moment was July 25, 2007, when Dr. Griffith's bank sent the check, three days before his death. The court also dismissed the argument about the check being postdated, citing UCC provisions that allow a bank to honor a postdated check before its date unless the customer specifically instructs otherwise.
Analysis:
This decision affirms the enduring relevance of the common law mailbox rule and extends its application to modern, hybrid electronic-to-physical payment methods. By defining the moment of 'dispatch' as when a bank sends a check pursuant to an online bill-pay instruction, the court provides a clear and predictable rule for determining when payment is made in such transactions. This reinforces the principle that acceptance is effective when the offeree acts and relinquishes control, protecting the insured from delays in mail delivery or processing by the insurer. The case serves as a key precedent for how centuries-old contract principles adapt to evolving financial technologies.
Unlock the full brief for United States Life Insurance Company v. Wilson