Guardian Life Insurance v. United States Tower Services, Ltd.

⁵⁵² SALMON, Judge. United States Tower Services, Limited (UST), and Joseph Burdette and Norman Jeweler, both trustees of the UST Profit Sharing Plan and Trust and of the UST Pension Plan (the Plan), filed suit in the Circuit Court for Montgomery County against appellant, The Guardian Life Insurance Company of America (Guardian). 1 Plaintiffs alleged in their complaint that Guardian was obligated, under the terms of its insurance contracts and also under the terms of a Maryland statute, to refund to its insureds all premiums paid to it if the insured returned the policy within ten days of its receipt. The complaint further alleged that the Plan, within ten days of the date it received its policies, returned to Guardian’s home office all the policies it had purchased from Guardian, but, nevertheless, Guardian refused to refund the premiums. Guardian denied that it owed the Plan any money.

The case was tried before a jury from February 26 to March 4, 1996. At the end of plaintiffs’ case and at the end of the entire case, Guardian made a Motion for Judgment, claiming, inter alia, that, even if it had technically breached the insurance contracts by failing to refund the past-paid premiums, the Plan had waived the breach. Alternatively, Guardian argued that, as a matter of law, the Plan was equitably estopped from asserting a right to the premiums. The motions for judgment were denied, and the jury returned a verdict in favor of the Plan in the amount of $204,428.71.

This figure was calculated by totaling the premium payments made by the Plan from November 1987 to February 1992. After filing a motion for judgment notwithstanding the verdict, which was denied, Guardian filed this timely appeal. It raises several issues, but we need address only two: 2 ⁵⁵³ 1. As a matter of public policy, can an insured by its conduct waive the right to a premium refund that is granted by Maryland Code Annotated (1994 RepLVol.), article 48A, section 387C? 2.

Assuming, arguendo, that the provisions of article 48A, section 387C, can be waived, did appellees waive their right to a premium refund by their conduct after appellees demanded a refund? We answer both questions in the affirmative and reverse. A. FACTS 3 UST, a small company located in Rockville, Maryland, 4 is in the business of erecting and maintaining communication towers for cellular telephones, radio stations, television stations, the United States military, and microwave systems. UST’s employees engage in dangerous work.

Many are required to climb towers even during inclement weather. It was impor ⁵⁵⁴ tant to some of UST’s employees that the company purchase life insurance. Sometime in 1987, representatives of UST contacted David Kenny, an agent of Guardian, to inquire about purchasing life insurance as part of the company’s pension plan. In late 1987, Mr. Kenny persuaded the Plan to purchase life insurance policies from Guardian.

The policies that were purchased insured the lives of Joseph Burdette (Burdette), Norman Jeweler (Jeweler), and six other employees of UST. As already mentioned, Burdette and Jeweler were Trustees of the Plan. The policies insuring Burdette and Jeweler were whole life policies providing $1,000,000 in life insurance. The other policies were five-year automatic convertible term policies.

The policies funded the Plan. Each of the policies contained what is known as a “ten-day free look provision,” which read as follows: READ THIS POLICY CAREFULLY: This policy is a legal contract between the owner and Guardian. If this policy is returned to Guardian’s home office or to any agent or agency within ten days after it is received, all premiums paid will be refunded. The policy will be void from the beginning.

At the time of the application for the policies, Kenny told representatives of the Plan that after the policies were issued that the trustees and their advisers would have an opportunity to examine the policies to see if each of the policies met with their approval. Kenny specifically assured the trustees that if, after examination, the Plan was dissatisfied, then the policies could be canceled. After the policies were issued, Kenny told Burdette that he intended to keep the originals of the policies in case he was contacted by any of the professionals hired by UST to evaluate the Plan. This arrangement was not agreeable to Burdette.

Burdette, in 1988,. told Kenny that he wanted the originals of the policy to be delivered to him. Thereafter, the Plan made numerous unsuccessful written and oral demands to Kenny to obtain the policies. ⁵⁵⁵ The policies consisted of two parts. Part A set forth information particular to each insured. Part B contained boilerplate provisions that were the same for every policy of a particular type.

The ten-day free look provision was in Part A. Although appellees never received the entire policies prior to 1992, they did receive Part A in early 1988, and by at least 1990 the appellees had in their possession a copy of the insurance binders for the various policies. Finally, after much effort on the part of the trustees and their lawyers, Guardian delivered to appellees “duplicate” policies 5 in February 1992. 6 Within ten days of receipt of the duplicate policies and on February 27,1992, Jeweler, who was President of UST, wrote to Guardian and demanded a full refund of the more than $200,000 in premiums (five years’ worth) paid to Guardian; he also returned the policies in accordance with the “free-look” provision of the policies. On February 28, 1992, Guardian refused to accept the policies and also refused to refund any of the premiums paid by appellees. In a letter dated March 24, 1992, Guardian spelled out its position to Jeweler.

First, Guardian said that its agent, Kenny, had “indicated [to it] that the policies in question were, in fact, delivered” to either Burdette or Jeweler soon after they were issued and that he (Kenny) was “at a loss” to explain appellees’ claim that the policies had not been received. Guardian also asserted that “other factors indicated that appellees were aware of the coverage they had.” Guardian listed those other factors as follows: First, the policies were in force 5 years before you contacted the Home Office. In addition, (a) Premiums were paid in full during this period. (b) The plan was maintained as a qualified [pension] plan [for IRS purposes]. ⁵⁵⁶ (c) Tax deductions were taken based on the insurance premium.

(d) All policies in question did provide death benefits which would have been paid in the event of death. Appellees filed their complaint in the Circuit Court for Montgomery County on July 10, 1992, to enforce their right to the refund. Despite the fact that the appellees had attempted in February 1992 to void the policies and obtain a refund of all monies paid through February 27, 1992, UST thereafter continued to make premium payments to Guardian on four of the six policies but not on the policies insuring Burdette and Jeweler. On each of its premium payment checks, appellees wrote the words “under protest.” On December 11, 1992, the policies covering the lives of Burdette and Jeweler lapsed for nonpayment of premiums.

But in March of 1993, appellees applied for reinstatement of these whole life policies and Guardian reinstated them. Thereafter, appellees regularly made premium payments due for all of the policies. At trial, Jeweler testified that as a trustee of the Plan he applied for reinstatement of the policies in order to protect “a tremendous amount of money that belonged] to the pension plan.” On a related subject, Burdette testified that he did not cancel the policy after February 27, 1992, because he feared that cancellation might be a “financial” mistake. Q. [Guardian’s Counsel:] Why didn’t you cancel the policies?

A. [Mr. Burdette:] Well, the policies were probably cancelable, I guess. I’ve learned that. We wouldn’t have canceled them because they were an investment vehicle in the pension plan and we were trying to oversee the pension plan. They also were security for the workers and myself.

The insurance policy gains cash value not very rapidly in the first year or two, and we had already passed that milestone. So switching insurance or — or canceling insurance after you’ve passed the first years may very well be a ⁵⁵⁷ financial mistake, perhaps the best thing I just could conjecture. In response essentially to the same question, Jeweler testified: A. Well, we had paid money in, we had insurance. We felt relatively comfortable that there was insurance in place and we paid a lot of money for that insurance, and that’s what we wanted, we wanted the insurance, it was part of the pension plan.

At the time of trial, four years after the attempt to cancel by the Plan, the appellees still regularly paid the premiums on the policies, continued to accept policy dividends from Guardian, continued to take federal income tax deductions for the monies paid to Guardian for the insurance, and enjoyed the financial protection afforded by the policies. B. ISSUE 1 Appellees contend that under no circumstances may an insured waive enforcement of the ten-day free look provision. Maryland Code (1957, 1994 RepLVol.), Art. 48A, § 387C, 7 provides: Information to be attached or printed on face of policy or contract. (a) Required information. — Each life insurance policy or annuity contract subject to this subtitle shall have attached or prominently printed on the face of the policy or contract the following information: (1) A notice to the policyholder that, during the period of ten days from the date the policy or contract is delivered to the policyholder, it may be surrendered to the insurer for cancellation, and a pro rata premium for the unexpired term of the policy shall be returned to the policyholder.

The notice shall be given to the insurer in writing; or ⁵⁵⁸ (2) A notice to the policyholder which is similar to the notice contained in paragraph (1) and which, in the opinion of the Commissioner, is not less favorable to the policyholder. (b) Application of section. — The section shall not apply to policies or contracts issued to an employee in connection with the funding of a pension, annuity or profit-sharing plan, qualified or exempt under, § 401, § 403, § 404, or § 501 of the Internal Revenue Code if participation in the plan is a condition of employment. [8] Article 48A, section 377(d), 9 which governs section 387C, states that “[n]o such [mandatory] provision, if required to be contained in the policy, can be waived by agreement between the insurer and any other person.” (Emphasis added.) The appellees posit that even if they had intended to do so they could not, by their actions or failure to act, have waived a provision of a statute such as section 387C, which is founded upon public policy. 10 We do not agree with this proposition because if the Legislature had wanted to prevent waiver by act or conduct of the insured it would have said so, as it has done in the past. See, e.g., Md.Code (1957, 1995 RepLVol.), ⁵⁵⁹ Art. 70B, § 16 (“No act, agreement, or statement ... shall constitute a valid waiver.... ”); Md.Code (1975, 1990 Repl. Vol.), § 12-512 of the Commercial Law II Article (“No act, agreement, or statement ... may constitute a valid waiver____”).

Instead of prohibiting all types of waiver, section 377 prohibits only waiver by agreement. From the inclusion of one type of waiver, we infer the exclusion of any other type — inclusio unius est exclusio alterius (inclusion of one is the exclusion of another). This principle was explained in Dodds v. Shamer, 339 Md. 540, 554 , 663 A.2d 1318 (1995), a case involving the issue of whether a liquor license in Baltimore County was subject to levy under a writ of execution. Maryland Code (1957, 1998 RepLVol.), Art. 2B, § 10-501, provides that liquor licenses in Prince George’s, Worcester, Howard, and Harford Counties were specifically shielded from execution by creditors.

The Dodds Court said: We will not infer from the absence of explicit provisions that the statute extends the rule in the four named counties to the entire State. See Slate v. Zitomer, 275 Md. 534, 540 [ 341 A.2d 789 ] (1975) (“[C]ourts may not ‘attempt under the guise of construction, to supply omissions or remedy possible defects in the statute, or to insert exceptions not made by the Legislature.’ ”) (citing Amalgamated Casualty Ins. Co. v. Helms, 239 Md. 529, 535-36 [ 212 A.2d 311 ] (1965)), cert. denied, Gasperich v. Church, 423 U.S. 1076 , 96 S.Ct. 862 , 47 L.Ed.2d 87 (1976). Had the General Assembly intended to exempt liquor licenses from writs of execution throughout the State, it could have done so just as it did for the four named counties.

Following the doctrine of inclusio unius est exclusio alterius, we find that by specifically exempting liquor licenses from execution in Prince George’s, Worcester, Howard, and Harford Counties the General Assembly did not intend also to exempt liquor licenses from execution in the rest of the State. American Security & Trust Co. v. New Amsterdam Casualty Co., 246 Md. 36, 41 [ 227 A.2d 214 ] (1967) (concluding that because the Legislature had not included mortgagees within the terms of a ⁵⁶⁰ statute that they were purposely excluded from the statute’s reach). Dodds, 339 Md. at 554 , 663 A.2d 1318 (footnote omitted). Several Maryland cases show that statutory provisions, analogous to section 387C of the Insurance Code, can be waived by the conduct of the person the law was designed to protect.

See, e.g., Hudson v. Maryland State Housing Co., 207 Md. 320, 329-30 , 114 A.2d 421 (1955) (vendee waived right to rescind land installment contract despite technical deficiencies under Land Installment Contract Act); Mercedes-Benz of N.A., Inc. v. Garten, 94 Md.App. 547, 564-65 , 618 A.2d 233 (1993) (car buyer waived right to a refund of purchase price under Automotive Warranty Enforcement Act); Bagel Enter., Inc. v. Baskin & Sears, 56 Md.App. 184, 200 , 467 A.2d 533 (1983)(franchisees waived right to rescind a contract to purchase franchise rights sold in violation of the Franchise Registration Act), cert. denied, 299 Md. 136 , 472 A.2d 999 (1984). C. ISSUE 2 Appellant contends, inter alia, that by appellees’ action, after February 1992 when the Plan demanded a refund, it waived its rights to a cancellation of the