Becky K. Simon v. USAA Life Insurance Company

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 23-12693
Non-Argument Calendar
____________________
BECKY K. SIMON,
Plaintiff-Appellant,
versus
USAA LIFE INSURANCE COMPANY,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Alabama
D.C. Docket No. 2:23-cv-00125-ECM-CWB
____________________
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2 Opinion of the Court 23-12693
Before R OSENBAUM , NEWSOM , and ANDERSON, Circuit Judges.
PER CURIAM:
Becky Simon sued USAA Life Insurance Company for failure
to provide benefits under a term life insurance policy her late hus-
band purchased. USAA denied coverage because Simon’s husband
died two days after the policy had lapsed for nonpayment of the
annual premium, and it returned Simon’s late premium payment
aimed at restoring coverage. Simon contends that USAA either
waived or is barred from denying coverage by retaining her late
premium for approximately 45 days, and that equitable tolling ap-
plies to excuse a payment missed due to incapacity of the insured.
The district court rejected these arguments and granted summary
judgment to USAA. After careful review, we affirm the district
court.
I.
Simon was the primary beneficiary of a $2 million 20-year-
term life insurance policy from USAA held by her late husband, Jef-
frey Simon, a pediatrician and former U.S. Navy Commander, with
whom she raised five children. During his lifetime, Jeffrey handled
all financial affairs in the Simon household, including paying the
annual life insurance premium for nearly seventeen years.
Unfortunately, in 2018, Jeffrey was diagnosed with multiple
sclerosis, an immune-mediated disorder that affects the body’s cen-
tral nervous system. Although he tried many treatment options,
his condition deteriorated rapidly, and by early 2021, he was com-
pletely immobile, essentially nonverbal, and had severe cognitive
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23-12693 Opinion of the Court 3
deficits. In September 2021, the Simons left for a treatment facility
in Mexico in the hope of obtaining some relief for his symptoms.
Sadly, Jeffrey passed away in Mexico on October 5, 2021, at the age
of 57.
When Simon returned home and began managing the
household finances, she discovered that Jeffrey had failed to pay the
premium due in August 2021 on his USAA life insurance policy,
among other bills. A letter from USAA dated September 2, 2021,
notified Jeffrey that his coverage would lapse if he did not send his
premium payment of $2,770 by October 2, 2021. A follow-up letter
dated October 3, 2021, a mere two days before Jeffrey’s death,
stated that the policy had lapsed.
On December 1, 2021, the day after she found the USAA let-
ters, Simon mailed USAA a check for $2,770 as full payment for the
missed premium. Soon after, an attorney retained by Simon wrote
a letter to USAA, informing the insurer that Simon had mailed the
balance of the outstanding premium on December 1, 2021, that
“[t]he payment was past due because [Jeffrey’s] health was in criti-
cal condition,” and that Jeffrey had died.
USAA received Simon’s check on or about December 8,
2021, and deposited the funds. On January 21, 2022, however,
USAA sent Simon a letter notifying her that Jeffrey’s policy had
been terminated. USAA also informed Simon that it would not
provide death benefits under the policy. Simon received a check
from USAA for $2,770 on January 23, 2022, refunding the premium
payment.
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4 Opinion of the Court 23-12693
II.
In January 2023, Simon sued USAA in Alabama state court,
alleging that it had breached the contract and acted in bad faith by
refusing to pay death benefits under the policy. USAA removed
the case to federal court and then filed a motion to dismiss for fail-
ure to state a claim. USAA maintained that it was not liable under
any of the causes of action asserted because the policy had lapsed
for nonpayment before Jeffrey’s death.
USAA submitted a copy of the policy at issue1, which pro-
vided that “[i]f a premium is not paid when due, the policy will ter-
minate except as indicated elsewhere in the policy.” Other policy
terms stated that, after a missed premium, the policy would remain
in force for a 31-day grace period before lapsing. If the policy lapsed
“due to nonpayment of premium,” coverage could be reinstated
upon receipt of the unpaid premium and “[e]vidence satisfactory to
[USAA] that the Insured [was] still insurable.”
Simon responded in opposition, contending that USAA had
waived forfeiture of the policy for nonpayment by depositing and
retaining her post-lapse premium payment, that equitable tolling
1 We may consider the policy at the motion-to-dismiss stage because it is cen-
tral to Simon’s claims and its authenticity is not disputed. See Hi-Tech Pharm.,
Inc. v. HBS Int’l Corp., 910 F.3d 1186, 1189 (11th Cir. 2018) (“Under the doctrine
of incorporation by reference, we may also consider documents attached to
the motion to dismiss if they are referred to in the complaint, central to the
plaintiff’s claim, and of undisputed authenticity.”).
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23-12693 Opinion of the Court 5
excused the late payment due to Jeffrey’s incapacity, and that
USAA was equitably estopped from denying coverage.
The district court granted USAA’s motion to dismiss. The
court found that USAA did not waive its right to deny coverage
under the policy because it had “returned Simon’s overdue pre-
mium payment,” that Alabama law did not support equitable toll-
ing of the policy lapse date, and that USAA was not equitably es-
topped from denying coverage by temporarily retaining the over-
due premium before returning it. Simon appeals.
III.
We review de novo the grant of a motion to dismiss for fail-
ure to state a claim to relief. Smith v. United States, 873 F.3d 1348,
1351 (11th Cir. 2017). “In assessing the sufficiency of a claim, we
accept all well-pleaded allegations as true and draw all reasonable
inferences in the plaintiff’s favor.” Id. We may affirm the judgment
on any grounds supported by the record. Kernal Records Oy v. Mos-
ley, 694 F.3d 1294, 1309 (11th Cir. 2012).
Simon does not dispute that the policy lapsed for nonpay-
ment under its plain terms. But she contends that USAA cannot
avoid coverage, relying on the doctrines of waiver, equitable estop-
pel, and equitable tolling.
A.
In general, when an insurance policy states that failure to
pay premiums causes the policy to lapse, the insured must either
pay the premiums or lose coverage. See Haupt v. Midland Nat’l Life
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6 Opinion of the Court 23-12693
Ins. Co., 567 So. 2d 1319 (Ala. 1990). “[A]greements for the forfei-
ture of an insurance policy for nonpayment of premiums are valid
and are enforceable by the insurer.” Grimes v. Liberty Nat’l Life Ins.
Co., 551 So. 2d 329, 332 (Ala. 1989).
Nevertheless, “forfeitures for nonpayment of premiums are
not favored” under Alabama law. State Farm Mut. Auto. Ins. Co. v.
Anderson, 318 So. 2d 687, 689 (Ala. 1975). The right to insist on
forfeiture may be waived by the insurer, and such waiver may be
implied by conduct inconsistent with the intention to exercise it.
Id. “[I]f the insurer, with knowledge of facts that would bar liability,
recognizes such liability by treating the policy as in force, it will not
thereafter be allowed to plead such facts to avoid liability.” Am.
Cas. Co. v. Wright, 554 So. 2d 1015, 1018 (Ala. 1989).
Thus, “it is settled that acceptance of premiums by an in-
surer, after learning of a breach of a condition or ground for forfei-
ture, normally constitutes a waiver or estoppel.” Henson v. Celtic
Life Ins. Co., 621 So. 2d 1268, 1277 (Ala. 1993). When “an insurance
company accepts payment for a premium on a lapsed policy with
knowledge that an accident has occurred during the period of
lapse,” the insurer may do one of three things: “1) return the pre-
mium for the lapsed period; 2) apply the premium from the date
received forward; or 3) retain the premium and cover the loss.”
Wright, 554 So. 2d at 1017. If the insurer chooses the first option, it
“must return the premiums within a reasonable time to avoid
waiver or estoppel.” Henson, 621 So. 2d at 1277; see Gen. Ins. Co. v.
Killen, 120 So. 2d 887, 897–98 (1960). Accord Glezerman v. Columbian
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23-12693 Opinion of the Court 7
Mut. Life Ins. Co., 944 F.2d 146, 154 (3d Cir. 1991) (“[R]etaining an
overdue premium for an extended period of time is evidence that
a policy has been reinstated.”). What constitutes “a reasonable
time ordinarily is a question of fact.” Killen, 120 So. 2d at 897.2
Simon maintains that waiver or estoppel applies here be-
cause USAA accepted Simon’s payment for the premium on Jef-
frey’s lapsed policy, with knowledge of his death, and then retained
the premium for approximately 45 days.
Here, the district court did not err in concluding that neither
waiver nor estoppel prevented USAA from denying coverage un-
der Jeffrey’s life insurance policy. It’s undisputed that the policy
lapsed on October 3, 2021, under its terms, for nonpayment of the
annual premium due in August 2021. Thus, the policy, unfortu-
nately, was not in force when Jeffrey died on October 5, 2021.
USAA also provided timely advance notice that the policy would
lapse if payment was not received within the grace period ending
on October 2, 2021, even though Simon was outside the country at
the time. The facts are certainly unfortunate. But we cannot say
that any of USAA’s conduct is inconsistent with an intent to exer-
cise its right to insist on forfeiture for nonpayment.
2 We reject USAA’s argument that these waiver or estoppel rules do not apply
when the insurance contract had already terminated when the accident oc-
curred. See Mobile Airport Auth. v. Health Strategies, Inc., 886 So. 2d 773, 783–84
(Ala. 2004) (rejecting a similar argument and holding that waiver may apply in
circumstances where “no policy existed” or had been terminated).
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8 Opinion of the Court 23-12693
We agree with Simon that the district court should have, but
did not, consider whether the lapse of time between receipt and
return of her past-due premium—approximately 45 days—was suf-
ficient to warrant an inference that USAA had “elected to retain the
money and thereby waive the forfeiture.” Sovereign Camp, Wood-
men of the World v. Jones, 66 So. 834, 836 (Ala. 1914). But while the
question of “a reasonable time ordinarily is a question of fact,”
Killen, 120 So. 2d at 897, we cannot say that the lapse of time in this
case, standing alone, is legally sufficient to support a finding of
waiver or estoppel. See Smith, 873 F.3d at 1351.
Nothing in the complaint suggests that USAA acted with un-
reasonable delay in processing and returning the late premium pay-
ment within 45 days. Nor did USAA, during the time that it re-
tained the premium, take any other action inconsistent with exer-
cising its right to insist on forfeiture for nonpayment. Cf. Nation-
wide Mut. Ins. Co. v. J-Mar Machine & Pump, Inc., 73 So. 3d 1248,
1253 (Ala. 2011) (rejecting a claim that the insurer had “waived its
prior cancellation of the insurance policy by accepting [the in-
sured’s] check paying the premiums for the canceled insurance pol-
icy,” where the insurer refunded the payment in accordance with
the policy). Simon knew that the policy was not in force when she
sent the late premium, and that the policy’s terms of reinstatement
required “[e]vidence satisfactory to [USAA] that the Insured [was]
still insurable,” and she heard nothing to the contrary from USAA.
In these circumstances, the mere fact that USAA temporarily re-
tained the premium does not plausibly suggest that it had “treat[ed]
the policy as in force.” Wright, 554 So. 2d at 1018.
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23-12693 Opinion of the Court 9
The facts here are easily distinguishable from the cases Si-
mon cites where Alabama courts have found waiver or estoppel by
the insurance company based on delay in returning a premium. In
Henson, for example, the insurer “continued to accept premiums
on the policy until August 1989,” after learning of a ground for re-
scission in February 1989, “and failed to tender the refund of the
premiums until October 4, 1991,” more than two years later. 621
So. 2d at 1275. Similarly, in Killen, the insurer returned the pre-
mium “over one year and six months from the time it was col-
lected,” which “came too late.” 120 So. 2d at 897. Accordingly,
neither Henson nor Killen supports a reasonable inference of waiver
or estoppel in this case.
For these reasons, USAA was not barred by waiver or estop-
pel from denying coverage under the policy.
B.
Next, Simon relies on the doctrine of equitable tolling, argu-
ing that it “may apply when an incompetent insured loses coverage
due to their incapacity.”
In extraordinary circumstances, equitable tolling may ex-
cuse a party’s failure to comply with a time period specified by law.
Weaver v. Firestone, 155 So. 3d 952, 957–58 (Ala. 2013); Ex part Ward,
46 So. 3d 888, 897 (Ala. 2007) (stating that equitable tolling applies
in circumstances where “principles of equity would make the rigid
application of a limitation period unfair”). In Branch v. G. Bernd Co.,
for example, we held that equitable tolling applied to the “period
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10 Opinion of the Court 23-12693
during which COBRA3 allows a beneficiary to elect to continue
coverage under a health plan.” 955 F.2d 1574, 1576, 1582 (11th Cir.
1992). We reasoned that equitable tolling was necessary to “ensure
that beneficiaries receive the full 60–day election period that Con-
gress has required.” Id. at 1582.
Simon’s cited cases do not support her claim that equitable
tolling can apply to excuse the failure to make a premium payment
under an insurance contract during periods of incapacity. She does
not suggest that any statute or regulation is at issue here, as in
Branch. In Bothwell v. Primerica Life Insurance Co., 444 F. Supp. 3d
1337, 1343 (N.D. Ala. 2020), the court concluded that equitable toll-
ing was “simply inapplicable” to a life insurance contract, and that
it did not permit the court “to treat the Policy as if it never lapsed”
for nonpayment due to incapacity. And the decision in Jefferson v.
Reliance Standard Life Insurance Co., 818 F. Supp. 1523 (M.D. Fla.
1993), was vacated on appeal, 85 F.3d 642 (11th Cir. 1996) (un-
published table decision).
As much as we may wish to, we cannot grant relief in this
case solely as a matter of equity. Simon’s breach-of-contract and
bad-faith claims against USAA are based on an insurance contract,
and there is no provision in the contract for tolling of the due date
for premium payments. See Ex parte Alfa Mut. Ins. Co., 799 So.2d
957, 962 (Ala. 2001) (stating that “a breach of the insurance contract
is an element” of a bad-faith claim against an insurance company).
3 The Consolidated Omnibus Budget Reconciliation Act of 1985, see 29 U.S.C.
§§ 1161–1168.
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23-12693 Opinion of the Court 11
“[U]nder Alabama law, where there is no ambiguity in its terms, an
insurance contract must be enforced as written.” Brock v. Old S. Life
Ins. Co., 531 So. 2d 867, 870 (Ala. 1988). We cannot “rewrite the
contract by judicial interpretation.” Id.
For these reasons, we agree with the district court that equi-
table tolling does not apply here.
IV.
In sum, we affirm the district court’s grant of USAA’s mo-
tion to dismiss.
AFFIRMED.
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