An insurance agent, insurance broker or employee of an insurancecompany should never give information to an insured without beingcertain that the information is true and accurate. In this case, anemployee of the insurer advised the insured by phone that premiumhad been paid by electronic transfer when in fact it had not.

Read Barry Zalma's previous column, “Don't change a policy.”

Based on the lack of payment, Wisconsin Mutual Insurance Co. declared the policy hadlapsed before an accident and denied coverage. After trial,Wisconsin Mutual appealed a judgment preventing it from denyingcoverage for Jean George's automobile accident based on her failureto pay the premium. Wisconsin Mutual claimed that her husband'stestimony regarding a Wisconsin Mutual employee who assured thepremium had been paid was insufficient to establish estoppel andincredible. The Wisconsin Court of Appeals agreed with the trialcourt that the equitable remedy of estoppel prevented WisconsinMutual from denying the claim.

Background

Jean George was involved in an accident on Oct. 28, 2003.Wisconsin Mutual denied coverage for nonpayment, asserting George'spolicy had lapsed on Oct. 22, 2003. The policy required monthlyrenewal. Several months before the Oct. 28 accident, George electedto make her premium payments by electronic transfer from her andher husband's bank account. On Oct. 10, 2003, Wisconsin Mutual sentGeorge a policy renewal form, which stated that $178.60 would bewithdrawn through an electronic funds transfer on Oct. 22. Therenewal form also contained a nonpayment clause:

“If this notice is for premium due and not paid, the insurancecoverage shall lapse at 12:01 a.m. central time on the due date orwithdrawal date. The policy will not lapse if paid by the due dateor withdrawal date or within 10 days thereof.”

On Oct. 22, Wisconsin Mutual initiated an electronic transferfrom George's bank account. There were insufficient funds to coverthe transaction and the premium was not paid.

The day after the accident, George's husband, John, contactedWisconsin Mutual to inquire about the premium payment. A WisconsinMutual employee told him that the premium payment had been receivedand that George was covered for the accident. George took nofurther action and the 10-day grace period passed on Nov. 1,2003.

Wisconsin Mutual again unsuccessfully attempted an electronictransfer on Nov. 5. Wisconsin Mutual's electronic transfer accountmanager testified that if the Nov. 5 transaction had beensuccessful, Wisconsin Mutual would have provided coverage for theaccident despite the grace period's expiration.

George filed suit against Wisconsin Mutual after it denied herclaim. Following a trial, the circuit court found that George hadrelied on the Wisconsin Mutual employee's assurance that thepremium had been paid. Accordingly, the circuit court ruled thatWisconsin Mutual, by its actions, could not deny. The insurerappealed.

Equitable estoppel

Equitable estoppel, the ground used by the court to prevent theinsurer from denying coverage even though the policy had lapsed, isestablished by proof of the following elements:

1. Action or non-action,
2. on the part of one against whom estoppel is asserted,
3. which induces reasonable reliance thereon by the other, eitherin action or non-action, and
4. which is to his or her detriment.

The Court of Appeals concluded that the trialcourt's findings of fact were sufficient to establish equitableestoppel. A representative of Wisconsin Mutual assured George'shusband that it withdrew the premium payment from their account.George's husband testified that he would have made the paymentwithin the 10-day grace period if he had been told the electronictransaction was unsuccessful. He further stated that because ofWisconsin Mutual's representation, he made no additional efforts todetermine whether it had received the premium payment. Georgerelied on Wisconsin Mutual's statement to her detriment because thepayment had not, in fact, been timely made. The circuit court'sestoppel conclusion was supported by “clear, satisfactory andconvincing” evidence.

Related “Negligent Agent Escapes Liability.”

To the extent Wisconsin Mutual attacks the credibility ofGeorge's husband, the Court of Appeals rejected the argumentbecause the trial court is the ultimate arbiter of both thecredibility of the witnesses and the weight to be given to eachwitness' testimony and not the province of an appellate court. Thecircuit court specifically found John George's testimony credible,and an appellate court will never overturn that type offinding.

Phone records admitted at trial indicate that on Oct. 29, JohnGeorge placed two short calls to directory assistance and one callto his insurance agent. John George explained he asked directoryassistance to transfer him to Wisconsin Mutual and spoke brieflywith a Wisconsin Mutual representative:

Just trying to get the number for Wisconsin Mutual, their headoffice. First time I called they connected me to a number thatwasn't the right number. It was something else. So I called back.And the second call was where they gave me—put me through to theright number finally.

When I called Wisconsin Mutual, I just explained that my wife—mymoney came out of my money transfer. My wife had been in anaccident, and I wanted to make sure my payment had been made, thewire transfer had been made, I was covered, everything was fine,well, and good. She said, just a minute, Mr. George, I will look itup. She must have had a computer in front of her or some way tolook it up. She came back on and said, yes, the wire transfer hadbeen made on the 22nd. And I did not have it billed again until the22nd of the following month.

The trial court could properly find, based onthe phone records and the above testimony, that a Wisconsin Mutualemployee represented that George's premium had been paid. WisconsinMutual nonetheless emphasizes the fact that John George could notrecall the name of the employee with whom he spoke.

The issue in this case is not whether Wisconsin Mutual wasestopped from denying the existence of a valid contract. AfterGeorge permitted Wisconsin Mutual to automatically withdraw thepremium from her joint account, no further act of acceptance wasnecessary on her part. All the elements of a valid contract—offer,acceptance, and consideration—were present before Wisconsin Mutualrepresented it received George's premium payment. The issue iswhether that policy lapsed as a consequence of George's failure toperform.

Finding that Wisconsin Mutual represented that it receivedGeorge's payment when in fact it did not was sufficient to allowGeorge to rely on Wisconsin Mutual's statement and to preventWisconsin Mutual from denying coverage because of nonpayment.

The Wisconsin Supreme Court has held that when one telephones aperson's place of business and someone there answers and undertakesto accept the communication, it is prima facie evidence that themessage was delivered to someone authorized to receive the messageon behalf of that person, even though the voice of the person isnot identified.

In that case, the court held that the jury was entitled to findthat the witness had spoken with a representative of the insurer,who promised to “attend to the coverage, notwithstanding thetestimony of [another employee] that she did not recollect thetransaction and found no record thereof….” The trial court alsoconcluded that Wisconsin Mutual failed to provide a statutorynotice of cancellation. Wisconsin Mutual contended the notice wasnot required. Because the Court of Appeals concluded that WisconsinMutual is estopped from denying coverage, it did not need to, nordid it, reach the issue.