Filed 10/10/22 McHugh v. Protective Life Insurance CA4/1
OPINION ON REMAND FROM THE CALIFORNIA SUPREME COURT
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
BLAKELY McHUGH et al., D072863
Plaintiffs and Appellants,
v. (Super. Ct. No. 37-2014-
00019212-CU-IC-CTL)
PROTECTIVE LIFE INSURANCE,
Defendant and Respondent.
APPEAL from a judgment and an order denying motion for new trial
and judgment notwithstanding the verdict of the Superior Court of San Diego
County, Judith F. Hayes, Judge. Reversed and remanded.
Winters & Associates, Jack B. Winters, Jr., Georg M. Capielo and
Sarah D. Ball; Williams Iagmin and Jon R. Williams, for Plaintiffs and
Appellants.
Grignon Law Firm, Margaret M. Grignon; Maynard Cooper & Gale,
John C. Neiman, Jr.; Noonan Lance Boyer & Banach and David J. Noonan,
for Defendant and Respondent.
Blakely McHugh and Trysta M. Henselmeier (plaintiffs) sued
Protective Life Insurance Company (Protective Life) for breach of contract
and breach of the implied covenant of good faith and fair dealing. They
alleged that Insurance Code sections 10113.71 and 10113.72,1 which came
1 Undesignated statutory references are to the Insurance Code.
Section 10113.71 states: “(a) Each life insurance policy issued or
delivered in this state shall contain a provision for a grace period of not less
than 60 days from the premium due date. The 60-day grace period shall not
run concurrently with the period of paid coverage. The provision shall
provide that the policy shall remain in force during the grace period. [¶]
(b) (1) A notice of pending lapse and termination of a life insurance policy
shall not be effective unless mailed by the insurer to the named policy owner,
a designee named pursuant to Section 10113.72 for an individual life
insurance policy, and a known assignee or other person having an interest in
the individual life insurance policy, at least 30 days prior to the effective date
of termination if termination is for nonpayment of premium. [¶] (2) This
subdivision shall not apply to nonrenewal. [¶ ] (3) Notice shall be given to
the policy owner and to the designee by first-class United States mail within
30 days after a premium is due and unpaid. However, notices made to
assignees pursuant to this section may be done electronically with the
consent of the assignee. [¶] (c) For purposes of this section, a life insurance
policy includes, but is not limited to, an individual life insurance policy and a
group life insurance policy, except where otherwise provided.”
Section 10113.72 states: “(a) An individual life insurance policy shall
not be issued or delivered in this state until the applicant has been given the
right to designate at least one person, in addition to the applicant, to receive
notice of lapse or termination of a policy for nonpayment of premium. The
insurer shall provide each applicant with a form to make the designation.
That form shall provide the opportunity for the applicant to submit the name,
address, and telephone number of at least one person, in addition to the
applicant, who is to receive notice of lapse or termination of the policy for
nonpayment of premium. [¶] (b) The insurer shall notify the policy owner
2
into effect on January 1, 2013, applied to policies issued before this effective
date, and that Protective Life failed to comply with the statutes’
requirements before it terminated the term life insurance policy of the
decedent, William Patrick McHugh.
In the parties’ various filings, including a motion for summary
adjudication, motions for a directed verdict and for judgment
notwithstanding the verdict (JNOV), the parties argued whether sections
10113.71 and 10113.72 applied to McHugh’s policy, which was issued before
January 1, 2013. The trial court concluded the statutes applied retroactively
to McHugh’s policy, and that “there are questions of fact in regard to whether
or not there were material breaches of the insurance contract that require
consideration by the jury.” Ultimately, the jury returned a special verdict
that read:
“We answer the questions submitted to us as follows:
1. William McHugh and Protective Life Insurance Company entered
into a contract.
2. Did William McHugh do all, or substantially all, of the significant
things that the contract required him to do?
Yes 1 No 11
or
Was William McHugh excused from having to do all, or substantially
all, of the significant things that the contract required him to do?
Yes 9 No 3
annually of the right to change the written designation or designate one or
more persons. The policy owner may change the designation more often if he
or she chooses to do so.”
Section (b) of section 10113.72 is not a focus of the parties’ arguments
or of this opinion.
3
If your answer to either option for question 2 is yes, then answer
question 3. If you answered no to both options, stop here, answer no further
questions, and have the presiding juror sign and date this form.
3. Did all the conditions that were required for Protective Life
Insurance Company’s performance occur or were they excused?
Yes 12 No 0
If your answer to question 3 is yes, then answer question 4. If you
answered no, stop here, answer no further questions, and have the presiding
juror sign and date this form.
4. Did Protective Life Insurance Company fail to do something that
the contract required it to do?
Yes 3 No 9
or
Did Protective Life Insurance Company do something that the contract
prohibited it from doing?
Yes 11 No 1
If your answer to either option for question 4 is yes, then answer
question 5. If you answered no to both options, stop here, answer no further
questions, and have the presiding juror sign and date this form.
5. Was Plaintiff harmed by that failure?
Yes 2 No 10
If your answer to either option for question 5 is yes, then answer
question 6. If you answered no to both options, stop here, answer no further
questions, and have the presiding juror sign and date this form.
6. What are Plaintiff’s damages?
$ ______________
4
7. Did William McHugh unreasonably fail to mitigate any damages
between February 9, 2013 and March 12, 2013 that Plaintiffs have been able
to prove?
Yes No
If your answer #7 yes, state what amount of damages could have been
avoided.
$ ______________.”
After the court denied plaintiffs’ motion for new trial based on an
inconsistent verdict and plaintiffs’ JNOV, plaintiffs appealed.
Plaintiffs contended the trial court erroneously (1) declined to decide as
a matter of law whether Protective Life had complied with sections 10113.71
and 10113.72, and instead permitted the jury to decide that issue; (2)
declined to instruct the jury that Protective Life was required to “strictly
comply” with sections 10113.71 and 10113.72; and (3) instructed the jury that
McHugh had a duty to mitigate his damages. They further contended the
instructional errors were prejudicial because they resulted in an inconsistent
verdict.
This court affirmed the judgment on the separate ground that
Insurance Code sections 10113.71 and 10113.72 did not apply retroactively to
McHugh’s policy, and the trial court erred as a matter of law when it ruled
otherwise in denying Protective Life’s directed verdict motion. (McHugh v.
Protective Life Insurance Co. (2019) 40 Cal.App.5th 1166, 1175–1176.)
Plaintiffs appealed to the California Supreme Court, which granted
review and reversed. (McHugh v. Protective Life Ins. Co. (2021) 12 Cal.5th
213, 246 (McHugh).) It concluded that sections 10113.71 and 10113.72
“create a single, unified pretermination notice scheme.” (McHugh, at p. 240.)
It held: “The grace period and notice protections apply to all policies in effect
5
as of the sections’ effective date—and in this case, nothing in the
presumption against retroactive application of legislation as ordinarily
applied compels another result.” (Id. at p. 246.)
The Supreme Court rejected Protective Life’s contrary arguments:
“The grace period and notice provisions at issue here simply dictate the
procedures for terminating policies after January 1, 2013. Applying the
provisions to policies already in effect on that date does not appear to impose
new or different liabilities based on earlier conduct.” (McHugh, supra, 12
Cal.5th at p. 232.) The court remanded for proceedings consistent with its
opinion. (Id. at p. 246.)
Plaintiffs on remand reiterate their contention that, as a matter of law,
they are entitled to the policy benefits because the policy remained in effect
through the date McHugh died: “[T]he record below demonstrates Protective
Life did not comply with either the McHugh policy terms or applicable
statutory provisions. Instead, it terminated McHugh’s policy on February 9,
2013, well before its grace period expired, violating both the insurance
contract and section 10113.71. It further sent McHugh two notices informing
him that his policy would be terminated if the premium payment was not
received by February 9, 2013[,] based upon an improperly calculated grace
period which also did not comply with section 10113.71. Having not received
that premium by February 9, 2013, Protective Life then unilaterally
terminated McHugh’s policy on that date, even though the grace period
extended by section 10113.71 was still in effect through March 10, 2013.”
Plaintiffs add that “by further failing to provide McHugh with a proper
pretermination notice, and then prematurely terminating McHugh’s policy
while the extended grace period was still running, Protective Life did not
validly terminate McHugh’s policy consistent with either that policy’s
6
language or applicable law. As such, its attempted termination of that policy
was a legal nullity, with the policy therefore remaining in force up through
the time of McHugh’s subsequent death a few months later, in June of 2013.”
We conclude the jury’s special verdict was contradictory and hopelessly
ambiguous. Reversed and remanded for a new trial.
FACTUAL AND PROCEDURAL BACKGROUND
The California Supreme Court summarized the relevant facts as
follows: “In March 2005, Chase Life Insurance Company, the predecessor in
interest to [Protective Life], issued a $1 million term life insurance policy to
William McHugh. The policy named McHugh’s daughter . . . as the
designated beneficiary and [her] mother and McHugh’s successor in interest,
[Henselmeier] as a contingent beneficiary. [¶] The policy was for a 60-year
term, and it set out a schedule of annual premiums to keep the policy in force.
For the first 10 years of the policy, the insurance policy set the annual
premium at $310; after that, the premium steadily increased each year. The
policy included a provision for a 31-day grace period before the policy could be
terminated for the failure to pay the premium. [¶] McHugh paid all the
yearly premiums through January 2012. That meant his policy was, by its
terms, ‘in force’ until February 9, 2013, 31 days after the January 9, 2013 due
date for that year’s payment. On December 20, 2012, Protective Life sent
McHugh a letter reminding him of the January 9 deadline and that
nonpayment by February 9 would cause his policy to lapse or terminate.
McHugh failed to pay the premium by the due date. Protective Life sent him
a second letter on January 29, which stated that it had not received his
premium payment for the year and warned that his policy would lapse if he
did not make the payment by February 9, the end of the grace period.
McHugh again failed to make the payment, and the policy lapsed. On
7
February 18, Protective Life sent McHugh a letter informing him the grace
period had expired, but that he could reinstate the policy if it received his
payment by March 12, during his lifetime. McHugh did not pay, and
Protective Life formally terminated his policy. [¶] At some point close to
when Protective Life sent its last letter, McHugh suffered a serious fall that
left him disabled, caused him continuing physical pain, and required surgery.
McHugh passed away in June 2013. Henselmeier contacted Protective Life to
inquire about the status of McHugh’s policy and whether a claim could be
made. Protective Life advised that the policy had been terminated.”
(McHugh, supra, 12 Cal.5th at pp. 220–221.)
Pretrial Motions
Plaintiffs moved for summary adjudication, arguing sections 10113.71
and 10113.72 applied retroactively to the policy; therefore, Protective Life
was required to provide McHugh at least a 60-day grace period and at least a
30-day written notice of lapse and termination. Plaintiffs also stated they
would take the position at trial “that [Protective Life’s] notice of pending
lapse and termination was ineffective as a matter of law.” The trial court
granted plaintiffs’ motion, concluding the statutes applied to McHugh’s
policy. It found that McHugh failed to pay his premium, and he later
“acknowledged the lapse and sought to remit payment and reinstate the
policy once lapsed. His efforts to reinstate the policy were unsuccessful.” It
ruled, “The remaining issues, such as whether [Protective Life’s] conduct
amounted to bad faith, whether the notices sent to [McHugh] are void, and
whether either party’s conduct constituted a breach of the insurance contract,
shall be determined at trial.”
8
Trial Testimony
Protective Life’s assistant vice-president, Patrick West, testified by
referring to the insurance policy that the “policy date,” which is when
coverage started, was January 9, 2005. West testified about the three notices
Protective Life sent McHugh: “[W]hen [Chase] wrote this policy, they put a
31-day grace period. So according to their contract, the 31 days would have
expired on [February 9, 2013]. Protective [Life] has what we call our
[‘]prompt reinstate period.[’] What we do is after the premium is not received
within the first 31-day period, we send them, on their premium notice, the
last notice of payment due asking for the premium.” West testified Protective
Life gave McHugh until March 12, 2013, to pay the premium for the policy to
be “automatically reinstated” under the insurer’s prompt reinstatement
practice. West testified McHugh was not required to fill out any forms to
obtain prompt reinstatement: “No forms, no formal reinstatement for the
process. That’s why we say, ‘not having to provide evidence of insurability.’
We will accept the premium. Basically, we extended the grace period and
gave [McHugh] additional time to make the payment.”
West testified that under the prompt reinstatement practice, McHugh’s
policy formally terminated on March 12, 2013.2 West testified that on March
22, 2013, and May 29, 2013, after the policy had expired, McHugh telephoned
Protective Life requesting insurance reinstatement forms, which were sent to
him on both occasions. However, McHugh never returned a completed form.
West testified on cross-examination that sections 10113.71 and
10113.72 were incorporated into the policy: “California has a 60-day grace
2 According to West, Protective Life has separate criteria for formal
reinstatement, requiring the policyholder to fill out an application that
Protective Life reviews. If the application is approved, the policyholder
reverts to the same class as when the policy was originally issued.
9
period. And it has been deemed that this policy has a 60-day grace period.
So [McHugh] had a 60-day grace period because of the statute of the law [sic].
He had a 60-day grace period. If he had died on [February 19, 2013], . . . he
would have been insured.”
West testified that if McHugh had paid his annual premium at any
time before March 12, 2013, the policy would have been in effect when he
died in June 2013.
James Reinholtz, an insurance agent who had been involved in selling
the policy to McHugh, testified that in 2013, he received an email from
Protective Life and immediately left McHugh a voicemail stating, “I just
received a notice from [Protective Life. Y]our life insurance policy is cancelled
and you need to give them a call and get the policy reinstated.”
Approximately one month later, in May or June 2013, McHugh telephoned
Reinholtz, who asked if McHugh had reinstated the Protective Life policy.
McHugh said something like, “I need to get a new policy, they won’t reinstate
me.” Reinholtz helped McHugh fill out a different insurer’s application form
online. That new insurer sought additional information from McHugh,
including whether he had existing insurance, and he responded in the
negative. Reinholtz telephoned McHugh another time and told him he
needed to answer the new insurer’s other questions, and schedule a medical
exam. McHugh never completed this application process.
Plaintiffs’ Counsel’s Closing Arguments
Plaintiffs’ counsel argued to the jury that sections 10113.71 and
10113.72 applied to the policy, and summarized 10 ways in which Protective
Life purportedly breached it: “Okay. So, in 2005, [Protective Life] took an
10
overpayment, they didn’t keep good records of it.[3] In December of 2013 [sic]
they wrote [McHugh] a notice that said, wrong date for grace expiration. On
January [1, 2013,] they gave [McHugh] no explanation regarding the new
laws. They didn’t tell him anything. On January [28], 2013, they didn’t
comply with the new statutes. They gave him 10-day notices, not 30 days’
notice. [¶] On February 9[, 2013], they prematurely terminated during the
grace period. . . . On February [18, 2013], they sent a post-lapse notice that
was inaccurate, did not comply with any statutes, misstated the grace period,
misstated the dates of termination, misstated the date of the lapse. That’s
wrong. [¶] And on March [12], 2013, by their own admission, they did a
formal termination. . . . They breached. [¶] And on that date, yeah,
coverage remained in force. Coverage remained in force.”
Plaintiffs’ counsel also argued: “[McHugh] was given a 31-day grace
period and then 31 days where he could auto-reinstate. That’s not a 60-day
grace period, folks. That’s not just accepting the premiums. That is a flat-
out misrepresentation. . . . He should have been told he had a 31-day grace
[period] and then told he could reinstate without evidence of insurability.”
3 Plaintiffs in their first amended complaint stated the policy’s issue date
was March 1, 2015, but they allege the record is unclear as to whether
McHugh was insured in the preceding two months: “[T]he records provided
to date by [Protective Life fail] to indicate when and under what
circumstances [McHugh] originally paid the sum of $310, other than that the
payment was made with a credit card by or before March 1, 2005, with
coverage commencing in March 2005. There is no evidence [the insurers]
actually agreed to or in fact insured [McHugh] during the months of January
or February of 2005. [They] have produced no binder, no evidence of any
temporary insurance, or anything to indicate if during the months of January
and/or February of 2005 [McHugh] was in fact insured. Thus, in the year
2005, Plaintiffs allege, based on the evidence obtained from [Protective Life],
that [McHugh] in fact over paid two-months of premiums which were
unearned by [Protective Life].”
11
Counsel added, “The major breach in this case beyond terminating this policy
during the middle of the grace period was the no payment on the policy.”
Plaintiffs’ counsel conceded in closing arguments that McHugh
breached his contractual obligations by failing to pay his premium: “Here is
all of Mr. McHugh’s breaches and errors. He forgot to make one single
payment one time in [eight] years. As counsel indicated, the defendant in his
opening statement, ‘everybody has missed payments. I’ve missed lots of
payments.’ ” However, counsel argued McHugh had overpaid his premiums
by two months and “[h]e was ahead. His policy was in force.” Counsel also
argued that this breach was excused: “Mr. McHugh’s biggest obligation is to
pay . . . premiums literally and this time period never really accrues because
he had a credit. But putting that aside, on [February 9, February 18,
January 1 and January 9, Protective Life] materially breached the contract.
And when someone materially breaches a contract, the other person doesn’t
have to perform anymore. And that’s what happened in this particular case.
Not only did [McHugh] comply with his obligations, he had paid enough
premiums. [Protective Life] breached, excusing [McHugh’s] conduct.”
Protective Life’s Counsel’s Closing Arguments
Protective Life’s counsel countered in closing arguments that Protective
Life sent McHugh notices to pay his 2013 premium in December 2012 and in
January and February 2013; however, he never paid it. Agreeing sections
10113.71 and 10113.72 applied here, Protective Life also argued it provided
McHugh at least the required 60 days’ notice before terminating the policy:
“[By] operation of law [McHugh] had a 60-day grace period. So when any
[insurance] company would have said no, the law would have said he had 60
days if he died. So no matter what you say, he had 60 days. [¶] That’s the
one thing we agree on is that the operation of the law says that’s the way the
12
policy reads and there is no dispute about that.” Counsel added: “The second
thing with respect to the notices, it’s not tricky, it’s not complicated, it’s not a
mystery. What the statute says with your notices, you have to send one at
least 30 days before pending lapse of termination. You have to send the
notice. So if the policy is pending lapse or termination, just send them a
notice of that 30 days before. [¶] That’s what we did in December.”
Protective Life’s counsel disputed McHugh’s claims that his actions
were excused, pointing out that, under that theory, McHugh would not “have
to keep paying his premiums forever. He could have kept his policy for years,
never had to pay anything.”
Protective Life’s counsel added that McHugh’s failure to pay the
premium discharged Protective Life’s duties under the policy: “There will
also be a charge that the judge will give you, failure of consideration. If one
party materially fails to perform his promise, the other party’s duty is
discharged. . . . [¶] [McHugh’s] deleted performance, it was discharged by a
material failure of consideration, even though the party owing the duty is
unaware of the failure. We can’t have a duty under this policy when he didn’t
pay. There is no evidence or suggestion that he did. He is the one who told
us that he failed to pay. He told us that in May. Two weeks before he died.”
Jury Instructions
Plaintiffs offered two special instructions regarding strict compliance.
Special instruction No. 43 stated: “As of January 1st, 2013, Protective was
required to provide a written notice to the policyholder and to a designee
thirty days before any lapse or termination of the policy. The notice could
only be sent after a premium was due and unpaid and had to be sent prior to
any lapse or termination. Until such notice was provided the policy remained
in force. The law requires strict compliance with this provision.”
13
Special instruction No. 44 stated: “As of January 1[], 2013, Protective
was required to advise in writing that Mr. McHugh that [sic] he was entitled
to annually designate someone to receive notices of lapse or termination. The
law requires strict compliance with this provision.”
The court declined to instruct the jury with those instructions: “If we’re
going to read the statute and the sections, then I will not have to give these.”
Accordingly, it instructed the jury with the language of sections 10113.71 and
10113.72 verbatim.
The court also instructed the jury that “[w]here a policy provision is
mandated by statute, the policies that do not contain the required provision
will be enforced as if they did.” The court instructed the jury: “The word
‘shall’ for California insurance purposes means an action described is
mandatory. If one party materially fails to perform his, her or its
performance or materially delays its performance, the other party’s duty is
discharged.”
The court instructed the jury with CACI No. 303 regarding the
elements of a breach of contract claim: “To recover damages from Protective
for breach of contract, Plaintiffs must prove all of the following: 1. That
William McHugh and Protective Life entered into a contract; 2. That William
McHugh did all the significant things that the contract required him to do,
including paying all premiums owed under the contract; or; 3. That William
McHugh was excused from having to pay premiums on the life insurance
policy; 4. That Protective failed to do something that the contract required it
to do; and 5. That Plaintiffs were harmed by Protective’s breach of contract.”
The court instructed the jury with BAJI No. 10.82 regarding how to
evaluate breach of duty claims: “If one party materially fails to perform his,
her or its promise, or materially delays performance, the other party’s duty is
14
discharged. However, a slight or partial delay or failure to perform does not
discharge the other party’s duty to perform. [¶] In determining whether a
failure to perform is material, you should consider: 1. The extent of the
actual performance or preparation; 2. The good faith, or lack thereof, of the
defaulting party; 3. The hardship, if any, resulting to the defaulting party;
and 4. The adequacy of damages to compensate the other party for the
default. [¶] Delay in performance is material only if time of performance is
of the essence, that is, if prompt performance is, by the express language of
the contract or by its very nature, a vital matter. [¶] A duty to perform is
discharged by a material failure of consideration even though the party owing
the duty is unaware of the failure or has breached his, her or its own
promise.”
Jury Questions During Deliberations
During deliberations, the jury asked the court certain questions that
the court answered after consulting counsel. The jury’s note No. 7 stated:
“We are stuck on question 2 part b. May we continue on to other questions
due to our deadlock on question 2? Maybe moving on will help those on the
fence decide.” The court replied: “You may consider the questions in any
order you wish; however, in recording your answers to the questions on the
verdict form, you must record them in the order listed.”
The jury’s note No. 9 asked, “Do we have to reach a supermajority (9
votes or more) on each of the parts of a question (such as #2 and #4) that give
two options, in order for the verdict to be valid?” The court replied: “Yes, as
set forth in the instructions on the Special Verdict form.”
The jury asked in note No. 5: “From BAJI 10.82 in the jury
instructions, concerning “materiality” of a breach: “3. The hardship, if any,
resulting to the defaulting party”—Does this mean the hardship to the
15
defaulting party resulting from a judgment that its breach was material? Or
does it mean the hardship to the defaulting party in performing under the
contract?” The court replied: “Hardship does not relate to personal
circumstances in failing to pay premium. Hardship does not relate to the
hardship to the insurance company in paying the benefit.”
The Jury’s Special Verdict
The parties agreed to the special verdict form set forth above. After the
jury returned a verdict, the court invited the parties to address whether the
verdict was inconsistent. Protective Life’s counsel argued the verdict was
consistent: “I think what [the jurors] are saying, . . . if [Protective Life]
breached the contract with respect to giving the notices, that the failure to
give the notice was not what caused [McHugh] harm.”
Plaintiffs’ counsel argued the verdict was inconsistent: “You can’t have
all of this happen and not have harm to either Mr. McHugh or to the plaintiff
herself.” The court concluded that the verdict was consistent. At plaintiffs’
request, the court polled the jury.
Plaintiffs’ New Trial Motion
In moving for a new trial, plaintiffs argued the court should have
instructed the jury regarding “strict compliance” and the fact that Protective
Life’s “failure to strictly comply left the policy in force.” They also argued the
verdict was inconsistent: “[I]t is evident the jury found that . . . McHugh was
excused from performance, i.e., he was excused from paying the premium,
due to the obvious premature and improper termination of coverage 31 days
into a 60-day grace period. This material breach clearly caused [Blakely]
harm.” Plaintiffs also argued that insufficient evidence supported the jury’s
findings they suffered no harm, as well as that Protective Life’s notices
complied with the statutory mandates.
16
Protective Life argued in opposition to the new trial motion that based
on the jury instructions and the uncontradicted evidence, the jury reasonably
concluded that any harm incurred by Plaintiffs was not proximately caused
by Protective Life. The court denied Plaintiffs’ new trial motion without
explanation.
Plaintiffs’ JNOV Motion
In moving for a JNOV, plaintiffs reiterated their previous argument
that because Protective Life failed to comply with sections 10113.71 and
10113.72, its cancellation was invalid and the policy remained in effect when
McHugh died. Plaintiffs argued the verdict was inconsistent because “the
jury excused . . . McHugh’s payment of premium due to the erroneous,
premature, and illegal termination of the policy on February 9, 2013. As
such, as a matter of law, [Blakely] was injured and her only measure of
damages is the policy benefits [sic] of $1 million.” They further argued the
court should strike the defense of failure to mitigate because Protective Life
could not and did not prove plaintiffs had failed to mitigate their damages.
Protective Life opposed the JNOV, arguing the jury’s verdict was
consistent, proper and complete. It reasoned that, “the jury could have found
that Protective [Life] did not keep adequate records. The jury also could have
found that Protective [Life] should have told McHugh about the enactment of
the new code sections. . . . It is clear that neither Plaintiffs, nor the Court,
nor Protective [Life] can determine exactly what facts the jury’s findings were
based on; therefore, it is impossible for Plaintiffs to prove ‘that there is no
substantial evidence and no reasonable inference [to] support the jury’s
verdict[,]’ necessitating denial of . . . the [JNOV].”
Protective Life argued it had introduced substantial trial evidence
supporting the verdict. It reasoned that even if McHugh did not get a 60-day
17
grace period, plaintiffs still could not prevail under Civil Code section 3358,
which provides: “Except as expressly provided by statute, no person can
recover a greater amount in damages for the breach of an obligation, than he
could have gained by full performance thereof on both sides.” Protective Life
concluded that because McHugh died more than 60 days after his premium
was due and he never paid it, plaintiffs could not recover anything, as that
would result in plaintiffs’ unjust enrichment.
The court denied the JNOV motion on grounds Protective Life had
adduced substantial trial evidence supporting the verdict.
DISCUSSION
I. Instructional Error Claim
We first address plaintiffs’ claim the court erred by failing to instruct
the jury Protective Life had to strictly comply with the requirements of
sections 10113.71 and 10113.71; and by instructing regarding mitigation of
damages.4
We conclude the court did not err by declining to instruct the jury with
the plaintiffs’ special instructions on “strict compliance,” and instead
instructing with the language of sections 10113.71 and 10113.72. It is well
4 The court instructed the jury regarding failure to mitigate: “A party
injured by a breach of contract must mitigate his damages and is not entitled
to any loss which could have been avoided by reasonable means.” It further
instructed with CACI 358: “If Protective breached the contract and the
breach caused harm, Plaintiff is not entitled to recover damages for harm
that Protective proves Plaintiff could have avoided with reasonable efforts or
expenditures only during the period between February 9 and March 12, 2013.
You should consider the reasonableness of. . . McHugh’s efforts in light of the
circumstances facing him at the time, including his ability to make the efforts
or expenditures without undue risk or hardship. [¶] If . . . McHugh made
reasonable efforts to avoid harm, then your award should include reasonable
amounts that he spent for this purpose.”
18
settled that “ ‘ “Instructions in the language of an applicable statute are
properly given.” ’ ” (Metcalf v. County of San Joaquin (2008) 42 Cal.4th 1121,
1131 [interpreting instruction using the language of Government Code
section 835]; Garrison v. Pearlstein (1924) 68 Cal.App.334, 340 [“ ‘Laying
down the law in the words of the law itself ought not to be pronounced to be
error.’ ”]; Pemberton v. Arny (1919) 42 Cal.App. 19, 24 [“there was no error in
giving the instruction in the words of the law itself”].) We point out the court
also instructed the jury that where a policy provision is mandated by statute,
the policies that do not contain the required provision will be enforced as if
they did.
We are mindful this is an action for breach of contract that must be
decided on its own particular facts. Plaintiffs rely on cases that are factually
distinguishable from the present case and therefore have no applicability.
(Mackey v. Bristol West Ins. Servs. (2003) 105 Cal.App.4th 1247, 1258
[involving an automobile insurance]; Kotlar v. Hartford Fire Ins. (2000) 83
Cal.App.4th 1116 [involving a commercial insurance policy]; and Lee v. Indus.
Indem. (1986) 177 Cal.App.3d 921 [involving a fire insurance policy].)
The court instructed the jury on the plaintiffs’ burden of proof to
prevail in an action for breach of contract. In addition to proving Protective
Life breached the contract, plaintiffs had the burden of proving they were
harmed by the breach. The court noted there were factual disputes to be
decided by the jury. Under these circumstances, there was no error in
refusing plaintiffs’ special instructions.
We reject plaintiffs’ argument the court erred by instructing the jury on
mitigation of damages. It is clear from the verdict form that the jury never
reached that issue. Further, the court instructed the jury as follows: “After
you have decided what the facts are, you may find that some instructions do
19
not apply. In that case, follow the instructions that do apply and use them
together with the facts to reach your verdict.” We assume the jury followed
that instruction. (Gray v. Wagner (1969) 272 Cal.App.2d 671, 672.)
II. Inconsistent Verdict
We next address plaintiffs’ claim that the verdict was inconsistent.
They contend the jury’s “yes” answer to the second part of question 2, asking
if McHugh was excused from doing all or substantially all of the significant
things that the contract required him to do, conflicted with its “no” answer to
question 5, asking if McHugh was harmed by the failure of Protective Life to
do something that the contract prohibited it from doing. Respondents counter
that the verdict was “fully consistent.”
A. Applicable Law
“[A] special verdict is that by which the jury finds the facts only,
leaving the judgment to the Court. The special verdict must present the
conclusions of fact as established by the evidence, and not the evidence to
prove them; and those conclusions of fact must be so presented as that
nothing shall remain to the Court but to draw from them conclusions of law.”
(Code Civ. Proc., § 624.) “A special verdict is ‘fatally defective’ if it does not
allow the jury to resolve every controverted issue.” (Saxena v. Goffney (2008)
159 Cal.App.4th 316, 325.) “ ‘We analyze the special verdict form de novo’ as
a matter of law.” (Taylor v. Nabors Drilling USA, LP (2014) 222 Cal.App.4th
1228, 1242.)
“Where special verdicts appear inconsistent, if any conclusions could be
drawn which would explain the apparent conflict, the jury will be deemed to
have drawn them.” (Wysinger v. Automobile Club of Southern
California (2007) 157 Cal.App.4th 413, 424.) However, this court has held
that “[i]f the jury has been discharged and the verdict is ‘hopelessly
20
ambiguous,’ the judgment must be reversed. [Citation.] A court reviewing a
special verdict does not infer findings in favor of the prevailing party
[citation], and there is no presumption in favor of upholding a special verdict
when the inconsistency is between two questions in a special verdict.
[Citation.] ‘Where there is an inconsistency between or among answers
within a special verdict, both or all the questions are equally against the law.’
[Citations.] ‘The appellate court is not permitted to choose between
inconsistent answers.’ [Citation.] . . . [¶] If a verdict is not ‘hopelessly
ambiguous,’ the court may ‘interpret the verdict from its language considered
in connection with the pleadings, evidence and instructions.’ ” (Zagami, Inc.
v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083, 1092.)
B. Analysis
The first part of the special verdict form’s question 2 asks:
“Did . . . McHugh do all, or substantially all, of the significant things that the
contract required him to do?” The jury answered “No.” The second part of
question 2 asks, “or [w]as . . . McHugh excused from having to do all, or
substantially all, of the significant things that the contract required him to
do?” The jury answered, “Yes.”
McHugh’s only obligation was to pay the premium within the 60-day
grace period (or the 62-day period allowed by Protective Life). Accordingly,
the jury’s affirmative answer to the second part of question 2 can only mean
McHugh was excused from paying the premium. To put the answer to
question 5 in context, we must first set forth the question and answer to
question 4, which states, “Did Protective Life . . . fail to do something that the
contract required it to do?” The jury answered, “No.” Question 4 next asks,
“or [d]id Protective Life . . . do something that the contract prohibited it from
doing? The jury answered, “Yes.” Question 5 asks, “Was Plaintiff harmed by
21
that failure?” The jury’s “No” answer can only mean that the policy lapsed as
a result of McHugh’s failure to pay the premium. The answers to the second
part of question 2 and question 5 are inconsistent. Nonetheless, Protective
Life insists the verdict was consistent.
In closing, Protective Life’s counsel urged the jury to answer “No” to
both parts of question 2: “Did William McHugh do substantially all the
significant things the contract requires him to do? Was [he] excused from
having to do all of the substantial things required to do? The jury charge is
no, he didn’t because he didn’t pay. And was he excused? No. No. No. [¶]
Why? What do we know? What reason do we have in a discussion about --
what reason do we have that he was excused? So the answers are no and no.
And you stop. You stop. There is no breach of contract. You don’t have to go
any further. You stop.”5
5 Protective Life’s counsel continued instructing the jury on how to fill
out the special verdict form, insisting McHugh had failed to pay the
premium: “You don’t perform, if you don’t pay. How can you perform unless
you have paid your premiums? That’s the way this agreement works. And
Protective failed to do something the contract required it to do? Never. Did
Protective do something the contract prohibited them from doing? No, of
course not. And then was plaintiff harmed by that failure? No. [¶] But you
don’t have to get there. You stop on number two. You stop. You can’t go any
further. We didn’t breach the contract. [¶] [McHugh] did not do what he
was required to do and there is no reason for that. . . . [¶] Again, if this was
—is two or three weeks I was in the hospital, but this was months, and
months and months. And we have nothing, other than he knew and said,
[‘Y]eah, I didn’t pay my premium[’] and still did nothing.”
In rebuttal, plaintiffs’ counsel argued their preferred way for the jury to
answer the special verdict form: “The first question, that [McHugh] entered
into a contract, we proved by a preponderance of the evidence. That’s all we
have to do, is that . . . McHugh did all or the significant things that the
contract required him to do. He didn’t make the payment that month. But he
had a credit. And we believe it’s clear that he did everything he was
significantly supposed to do. He was late. And if he had been told,
22
If the jury had accepted Protective Life’s counsel’s closing argument
and answered “no” to both parts of question 2, then the jury would have
signed the verdict and not answered question 5. In short, Protective Life is
now arguing that a verdict substantially different from the one it urged the
jury to render in its favor is a consistent verdict.
On appeal, Protective Life argues that the verdict was consistent:
“[Protective Life’s counsel] maintained at closing argument that Protective
‘complied with’ the statutes and indeed ‘more than complied with’ them. The
jury agreed, finding that Protective had not ‘failed to do’ anything the
statutes, as incorporated into the policy, ‘required it’ to do. To the extent that
the jury concluded that Protective did something that the policy ‘prohibited’—
in purporting to lapse the policy before the true lapse date—longstanding
California law gave the jury ample latitude to conclude that any such error
had not caused Plaintiffs ‘harm.’ [¶] This finding also was consistent with
the rest of the verdict. Plaintiffs assert otherwise at various points in their
brief, claiming that the jury found that McHugh was excused ‘of any further
performance,’ that he never had to pay another premium, and that as a result
the policy never could have lapsed. But that is not what the jury found. A
grace period ‘does not change the date when the premium is due.’ [Citation.]
maybe he could have done something a little different. But he didn’t know.
But we still think that his failure was not a material breach of the contract.
but even if it was, the second question should be answered yes as well.
Was . . . McHugh excused from having to do all or substantially all of the
significant things that the contract required him to do?”
Plaintiffs’ counsel also argued in rebuttal: “So clearly, so
clearly . . . McHugh never failed to do anything reasonable. The only thing he
did the entire time, he missed one premium because of some reason we will
never know. And simply because you miss one payment does not put you in
material breach of the contract.”
23
So even when a policy provides a grace period, the ‘default occurs’ as of ‘the
[original] due date,’ when the insured fails to pay. That means that when
McHugh failed to make the payment on January 9, he was in ‘default.’ The
jury’s finding that McHugh was excused from having to do ‘all, or
substantially all, of the significant things that the contract required him to
do’ thus meant he was excused from paying during the 62 total days he had
between the grace period and the prompt-reinstate period. It did not mean
that he was excused from paying premiums even after then. Those findings
were fully consistent with its finding that, because Protective gave McHugh
until the end of that grace period to pay his premium, any purported lapse of
the policy on February 9 caused no harm to either McHugh or Plaintiffs. The
trial court rightly allowed the jury’s verdict to stand.”
We are not persuaded by Protective Life’s argument. Because
Protective Life was only willing to accept McHugh’s premium payment
through the end of the prompt reinstatement period, its claim—that the
jury’s “yes” answer to the second part of question 2 refers solely to the 62-day
period encompassing the grace period and prompt reinstate period—is
tantamount to saying that McHugh was excused from paying the premium.
Logically, if McHugh was excused from paying the premium, the insurance
policy would have remained in effect at the time of his death. The jury’s
answer to question 5, that plaintiff was not harmed, directly contradicts the
jury’s determination that McHugh was excused from paying the premium.
In light of the jury’s responses to the special verdict form, its questions
to the court during deliberations, counsels’ closing arguments, and our de
novo standard of review, we conclude the verdict is inconsistent and
“hopelessly ambiguous.” (Zagami, Inc., supra, 160 Cal.App.4th at p. 1092.) We
24
therefore order a new trial. There being no lawful verdict, the issues
regarding the court’s denial of the JNOV are moot.
DISPOSITION
The judgment is reversed and the matter is remanded for a new trial.
The parties are to bear their own costs on appeal.
O’ROURKE, J.
WE CONCUR:
HUFFMAN, Acting P. J.
AARON, J.
25