## Facts

- Pacific Mutual issued Cobb a policy in 1926 that included life coverage and a permanent total disability benefit.
- In 1929, the 1926 policy was canceled and replaced with two policies, including a noncancellable disability-income policy promising \$250 per month during “continuous, necessary and total loss of all business time.”
- About two and a half years later, Cobb became permanently totally disabled due to encephalitis and demanded monthly disability payments.
- The insurer refused to pay, gave notice purporting to rescind, and offered to return premiums, asserting Cobb had made material misrepresentations or concealments in obtaining the policy.
- Cobb sued to recover unpaid benefits and sought a lump-sum award equal to the present value of all future monthly payments over his life expectancy.
- A jury returned a verdict awarding Cobb the present worth of \$250 per month for a 15-year life expectancy; the trial court entered judgment for \$30,830 plus interest and costs and found no fraud warranting rescission.

## Issues

1. Whether an insurer’s repudiation and attempted rescission of a disability-income policy allows the insured to recover, in a single action, the present value of all future periodic disability payments (anticipatory breach).
2. Whether the insured was limited to recovering only installments that had accrued and become payable as of judgment.
3. Whether the insurer established fraud or concealment justifying rescission of the policy.

## Decision

- The court held the insured could not recover the present value of all future monthly benefits based on anticipatory breach.
- The insured’s recovery was limited to unpaid installments that had accrued (with appropriate interest and costs), not projected future installments.
- The court accepted the trial court’s resolution of the rescission issue against the insurer, concluding the policy was not fraudulently procured.
- The judgment awarding a lump sum for future benefits was therefore improper to that extent.

## Legal Principles

- Anticipatory repudiation generally does not accelerate an insurer’s obligation to make periodic disability payments into a single, present claim for all future installments.
- Disability-income policies providing monthly payments are treated like installment-payment obligations: each installment gives rise to a cause of action only when it becomes due.
- Where the insured’s performance is complete (e.g., premiums paid) and the remaining duties are the insurer’s periodic payments, the contract is treated as not fitting the usual anticipatory-breach model for maturing all future obligations.
- A wrongful refusal to pay benefits supports recovery of amounts currently due, but does not, by itself, justify a lump-sum award based on life expectancy.
- Rescission for misrepresentation or concealment requires proof of materially false statements or omissions made with the requisite intent; adverse factfinding on fraud will defeat rescission.

## Conclusion

The court ruled that, despite the insurer’s wrongful repudiation and failed rescission, the insured could not obtain a lump-sum award for the present value of all future disability payments; the remedy was limited to unpaid installments that had accrued and become due.


Cobb v. Pac. Mut. Life Ins. Co., 4 Cal. 2d 565 (Cal. 1935)