Anderson v. Cooperative Insurance Companies

Anderson v. Cooperative Insurance Companies (2004-445); 179 Vt. 288; 895 A.2d 155

2006 VT 1

[Filed 13-Jan-2006]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                  2006 VT 1

                                No. 2004-445


  Deborah Anderson                           Supreme Court

                                                 On Appeal from
       v.                                   Addison Superior Court


  Cooperative Insurance Companies           April Term, 2005


  Helen M. Toor, J.

  Kevin E. Brown and Clara F. Gimenez of Langrock Sperry & Wool, LLP,
    Middlebury, for Plaintiff-Appellant.

  Joan W. D. Donahue and Richard P. Foote of Conley & Foote, Middlebury, for 
    Defendant-Appellee.


  PRESENT:  Reiber, C.J., Dooley, Johnson and Skoglund, and 
            Allen, C.J. (Ret.),  Specially Assigned

        
       ¶  1.  SKOGLUND, J.   Plaintiff Deborah Anderson appeals from the
  Addison Superior Court's denial of her summary judgment motion and grant of
  summary judgment in favor of defendant.  She argues that defendant must
  cover a loss that occurred after her automobile insurance policy had
  expired because defendant was aware of the loss when it extended her an
  offer, retroactive to the expiration date, to reinstate the policy.  Thus,
  she reasons, the superior court erred in granting summary judgment for
  defendant.  Defendant argues that there is no coverage for plaintiff's
  claim because the loss occurred after the auto policy had expired, and
  defendant had unequivocally denied the claim at issue and never retracted
  that denial.  We affirm.

       ¶  2.  The facts are not in dispute.  Plaintiff was covered by an
  automobile liability policy issued by defendant.  Despite receiving a
  renewal notice from defendant approximately one month before the policy
  expiration date, plaintiff failed to pay her renewal premium on time.  As a
  result, the policy expired on August 13, 2003.  Three days later, on August
  16, plaintiff's car sustained substantial damage in an accident.  Plaintiff
  reported the accident to her insurance agent on August 18, and later that
  day the agent informed plaintiff that defendant was denying coverage for
  the August 16 accident because the policy had expired on August 13.

       ¶  3.  Next, plaintiff received a "Final Notice" generated by
  defendant's computer system and dated August 18, 2003.  The notice informed
  plaintiff that her policy had expired on August 13 and that she could
  reinstate the policy "back to 8/13/2003" if she paid her premium by August
  31.  Plaintiff mailed the renewal form with the premium to defendant.  On
  or about August 25, defendant received plaintiff's acceptance of its offer
  to reinstate coverage, along with the requested premium.  Defendant then
  sent an "Acknowledgment of Late Payment," dated August 25, stating that it
  received the premium payment and that "coverage has been reinstated and
  remains in force without interruption." 
   
       ¶  4.  On August 27, plaintiff resubmitted her claim for coverage of
  her losses resulting from the August 16 accident.  By letter dated August
  29, defendant informed plaintiff that the reinstatement of her policy did
  not provide coverage for the August 16 accident.  The letter explained that
  her policy only covered unknown losses, and that "[t]here was no longer an
  insurable risk" once she had the accident during the time she was
  uninsured.  The letter also pointed out that plaintiff was advised on
  August 18 that defendant was denying coverage for the loss.  Defendant
  never retracted its denial of coverage, nor did it or any of its agents
  ever tell plaintiff that it intended to cover her claims stemming from the
  August 16 accident.

       ¶  5.  Plaintiff sued, alleging that defendant wrongfully refused to
  provide coverage.  Both parties filed motions for summary judgment.  In an
  order dated September 3, 2004, the trial court denied plaintiff's summary
  judgment motion and granted defendant's because the reinstatement "did not
  cover her for a claim that had already been reported and denied."  The
  court noted that "[w]hile an insurer may agree to cover a loss already
  known to it, there must be an intent to offer such coverage" and concluded
  there was no evidence of such an intent on the part of defendant.  This
  appeal followed.

       ¶  6.  On appeal, this Court reviews a motion for summary judgment de
  novo, employing the same standard as applied by the trial court.  Hardwick
  Recycling & Salvage, Inc. v. Acadia Ins. Co., 2004 VT 124, ¶ 14, 177 Vt.
  421, 869 A.2d 82.  To prevail on a motion for summary judgment, the moving
  party must show there is no genuine issue as to any material fact and that
  it is entitled to judgment as a matter of law.  V.R.C.P. 56(c)(3).  Where a
  genuine issue of material fact exists, summary judgment may not serve as a
  substitute for a determination on the merits.  Human Rights Comm'n v.
  Benevolent & Protective Order of Elks, 2003 VT 104, ¶ 11, 176 Vt. 125, 839 A.2d 576.
   
       ¶  7.  It is undisputed that, at the time of the accident, plaintiff's
  policy of automobile insurance had expired.  It is also undisputed that,
  when plaintiff filed a claim for the August 16 accident, she was informed
  that her claim was denied because no contract of insurance was in existence
  between plaintiff and defendant.  The issue in this case arises from the
  wording of the Final Notice, generated by defendant on August 18, and the
  conduct and expectations of the parties in relation to both the terms
  contained in the Final Notice and any subsequent extension of insurance
  coverage.

       ¶  8.  We hold that, as a matter of law, plaintiff cannot demonstrate
  that defendant was required to cover the August 16 accident by virtue of
  its offer to reinstate her policy and her acceptance of that offer.  This
  conclusion flows from defendant's explicit denial of coverage before
  plaintiff received and accepted defendant's offer to reinstate the policy,
  which shows that defendant properly exercised, and did not, as plaintiff
  contends, waive its right to deny coverage under the expired policy. 

       ¶  9.  Plaintiff argues that defendant could have withdrawn or amended
  its offer to reinstate coverage to exclude any claims of which it had
  knowledge and which had occurred during the lapse period.  She notes,
  correctly, that coverage exclusions must be specific and unambiguously
  expressed in the policy, and any uncertainty in this regard must be
  resolved in favor of the insured.  Am. Fid. Co. v. Elkins, 125 Vt. 313,
  315, 215 A.2d 516, 518 (1965).  She claims defendant extended an
  unconditional offer of retroactive coverage back to August 13, 2003, which
  plaintiff accepted.  Thus, she reasons, its decision not to limit its offer
  evinces its intent to cover the August 16 accident.  In effect, plaintiff
  argues that we should find an implied waiver of defendant's right to deny
  the claim in the offer to renew.
   
       ¶  10.  A waiver is a voluntary relinquishment of a known right,
  Green Mountain Ins. Co. v. Maine Bonding & Cas. Co., 158 Vt. 200, 206, 608 A.2d 1160, 1165 (1992), and can be express or implied.  Holden & Martin
  Lumber Co. v. Stuart, 118 Vt. 286, 289, 108 A.2d 387, 389 (1954).  As to
  express waiver, the undisputed facts show that defendant, in its offer to
  reinstate the policy, did not expressly waive its right to deny coverage
  for the August 16 accident by rescinding its previous denial.  

       ¶  11.  In assessing a claim of implied waiver, "caution must be
  exercised both in proof and application."  Id.  To succeed on an implied
  waiver theory, plaintiff must show "some act or conduct on the part of
  defendant[] that was unequivocal in character."  West River Power Co. v.
  Bussino, 111 Vt. 137, 139, 11 A.2d 263, 264 (1940).  As other jurisdictions
  have recognized, implied waiver blurs the line between the doctrines of
  waiver and estoppel.  See, e.g., Brown v. Taylor, 901 P.2d 720, 723 (N.M.
  1995) ("Waiver implied from a course of conduct may be termed a waiver by
  estoppel."); Gitter v. Tenn. Farmers Mut. Ins. Co., 450 S.W.2d 780, 784
  (Tenn. Ct. App. 1969) ("[I]mplied waiver partakes of what is referred to as
  waiver by estoppel.").  Thus, to prove implied waiver, a plaintiff must
  show that she honestly and reasonably believed, based on the defendant's
  conduct, that the defendant would forego asserting some right to which it
  was otherwise entitled, and that the plaintiff acted to her detriment in
  reliance on that belief.  Brown, 901 P.2d at 723-24; Gitter, 450 S.W.2d  at
  785.  
   
       ¶  12.  We find no implied waiver in this case.  At best, from
  plaintiff's perspective, defendant's conduct was equivocal, because, on the
  one hand, it flatly denied coverage for the accident and, on the other,
  sent a reinstatement offer that did not reference the denied claim.
  Furthermore, plaintiff had no basis for a reasonable, honest belief that
  defendant intended to forego its right to deny coverage.  In fact,
  plaintiff knew that defendant had already exercised it right to deny the
  her claim because her policy had expired.  Although defendant's offer to
  reinstate the policy, upon payment of the premium, did not reiterate that
  denial, the offer to reinstate did not reflect any intention to reverse
  that decision.  Moreover, plaintiff can point to no detrimental change in
  her position occasioned by defendant's conduct.  Thus, plaintiff cannot
  demonstrate an implied waiver by defendant.

       ¶  13.  In this regard, the instant case closely resembles Gitter. 
  There, the plaintiff testified that she received a notice from the
  defendant insurance company indicating that her automobile insurance would
  expire on May 4 if she failed to pay the premium by that date.  Without
  having paid the premium, her car was damaged in an accident on May 7. 
  Sometime after the accident, she received a "Final Notice" from the
  defendant, stating that if she paid the premium within fifteen days of the
  May 4 due date her coverage would be reinstated without interruption.  On
  May 23, more than fifteen days after the due date, but before the defendant
  had denied coverage, she tendered payment to the defendant, and defendant
  issued her a policy commencing May 24.  On May 26, the defendant informed
  the plaintiff that she did not have coverage on the date of the accident. 
  The court's words, in holding that the plaintiff could not prove an implied
  waiver, ring strikingly true to the instant case:

    In the case at bar there was no proof of any reliance by the
    complainant on the act of the company in accepting her check and
    the issuance of a new policy.  This complainant knew the policy
    was not in force when she forwarded the check and premium notice
    to the company.  This complainant knew the receipt by the company
    of this check would not afford coverage for the May 7, 1966
    accident by the terms of every statement she had received from the
    company. . . .  The only inference which can be reached from the
    act of complainant in delivering the check and premium notice to
    the company's branch office in Memphis is that she attempted to
    thereby induce the defendant to waive the forfeiture for
    nonpayment of premium by its acceptance of the check.  We do not
    believe implied waiver can rest on these facts.  This complainant
    cannot be heard in equity to say she understood the terms by which
    she could have effected continuous coverage, not comply therewith,
    have the premium mailed in for her, and then contend the defendant
    has impliedly waived its right to insist on the forfeiture by the
    issuance of the new policy.

  Gitter, 450 S.W.2d  at 785.  The Gitter court reached that holding in spite
  of the fact that the defendant's adjuster contacted plaintiff immediately
  following the accident and "proceeded with a normal investigation," at one
  point telling the plaintiff "don't worry about it; it will be taken care
  of."  Id. at 782.  Needless to say, defendant in the instant case made no
  such representations.

       ¶  14.  The instant case contrasts sharply with those relied upon by
  plaintiff, in which insurers were required to cover claims because the
  insurers' conduct led the insureds to believe the insurers intended to
  provide coverage.  For example, in Central National Insurance Group of
  Omaha v. Grimmett, 340 So. 2d 767 (Ala. 1976), the insured, like plaintiff
  here, was in an automobile accident shortly after his policy expired due to
  his failure to pay his premium on time.  The next day, insured reported the
  accident to his insurance agent, learned that his policy had lapsed, and
  tendered payment for his renewal policy.  The insured never received notice
  from the insurer or its agent that the insurer was denying coverage for his
  claim.  As a result, the court concluded that, by the agent's acceptance of
  Grimmett's payment and by the agent's failure to notify him that insurer
  only intended for coverage to start the day payment was received, that is,
  the day after the accident, the insured "was led to believe . . . that the
  insurance company intended to waive its rights and provide coverage."  Id.
  at 768.  "[A]lthough Central may not have intended to waive its rights,
  this intention was not conveyed to the insured Grimmett.  Indeed, Grimmett
  was led to believe the opposite-that the insurance company intended to
  waive its rights and provide coverage."  Id.  The court held that because
  the defendant had failed to limit the offer to reinstate, it was estopped
  from denying coverage.  
   
       ¶  15.  In contrast, defendant here specifically informed plaintiff
  that she had no insurance coverage on the day of her accident and that her
  claim was denied for that reason.  Thus, unlike Grimmett, plaintiff had no
  reason to believe defendant intended to waive its right to deny the claim
  and provide coverage.

       ¶  16.  Plaintiff's argument that we should follow Reed v. Vermont
  Accident Insurance Co., 110 Vt. 501, 9 A.2d 111 (1939) is similarly
  unavailing.  There, Reed's accident insurance policy lapsed due to
  nonpayment of the premium on April 1, 1938.  On or about June 23, the agent
  of the insurer wrote to Reed and advised him that an immediate payment
  would cause his policy to be in force from that day until August 1.  Reed
  placed the payment in the mail to the agent on June 27 and was seriously
  injured in a car accident at 1:15 a.m. on June 28, while the proverbial
  check was in the mail.  The agent received the payment later in the morning
  of June 28.  This Court held that because the insurer's agent expressly
  authorized Reed to mail in the premium, Reed's "deposit of the premium in
  the mail [was] sufficient to complete the contract."  Id. at 504-05, 9 A.2d 
  at 113.  Thus, the contract was in force at the time of his accident.  Id.
  at 506, 9 A.2d  at 114.  By contrast, plaintiff in the instant case did not
  accept defendant's offer to reinstate coverage by tender of the premium
  payment until after the loss had occurred and after defendant had denied
  coverage.  Indeed, plaintiff can point to no provision in her policy or the
  reinstatement documents generated in August 2003 that is reasonably subject
  to different interpretations concerning (1) the fact that she had no
  insurance at the time of the accident, (2) the fact that insurer denied her
  claim, and (3) the fact that her lack of insurance was a proper basis for
  denying her claim.  And although defendant offered to reinstate her policy
  back to August 13, it never retracted or altered its initial denial of the
  claim.
   
       ¶  17.  In denying plaintiff's resubmitted claim, defendant relied in
  part on the known-loss rule, which states that an insurer need not cover a
  loss known to the insured at the time the parties enter into an insurance
  contract, unless the loss was also known to the insurer at the time of the
  formation of an insurance contract.  See 7 L. Russ & T. Segalla, Couch on
  Insurance § 102:8, at 102-23 (3d ed. 1997) [hereinafter "Couch"] ("Given
  the underlying basis of the doctrine, and the right of the parties to agree
  to cover existing losses, it has been recognized that the known loss
  doctrine does not apply if the insurer also knew of the circumstances on
  which it bases the defense.").  Plaintiff argues that the known-loss rule
  does not protect defendant in this case, because defendant also knew of the
  existing loss she claimed as a result of the August 13 accident.  As noted,
  the trial court referred to the known-loss rule and decided this issue on
  that part of the rule that holds the insurer has no duty to defend or
  indemnify the insured with respect to the known loss ab initio, unless the
  parties intended the known loss to be covered.
   
       ¶  18.  The known-loss rule recognizes that "[i]mplicit in the
  concept of insurance is that the loss occur as a result of an event that is
  fortuitous, rather than planned, intended, or anticipated."  Couch § 102:7,
  at 102-17.  In other words, the rule effectuates the cornerstone principle
  that "insurance is fundamentally based on contingent risks which may or may
  not occur."  Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204, 1210 (Ill. 1992).  Thus, the known-loss rule protects insurers from
  unwittingly insuring losses that have already occurred, as opposed to risks
  of loss, see Inland Waters Pollution Control, Inc. v. Nat'l Union Fire Ins.
  Co., 997 F.2d 172, 179 (6th Cir. 1993) ("Because insurance policies . . .
  are designed to insure against fortuities, a fraud is worked when they are
  misused to insure a certainty."), and the exception for losses known to the
  insurer protects insureds by resolving the question of coverage in favor of
  the insured, see N. Sec. Ins. Co. v. Rossitto, 171 Vt. 580, 582, 762 A.2d 861, 864 (2000) (mem.) (recognizing policy of this Court to favor complete
  coverage when interpreting insurance contracts).  Here, neither of those
  concerns is present because it is undisputed that, although both parties
  knew of the loss before the policy was reinstated, defendant explicitly and
  properly denied the claim before plaintiff received and accepted the offer
  to reinstate her coverage and never expressed an intention to retract that
  denial or provide coverage.  Because it is far from clear on this record
  that defendant intended to cover this known loss, plaintiff's attempt to
  invoke the exception for losses known to the insurer is unavailing. 
  Indeed, this case is more properly viewed as not implicating the known-loss
  rule in the first place, given defendant's prompt and proper denial of the
  claim during the period of lapse coupled with plaintiff's failure to show
  that defendant somehow rescinded the denial of coverage or otherwise
  altered its position.  In any event, the exception to the known-loss rule
  does not assist plaintiff here.

       ¶  19.  Finally, plaintiff argues that the court below erred in
  holding that, because the offer to reinstate coverage was generated by a
  computer, it was "not an intentional offer to cover the already-denied
  claim."  We agree with plaintiff that a "contract is no less a contract
  simply because it is entered into via a computer."  Forrest v. Verizon
  Communications, Inc., 805 A.2d 1007, 1011 (D.C. 2002).  Nonetheless, the
  computer-generated offer did not indicate any intent on defendant's part to
  cover the already-denied claim or to otherwise alter its decision to deny
  the claim. Therefore, we conclude that the superior court correctly ruled
  in defendant's favor.

       Affirmed.


                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice