184 P.3d 28 (Alaska 2008), S-12396, Amos v. Allstate Ins. Co.

Docket Nº:S-12396, S-12415, S-12465.
Citation:184 P.3d 28
Opinion Judge:MATTHEWS , Justice.
Party Name:Casey AMOS and John Tice, Appellants and Cross-Appellees, v. ALLSTATE INSURANCE COMPANY and Beth Lancaster, Bertha Tatum, Jack Tatum, and Joe Tatum, Appellees and Cross-Appellants. Allstate Insurance Company, Appellant and Cross-Appellee, v. John Tice, Casey Amos, Bertha Tatum, Jack Tatum, Joe Tatum, and Beth Lancaster, Appellees and Cross-Appellan
Attorney:Steven D. Smith , Anchorage, for Appellants and Cross-Appellees Casey Amos and John Tice. Alfred Clayton, Jr. , Bliss, Wilkens & Clayton, Anchorage, for Appellant and Cross-Appellee Allstate Insurance Company and Beth Lancaster. C.R. Kennelly , Anchorage, for Appellants Bertha, Jack and Joe Tatum.
Judge Panel:Before : FABE , Chief Justice, MATTHEWS , EASTAUGH , and CARPENETI , Justices.
Case Date:May 23, 2008
Court:Supreme Court of Alaska
 
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Page 28

184 P.3d 28 (Alaska 2008)

Casey AMOS and John Tice, Appellants and Cross-Appellees,

v.

ALLSTATE INSURANCE COMPANY and Beth Lancaster, Bertha Tatum, Jack Tatum, and Joe Tatum, Appellees and Cross-Appellants.

Allstate Insurance Company, Appellant and Cross-Appellee,

v.

John Tice, Casey Amos, Bertha Tatum, Jack Tatum, Joe Tatum, and Beth Lancaster, Appellees and Cross-Appellants.

Bertha Tatum, Jack Tatum, and Joe Tatum, Appellants and Cross-Appellees,

v.

Allstate Insurance Company, Beth Lancaster, John Tice, and Casey Amos, Appellees and Cross-Appellants.

Nos. S-12396, S-12415, S-12465.

Supreme Court of Alaska.

May 23, 2008

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Steven D. Smith , Anchorage, for Appellants and Cross-Appellees Casey Amos and John Tice.

Alfred Clayton, Jr. , Bliss, Wilkens & Clayton, Anchorage, for Appellant and Cross-Appellee Allstate Insurance Company and Beth Lancaster.

C.R. Kennelly , Anchorage, for Appellants Bertha, Jack and Joe Tatum.

Before : FABE , Chief Justice, MATTHEWS , EASTAUGH , and CARPENETI , Justices.

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OPINION

MATTHEWS , Justice.

I. FACTS

The main question presented in this appeal is whether a river boat driven by Jack Tatum was insured when it collided with a river boat driven by John Tice. The accident occurred on August 9, 2000, in a narrow bend of the Little Susitna River. Tatum was alone in his boat; Casey Amos was a passenger in Tice's boat. All three men were injured in the collision.

Jack Tatum co-owned his boat with his brother Joe. The boat had been insured under a boat owner's policy issued by Allstate Insurance Company to Joe Tatum and his wife Bertha in 1999. The policy was purchased at the Stan Tebow Agency in Palmer and included property, liability, and medical payments coverage. The boat owner's policy was subject to a “short rate" table under which the entire premium for the annual premium period is earned if the policy is in effect for a minimum of five months during the annual period.

In the year 2000 the Tatums were to pay the annual premium of $289 in six installments, including a $3.50 payment fee for each installment, beginning on April 6. Allstate did not receive the payment that was due on June 6, 2000. On June 16 Allstate mailed to Joe and Bertha Tatum notice that the policy would be cancelled for nonpayment on July 15 unless payment in the minimum amount of $99.84 was received Before then. When on June 19 Allstate received a payment of $51.67, Allstate sent a notice to the Tatums that acknowledged receipt of this amount, and stated that the policy would still be cancelled on July 15 unless an additional $51.67 was received.

Allstate received no additional payments until August 14, 2000. On that day Bertha Tatum visited the Tebow Agency in order to make a payment. She did not mention the accident.1 She was told that the payment for reinstatement of the policy would be $51.67 and wrote a check for that amount. In exchange, Bertha Tatum was handed a document captioned “Conditional Receipt" that provided:

our acceptance of this payment does not (a) reinstate the policy, or (b) afford coverage for any accident, occurrence, or loss which took place Before this receipt was issued. A refund will be provided if coverage is not reinstated. Notification will be provided if the coverage is reinstated.

The next day, on August 15, 2000, Allstate mailed to Joe and Bertha Tatum a reinstatement notice stating that the policy was cancelled effective July 15, 2000, and reinstated on August 15, 2000.2

On August 26, 2000, Allstate received and cashed a check from Joe and Bertha Tatum for $54.09. This check was numbered 722 and was referred to as such in the ensuing litigation. It was dated July 10, 2000, signed by Bertha Tatum, and written on the Tatum's Warren Federal Credit Union account. The jury found that this check was actually mailed after the August 9 accident.

On September 6 Bertha Tatum personally delivered another check in the amount of $49 to the Tebow Agency. This payment was the balance of the annual premium. On that same day Allstate received its first notice of the accident. 3

The file was assigned to Allstate employee Beth Lancaster. On September 11, 2000, Lancaster wrote Joe and Bertha Tatum, stating that according to Allstate's records the policy was “in cancellation status" as of the date of the accident. Lancaster noted that the Tatums had advised her that the payment had been mailed on time and that this claim was being investigated. On October 9, 2000, Allstate mailed a letter to Joe and Bertha Tatum stating that the policy had been cancelled as of the August 9, 2000 accident

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and that Allstate would not pay claims arising out of the accident.

The Tatums remained in contact with Allstate in an effort to attempt to convince Allstate that check number 722 was timely mailed. On January 23, 2001, Bertha Tatum faxed to the Tebow Agency what purported to be checks number 721 and 723 written on the Warren account. Check 721 showed that it was written on June 8, 2000, and check 723 indicated that it was written on July 10, 2000. One could infer from these checks that check 722 was therefore written on or Before July 10. During the ensuing litigation Allstate learned that the copies of the checks that had been faxed to its agent had been altered with the dates and other information changed. Ultimately both the jury and the court concluded that the checks supplied by Joe and Bertha Tatum had been falsified.

Meanwhile, Casey Amos and John Tice hired attorney Steven Smith to represent them in personal injury claims against Jack Tatum. Amos's suit against Tatum was filed in May 2001 and Tice's was filed in October of the same year. Tatum consulted counsel who advised him that filing for bankruptcy might be advisable in light of Allstate's position that the accident was not covered. Alternatively, counsel suggested that bankruptcy might be avoided if Amos and Tice would accept a confession of judgment and an agreement to proceed against Allstate based on an assignment of any claim that Jack Tatum might have against Allstate for declining coverage. Smith, on behalf of Amos and Tice, refused to accept a confession of judgment and suggested instead that Jack Tatum simply allow default judgments to be taken against him. This proposal was agreed to. After hearings at which only each plaintiff testified, the superior court entered default judgments in favor of Amos and Tice. Amos's judgment amounted to $100,000 and Tice's was more than $1,000,000. Jack Tatum had not tendered the defense of the suits to Allstate and Allstate had received no notice of them.

II. PROCEEDINGS

In July 2002 Jack Tatum filed a complaint against Allstate and Beth Lancaster.4 This complaint forms the basis for the case presently under review. Tatum alleged breach of contract, negligence, and bad faith, and asked for compensatory damages including the amount of the two judgments entered against him and punitive damages. Allstate answered, denying breach of contract, negligence, and bad faith, and asserted a number of affirmative defenses.

In November 2002 Allstate took the depositions of Jack, Joe, and Bertha Tatum. Jack was represented by counsel but Joe and Bertha were not. Allstate questioned the Tatums concerning representations that they had made on their application for insurance. Allstate had already notified the Tatums of its position that the accident was not covered because of its cancellation for late payment. But Allstate had not told the Tatums that it was interested in developing facts that might show that material misrepresentations were made on the application that could result in the policy being declared void ab initio.

As the litigation progressed, Amos, Tice, and Joe and Bertha Tatum were added as parties. Amos and Tice asserted claims directly against Allstate as partial assignees of Jack Tatum. Allstate added a counterclaim against the Tatums for material misrepresentations in the application for insurance and for fraud in the claims process. Allstate sought as relief a declaration that the policy was void ab initio, or, alternatively, void because of fraud on the part of the Tatums during the processing of the claim. Allstate also sought a declaration that there was no coverage for the August 9, 2000 accident based on the cancellation of the policy effective July 15, 2000. Once joined, Joe and Bertha Tatum counterclaimed against Allstate for bad faith, malicious prosecution, and abuse of process.

A number of motions for summary judgment were made during the pretrial proceedings. Most relevant to our decision here is

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Jack Tatum's motion for partial summary judgment of March 26, 2003, seeking a ruling that the policy was in effect on August 9, 2000, because of Allstate's acceptance of payments subsequent to the accident. With respect to this motion, the court ruled that “Allstate waived any claim that the premium was not paid on time because Allstate accepted the premium payment and the policy did not contain a provision allowing for a lapse in coverage." The court explained:

The parties focus on acceptance of check 722 as the relevant one for waiver purposes. But given the case law, the focus must be on the partial payment on August 14 of $51.67, for it was that payment that reinstated the policy. Indeed, given the subsequent billing and payment history, Allstate basically accepted that payment as the payment that should have been made on July 15. After they made their May payment, the Tatums had to pay four more premiums: June, July, August and September. The June payment was not made, and so two payments had to be made by July 15. Bertha made one such payment...

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