Saunders v. Lloyd's of London

• Decision Date: 21 September 1989
• Docket Number: No. 55902-3,55902-3
• Citation: 779 P.2d 249,113 Wn.2d 330
• Court: Washington Supreme Court
• Parties: Larry G. SAUNDERS, Petitioner, v. LLOYD'S OF LONDON, a foreign corporation; Superior Underwriters, Division of Groninger & Co., Inc., a Washington corporation; Terry Edwards and Jane Doe Edwards, d/b/a Terry Edwards Insurance, a sole proprietor, Respondents.

Page 330

113 Wn.2d 330

779 P.2d 249

Larry G. SAUNDERS, Petitioner, v. LLOYD'S OF LONDON, a foreign corporation; Superior

Underwriters, Division of Groninger & Co., Inc., a

Washington corporation; Terry Edwards and Jane Doe Edwards,

d/b/a Terry Edwards Insurance, a sole proprietor, Respondents.

No. 55902-3.

Supreme Court of Washington,

En Banc.

Sept. 21, 1989.

Robert L. Henry, Spokane, for petitioner.

MacGillivray & Jones, P.S., Richard E. Hayes, Susan Marie Gasch, Spokane, for Lloyd's of London.

Keefe & King, P.S., John Hunt Whaley, Spokane, for Edwards.

UTTER, Justice.

The Court of Appeals affirmed the directed verdicts dismissing, for lack of evidence, petitioner Larry Saunders' suit to recover insurance proceeds. His policy stated that it terminated before the date the incident occurred. Saunders argues, however, that he presented sufficient evidence for jury consideration under theories of waiver, estoppel, and violation of the Consumer Protection Act. Under the facts of this case, we agree that the jury should have been allowed to consider evidence supporting estoppel as applied to the respondent insurance companies, Superior Underwriters (Superior) and Lloyd's of London (Lloyd's). The trial court properly dismissed the case against respondent Terry Edwards, who procured the insurance.

In June 1983, petitioner Larry Saunders contacted Terry Edwards to obtain insurance for a rental triplex in Spokane. At that time he made a partial premium payment of $150. Edwards secured insurance through Superior, ¹ but he has no binding authority for that company. ² Report of Proceedings, at 152, 218; Exhibit 32. Mr. Edwards neither had authority to determine nor participated in determining coverage dates, policy terms, or amount of premiums. Report of Proceedings, at 153-155; Exhibit 32. On June 14, Superior issued a Lloyd's policy which stated on its face that it would be effective June 11, 1983 through June 11, 1984. Exhibit 12; Report of Proceedings, at 161. The company could elect not to renew by giving written notice 30 days prior to expiration. Exhibit 1, Insurance Contract, at 8, clause 18. Saunders made subsequent payments to Edwards on August 1, following a June 13 invoice, and on October 5, following an August 2 invoice. Report of Proceedings, at 50, 66-67. However, Edwards paid Superior the entire balance following Superior's August billing, making up the difference and awaiting reimbursement from Saunders. Report of Proceedings, at 113-115.

On May 31, 1984, Superior sent Edwards a notice that the policy would expire June 11, and expressed willingness to renew. On June 5, Edwards sent Saunders the following premium notice for renewal covering the period from June 11, 1984 through June 11, 1985.

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Exhibit 9; Report of Proceedings, at 176. After Saunders paid the premium on June 27, 1984, Superior issued a renewal on July 9, backdated to June 11, 1984.

On June 3, 1985, Edwards sent Saunders a renewal invoice. Having moved, Saunders called Edwards at his office, gave him the new address, and requested a billing at that address. Edwards then sent a second insurance invoice on June 25, 1985. Report of Proceedings, at 73-77, 181. Saunders paid the premium on July 8, 1985. Superior renewed the policy dated August 13, again backdating coverage from June 11, 1985 through June 11, 1986.

On May 20, 1986, Edwards mailed a premium notice, apparently to the correct address. Report of Proceedings, at 21. However, later testimony reveals that the file copy contained an erasure in the box number, Report of Proceedings, at 128, and Saunders claimed he did not receive the renewal notice. In any event, he neither requested renewal nor paid the premium by June 11, 1986. He and his former wife deny receiving a renewal quote from Superior dated April 16, 1986, which stated that coverage would terminate on the expiration date if the company had not received a renewal order. Clerk's Papers, at 22, 38; Report of Proceedings, at 238-39. The insurers admit that the notice was sent to the wrong address. Clerk's Papers, at 42.

On June 28, 1986, a tree fell on Saunders' triplex causing extensive damage. Saunders contacted Edwards who, after calling Superior, informed him that the damage was not covered because his insurance policy had lapsed. Saunders offered to pay the premium but Superior rejected the offer. Report of Proceedings, at 196-97. Edwards told Saunders that he could not call Superior directly, stating that Saunders must deal with him. Report of Proceedings, at 5. Superior's phone number, however, was printed on the top of Saunders' policy. Saunders claims that neither Superior nor Edwards ever notified him that his policy would be terminated if he failed to make a prompt payment. Report of Proceedings, at 53, 136. On July 3, 1986, Superior sent Edwards a letter denying the claim for damages.

Saunders filed suit against Edwards, Superior and Lloyd's, claiming coverage under theories of estoppel, waiver, and violations of the Consumer Protection Act. Following the presentation of evidence to the jury, the trial court granted defendants' motions for directed verdict and dismissal for lack of evidence. Report of Proceedings, at 267, 288; Clerk's Papers, at 47-48. The Court of Appeals affirmed in an unpublished opinion and denied a motion for reconsideration. This court accepted Saunders' petition for discretionary review.

This case presents one issue for review. Did the trial court err by dismissing the case for lack of sufficient evidence where the insured argued theories of estoppel, waiver, and violation of the Consumer Protection Act? Insurers requested attorney fees under RAP 18.9, claiming that Saunders filed a frivolous appeal. Our resolution of the case eliminates their attorney fee argument. The insured requested attorney fees at the Court of Appeals but did not pursue that argument in his petition for review.

A trial court has no discretion in ruling on a motion for a directed verdict. Levy v. North Am. Co. for Life & Health Ins., 90 Wash.2d 846, 851, 586 P.2d 845 (1978). It must accept as true the nonmoving party's evidence and must draw all favorable inferences from it. Lockwood v. A C & S, Inc., 109 Wash.2d 235, 243, 744 P.2d 605 (1987). The court must deny the motion if there is any competent evidence or reasonable inference from which " 'reasonable minds might reach conclusions that sustain the verdict' ". Lockwood, at 243, 744 P.2d 605, quoting Levy, 90 Wash.2d at 851, 586 P.2d 845. A reviewing court reviews the evidence in the light most favorable to the aggrieved party and determines whether the trial court correctly applied the law. Jones Assocs., Inc. v. Eastside Properties, Inc., 41 Wash.App. 462, 465, 704 P.2d 681 (1985); Rainier Ave. Corp. v. Seattle, 76 Wash.2d 800, 803, 459 P.2d 40 (1969).

I

The Court of Appeals stated, as a rule of law, that waiver and estoppel could not apply to insurers' practices concerning renewal premiums. The court quoted the following general rule:

One may not, by invoking the doctrine of estoppel or waiver, bring into existence a contract not made by the parties and create a liability contrary to the express provisions of the contract the parties did make. The general rule is that, while an insurer may be estopped, by its conduct or its knowledge or by statute, from insisting upon a forfeiture of a policy, yet under no conditions can the coverage or restrictions on the coverage be extended by the doctrine of waiver or estoppel.

Saunders v. Lloyd's of London, unpublished opinion, noted at 52 Wash.App. 1082 (1988), quoting Carew, Shaw & Bernasconi, Inc. v. General Cas. Co. of Am., 189 Wash. 329, 336, 65 P.2d 689 (1937).

The underlying rationale is that an insurance company should not be required to pay for a loss for which it received no premium. See Saunders, quoting Sullivan v. Great Am. Ins. Co., 23 Wash.App. 242, 247, 594 P.2d 454 (1979). That rationale supports precluding waiver or estoppel in situations where the insured attempts to broaden coverage to protect against risks not stipulated in the policy or expressly disclaimed. See Carew; see also Annot., 1 A.L.R.3d 1139, 1144 (1965). That rationale cannot, however, support precluding waiver or estoppel where the insurers have previously accepted premium payments for periods for which they provided no coverage.

"It is well settled that an insurer who has adopted the custom of waiving strict compliance with provisions as to the payment of premiums is bound by the custom in the absence of notice to the contrary." Blomquist v. Grays Harbor Medical Serv. Corp., 48 Wash.2d 718, 720, 296 P.2d 319 (1956). While Blomquist dealt only with premiums within a policy term, the Court of Appeals has extended the principle to cover renewal premiums. See Evans v. State Farm Mut. Auto. Ins. Co., 16 Wash.App. 704, 707, 559 P.2d 574 (1977).

In Evans, the Court of Appeals applied the Blomquist rule to find waiver where the question involved late payment of a premium to renew a 6-month auto insurance policy. Evans, 16 Wash.App. at 707, 559 P.2d 574. In the past, the insurer had accepted late or partial payments. Moreover, the insurer had reduced the rate during the previous term and had applied the refundable amount toward the insured's next premium payment. These actions reasonably led the insureds to believe they had continuous coverage regardless of prompt payment.

Other jurisdictions appear to have applied similar principles in the renewal premium context but, for various reasons, have not found waiver or estoppel. See, e.g., Unigard Mut. Ins. Co. v. Fox, 142 Ga.App. 706, 708, 236 S.E.2d 851 (1977) (noting rule ["with regard to contract deviations or mutual departure"] where a 1-year fire policy expired before the fire loss, but finding that acceptance of only one late payment does not constitute a course of dealing); Butt v. State Farm Mut. Auto....