Safeco Ins. Co. v. Irish

• Decision Date: 16 May 1984
• Docket Number: No. 6337-9-II,6337-9-II
• Citation: 681 P.2d 1294,37 Wn.App. 554
• Parties: SAFECO INSURANCE COMPANY, a domestic corporation, Respondent, v. Michael D. IRISH and Jane Doe Irish, husband and wife, and their marital community, Appellants.
• Court: Washington Court of Appeals

Page 554

37 Wn.App. 554

681 P.2d 1294

SAFECO INSURANCE COMPANY, a domestic corporation, Respondent, v. Michael D. IRISH and Jane Doe Irish, husband and wife, and their marital community, Appellants.

No. 6337-9-II.

Court of Appeals of Washington Division 2.

May 16, 1984.

Edward G. Holm, Olympia, for appellants.

Ward J. Rathbone, Olympia, for respondent.

REED, Judge.

Safeco's insured, Michael D. Irish, appeals from a judgment awarding Safeco $5,199.05 plus costs, the amount the company had paid Irish's credit union as loss payee under his policy. We affirm.

The issue is whether Irish's failure to pay a renewal premium for his auto coverage by 12:01 a.m. February 17, 1979, resulted in a lapse of coverage on his Alfa Romeo, which was rendered a total loss on February 16, 1979. We answer in the affirmative.

Since about 1977, Irish had carried a "continuous protection plan" (6-month term) auto policy with Safeco. The policy's current expiration date was December 29, 1978. The policy contained the following standard clause AUTOMATIC TERMINATION. If we offer to renew and you or your representative do not accept, this policy will automatically terminate at the end of the current policy period. Failure to pay the required renewal premium when due shall mean that you have not accepted our offer.

(Italics ours.)

Sometime in December 1978, after preliminary discussions with Safeco, Irish purchased an Alfa Romeo, which he financed through his credit union. He then applied to Safeco for a policy change, substituting the Alfa Romeo for another car and adding the credit union as loss payee. On January 23, 1979, Safeco issued a "Statement of Coverage," effective December 29, 1978 and expiring July 27, 1979. The statement advised Irish his "renewal premium" of $86 was due January 27, 1979. The statement also reflected premium adjustments because of the addition of the sportier car.

Irish failed to pay the renewal premium on January 27. Thereafter, in accordance with its usual practice of giving the insured additional time in which to pay a renewal premium, ¹ Safeco mailed Irish a cancellation notice. This notice reminded him that his renewal premium had not been received and that if not received by 12:01 a.m. February 17, 1979, his policy would be "cancelled" at that time. ² The notice further stated that if the company received the amount due before February 17, his insurance would "continue in force."

The notice was mailed to Irish's correct address. Because of a mix-up between him and his brother, Irish was not aware he had not been receiving all his mail until his brother called him on February 15, 1979. About 8 or 9 o'clock on February 16, 1979, Irish drove the Alfa Romeo to his brother's home and was handed an accumulation of mail, including Safeco's notice. According to Irish, he was going out the door at about 10 p.m., intending to mail the premium, ³ when he discovered his car had been stolen. Just after midnight the Alfa Romeo was "totalled" in a high-speed chase with the police. Irish never has paid the renewal premium.

Irish's credit union, having received in due course its copy of the cancellation notice, contacted Safeco and made arrangements to pay a premium necessary to keep its loss payee coverage in force. Consequently, Safeco paid the balance owed the credit union, $5,199.05. Safeco then brought this action under the subrogation provisions of the policy. ⁴ Safeco was granted judgment. Irish appeals.

Unfortunately, the issue before us was brought about in great measure because of the form chosen by Safeco to notify Irish that he had an extended period of time in which to reinstate coverage under his lapsed policy. Although denominated a "cancellation" notice, it was, in fact, merely a reminder that, (1) Irish had not accepted Safeco's offer to renew, (2) his policy had lapsed and, (3) he was being given an opportunity to reinstate.

The term "cancellation" refers to a unilateral act of the insurer terminating coverage during the policy term. Cf. Continental Ins. Co. v. Paccar, Inc., 26 Wash.App. 850, 614 P.2d 675 (1980), rev'd on other grounds, 96 Wash.2d 160, 634 P.2d 291 (1981). Neither RCW 48.18.291, relied upon by Irish, nor his policy provisions governing cancellation apply to a situation where the insured fails to pay a premium as a condition to renewal. Shelly v. Strait, 634 P.2d 1017 (Colo.App.1981); Sampson v. State Farm Mutual Ins. Co., 205 Neb. 164, 286 N.W.2d 746 (1980); Farmers Ins. Co. v. Hall, 263 Ark. 734, 567 S.W.2d 296, (1978); Sereno v. Lumbermens Mutual Casualty Co., 132 Ariz. 546, 647 P.2d 1144 (1982). Thus, the general rule is that failure of an insured to pay a renewal premium by the due date results in a lapse of coverage as of the last day of the policy period. Thomason v. Schnorr, 41 Colo.App. 546, 587 P.2d 1205 (1978).

Situations involving nonrenewal of continuous private automobile insurance are governed by RCW 48.18.292(1)(b), which formerly read as follows: ⁵

(1) Each insurer shall be required to renew any contract of insurance subject to RCW 48.18.291 unless one of the following situations exists:

* * *

(b) The insurer has communicated its willingness to renew in writing to the named insured, and has included therein a statement of the amount of the premium or portion thereof required to be paid by the insured to renew the policy period, including the amount by which the premium or deductibles have changed from the previous policy, and the date by which such payment must be made, and the insured fails to discharge when due his obligation in connection with the payment of such premium or portion thereof.

(Italics ours.) Cf. American Family Mutual Insurance Co. v. Ramsey, 425 N.E.2d 243, (Ind.App.1981).

Safeco satisfied the statutory exception when it issued its "Statement of Coverage," offering to renew the policy and containing all the required information. Nationwide Mut. Ins. Co. v. American Mut. Fire Ins. Co., 265 S.C. 399, 219 S.E.2d 79 (1975). When Irish failed to accept Safeco's offer by paying the renewal premium when due, the company notified Irish he would have until 12:01 a.m. February 17. It was thus...