United Heritage Prop. & Cas. Co. v. Zech, 48457

CourtUnited States State Supreme Court of Idaho
Writing for the CourtBRODY, Justice.
PartiesUNITED HERITAGE PROPERTY AND CASUALTY CO., Plaintiff-Counterdefendant- Respondent, v. TERRILL W. ZECH and GAYLA D. ZECH, Defendants-Counterclaimants- Appellants.
Docket Number48457
Decision Date31 August 2022

UNITED HERITAGE PROPERTY AND CASUALTY CO., Plaintiff-Counterdefendant- Respondent,

TERRILL W. ZECH and GAYLA D. ZECH, Defendants-Counterclaimants- Appellants.

No. 48457

Supreme Court of Idaho

August 31, 2022

Appeal from the District Court of the Fifth Judicial District of the State of Idaho, Lincoln County. Ned C. Williamson, District Judge.

The judgment of the district court is affirmed.

Wright Brothers Law Office, PLLC, Twin Falls, for Appellants.

Andrew Wright argued. Gjording Fouser, PLLC, Boise, and Elam & Burke, P.A., Boise, for Respondent. Trudy Fouser argued.

BRODY, Justice.

This case involves an insurance coverage dispute for fire damage to a rental home. After receiving reminder notices by mail, the insureds failed to pay the renewal premium by the due date. Fourteen days after payment was due, the insureds mailed a check to the insurance company for the late renewal premium. Six days later, but before the insurance company reviewed the late payment, a fire occurred at the rental home. Two days after the fire, the insurance company returned the late payment, denied coverage for the loss, and denied reinstatement of the policy.


The insurance company subsequently brought a declaratory judgment action against the insureds. The district court granted summary judgment in favor of the insurance company. We affirm.


A. Factual Background.

In the twelve years leading up to this dispute, Terrill and Gayla Zech (the "Zechs") purchased home or rental insurance policies for their various properties from United Heritage Property and Casualty Company ("United Heritage"). When this dispute arose, the Zechs had thirteen active insurance policies with United Heritage. Relevant to this case is the Zechs' rental home located at 213 West C Street, Shoshone, Idaho (the "Rental"). The Rental was insured through United Heritage for roughly twelve years under an insurance policy (the "Policy") that covered losses due to fire. The Policy was effective for one-year periods and could be successively renewed on July 2 of each year. For successive renewal to occur, the Policy required United Heritage to offer renewal, and the Zechs to accept through timely payment of the renewal premium. The Policy contains no provisions providing for automatic renewal or reinstatement.

The Zechs were routinely late in making renewal premium payments on their various insurance policies with United Heritage, including the Policy at issue in this case. Between 2007 and 2018, "a total of seven lapsed policies were reinstated for the Zechs following Statements of No Loss." The record does not contain the facts surrounding every lapse and reinstatement. The earliest evidence in the record is from 2016 and shows United Heritage accepted the Zechs' late renewal premium payment for the Policy. Two years later, in 2018, the Zechs again missed the Policy's renewal premium due date. This renewal was for an effective period from July 2, 2018, to July 2, 2019. Nine days after the due date, on July 11, 2018, United Heritage mailed the Zechs a "Notice of Cancellation" letter stating the Policy was terminated for "non-payment of premium" with a backdated termination date of July 4, 2018. This notice contained no language that the Policy expired under its own terms on July 2, 2018, when the Zechs failed to pay the renewal premium. United Heritage later explained that its "Notice of Cancellation" letters are a function of its "automated billing system" generated when its employees perform a transaction in the system that payment "was not received, that the policy terminated, and no further bills or reminders should be generated."


Six days after mailing the notice, on July 17, 2018, a United Heritage policy diary noted receiving late renewal premiums from the Zechs to "reinstate" three policies, including the Policy at issue. That day, United Heritage sent the Zechs a Statement of No Loss form to sign and return. The form pertained to all three policies, and included language requiring the Zechs to certify no loss, accident, or circumstance that might give rise to a claim occurred between the renewal due date (July 2, 2018) and the date the renewal payments were received (July 16, 2018):

(Image Omitted)

United Heritage did not dispute that it prepopulated the form as only requiring the Zechs to certify no loss through the date it received the premiums and not through the "date and time signed" as stated on the form. After receiving the form and charging a fifteen-dollar reinstatement fee, United Heritage reinstated the three policies while backdating coverage so there was no lapse.

The next year, in 2019, the Zechs again missed the renewal premium due date for the Policy and two other policies. In May of 2019, the Zechs received a declarations page (the "Declarations Page") from United Heritage stating that the Policy "Declaration Type" was "Renewal" and that it would be effective for a new policy period of July 2, 2019, through July 2, 2020. The Declarations Page also stated that "COVERAGE WILL EXPIRE AT 12:01 A.M ON DUE/EFFECTIVE DATE IF NOT PAID."

Also in May 2019, United Heritage also mailed the Zechs a bill for the Policy's renewal premium (the "Bill"). The Bill stated the renewal premium was due on July 2, 2019, and that the "Policy Period" had an "Effective" date of July 2, 2019, through to the "Expiration" date of July 2, 2020. It also stated that "COVERAGE WILL TERMINATE AT 12:01 A.M. ON DUE DATE IF NOT PAID." Roughly one month later, in June of 2019, United Heritage sent the Zechs a reminder notice (the "Reminder Notice") to pay the renewal premium by its due date. The Reminder Notice is substantially similar to the Bill and also states that "COVERAGE WILL


TERMINATE AT 12:01 A.M. ON DUE DATE IF NOT PAID." The Zechs do not dispute receiving the Declarations Page, the Bill, or the Reminder Notice.

The Zechs did not pay the renewal premium by the July 2, 2019, due date. Eight days later, on July 10, 2019, United Heritage sent the Zechs a "Notice of Cancellation" letter regarding the Policy. The letter stated the reason for "[c]ancellation" was "Non-Payment of Premium." It also backdated the termination date to the renewal due date, July 2, 2019. The notice contains no language indicating that the Zechs failed to accept an offer of renewal from United Heritage, or that the policy expired under its own terms when the policy period ended on July 2, 2019. Around the same time, United Heritage also sent similar letters for two other policies because the Zechs failed to pay the renewal premiums by their respective due dates. On July 16, 2019, six days after United Heritage mailed the Notice of Cancellation letter regarding the Policy, the Zechs mailed a check for the renewal payments for four different policies, including the Policy at issue (the "Payment").

United Heritage received the Payment on July 18, 2019, and transmitted it to their underwriting department for review. United Heritage's underwriting department reviews payments and correspondence it receives in the order in which they are received. The department did not review the Payment on the day it was received (Thursday, July 18, 2019) or the next day (Friday, July 19, 2019), and the department was not open that weekend (Saturday, July 20, 2019, or Sunday, July 21, 2019).

Four days after United Heritage received the Payment, on Monday, July 22, 2019, a fire damaged the Rental. That same day, after the fire, Mrs. Zech called United Heritage's claims department and left a voicemail generally inquiring about reinstatement. The next day, Tuesday, July 23, 2019, one of United Heritage's underwriters received the voicemail from Mrs. Zech. The voicemail did not state which policies Mrs. Zech wanted reinstated or that a fire had occurred at the Rental. Apart from the Notice of Cancellation letter, United Heritage had made no other contact with the Zechs up to this point concerning renewal, reinstatement, or the late renewal Payment. After listening to the voicemail, the underwriter called the Zechs' insurance agent who informed the underwriter about the fire at the Rental. After the phone call, the underwriter located the late renewal Payment in United Heritage's underwriting system.

One day later, on July 24, 2019, United Heritage returned the entire Payment in a letter concerning the Policy and three other policies. The letter stated the Payment was "being


returned" because the Policy, as well as the other three policies, had been "cancelled for nonpayment of premium" when the Zechs failed to make the renewal payments. The letter goes on to explain that reinstatement is available for the three other policies, with signed Statements of No Loss, payment of the renewal premiums, and additional reinstatement fees. The letter then stated that reinstatement was not available for the Policy because "a signed Statement of No Loss will not be able to be provided."

Attached to the letter, United Heritage provided prepopulated Statement of No Loss forms for two of the other policies-but not the Policy at issue here. The forms, like before, required the Zechs to certify no loss occurred between the respective renewal premium due date and the date United Heritage received the late renewal Payment-July 18, 2019:

(Image Omitted)

As shown by the "X" marks and prepopulated dates, United Heritage apparently only needed the Zechs to sign and return the forms. The Zechs were not required to certify no loss through the date they actually signed the forms.

The Zechs signed and returned the two forms and paid the renewal premiums plus reinstatement fees. Thereafter, United Heritage reinstated both policies and backdated coverage to each respective renewal due date without a lapse in coverage. However, United Heritage refused to reinstate the Policy. The Zechs soon filed a complaint with...

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