Yovish v. United Services Auto. Ass'n

• Decision Date: 19 July 1990
• Docket Number: No. 89-455,89-455
• Parties: Mark YOVISH, Plaintiff and Respondent, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant and Appellant.
• Court: Montana Supreme Court

Page 682

794 P.2d 682

243 Mont. 284

Mark YOVISH, Plaintiff and Respondent, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant and Appellant.

No. 89-455.

Supreme Court of Montana.

Submitted Dec. 21, 1989.

Decided June 26, 1990.

Rehearing Denied July 19, 1990.

Dennis Tighe, Cure, Borer & Davis, Great Falls, for defendant and appellant.

J. David Slovak, Urgin, Alexander, Zadick & Slovak, Great Falls, for plaintiff and respondent.

HUNT, Justice.

Mark Yovish, plaintiff and respondent, filed suit against United Services Automobile Association (USAA), alleging a wrongful denial of coverage. The Eighth Judicial District Court, Cascade County, sitting without a jury, found in favor of Yovish, awarding him compensatory damages and attorney fees. USAA appeals. We affirm in part and reverse in part.

We will discuss the following issues on appeal:

1. Whether USAA complied with the insurance policy provisions governing renewal so that the policy expired of its own terms prior to the automobile accident in question;

2. Whether the District Court abused its discretion by awarding attorney fees to Yovish.

USAA, an insurance company with a principal place of business in San Antonio, Texas, provides multi-line insurance coverage exclusively to military personnel and their dependents. Mark Yovish, a member of the United States Air Force, insured his 1983 Volkswagen Rabbit with USAA in January, 1983. Yovish paid monthly premiums on the Volkswagen in response to premium notices sent by USAA. The notices indicated the amount due on the policy.

Sometime around May, 1983, Yovish moved from California to Great Falls. He retained his policy with USAA and continued to pay his premiums in response to monthly premium notices sent by the company. In early 1984, he moved from one Great Falls location to another. Consequently, his February, 1984 premium notice was returned to USAA by the post office. This notice indicated that the policy would be renewed for six months beginning February 1, 1984. Although Yovish did not receive the notice or pay the premium until approximately February 10, 1984, USAA backdated the coverage to the beginning of the month, leaving the six-month policy term running from February 1 to August 1, 1984. About this same time, Yovish also received a renewal declarations page to attach to his policy. The declarations page displayed a policy period of February 1 through August 1, 1984.

As USAA did not have any local agents, Yovish occasionally contacted the company by telephone to conduct business or obtain general rate and coverage information. In mid-February, 1984, he called the company for premium quotes. In April, 1984, after securing rental insurance coverage with Farmers, he called USAA to cancel his rental insurance policies.

On June 9 or 10, 1984, he again called the company. At trial, the parties disputed the substance of this conversation. Yovish maintained that he called USAA in June simply to obtain rate and coverage information. USAA, on the other hand, contended that he told the company not to renew the policy in August because he was insuring the automobile with Farmers. Yovish did not receive any written confirmation of the phone call from USAA nor did he receive a notice of non-renewal or cancellation. In fact, the last written notice Yovish received from USAA consisted of a May, 1984 premium notice indicating that, due to the cancellation of his rental policies, the balance on his auto policy was fully paid.

On August 5, 1984, Yovish sideswiped a parked car on a residential street in Great Falls. He admitted liability, and phoned USAA the following day to report the accident. A few days later, USAA denied coverage of the accident, maintaining that Yovish's policy had expired on August 1, 1984, the last day of the six-month policy period. USAA based its denial on the substance of the June telephone conversation.

On the advice of counsel, Yovish forwarded a $408 check to USAA on August 10, 1984 in an attempt to retain coverage from August 1, 1984. The check was cashed by the company but the money was returned to Yovish in late August.

Total damages incurred in the accident amounted to $3,634--$1,843 for Yovish's vehicle and $1,791 for the other car. After USAA refused to accept the claim, Yovish was forced to take out a $3,000 loan at 10 percent interest to cover the damages.

On April 25, 1985, Yovish instituted suit against USAA, asserting that USAA's rejection of the claim and alleged failure to comply with statutory notice provisions governing insurance companies constituted oppressive and malicious conduct. On December 23, 1986, the District Court denied USAA's motion for summary judgment. A bench trial commenced on December 31 of that year. On February 24, 1989, over two years later, the court issued findings of fact, conclusions of law and order, awarding Yovish $3,384 in compensatory damages (total damages of $3,634 offset by $250 deductible) and $322 in interest. The court denied Yovish's prayer for punitive damages but granted his request for attorney fees. On May 4, 1989, the court denied USAA's motion to amend the judgment with respect to the award of attorney fees. Following a hearing, the court awarded attorney fees in the amount of $8,703. USAA appealed to this Court.

USAA argues that it fully complied with both the policy provisions and statutory law governing renewal and non-renewal of auto insurance policies. Therefore, USAA maintains, it was not required to provide coverage for the car accident of August 5, 1984, because the policy had expired of its own terms on August 1, 1984 due to Yovish's failure to pay the renewal premium.

Montana's insurance notice statutes provide that an insurer may not cancel or refuse to renew an insurance policy without furnishing adequate notice of such intent to the insured. Sections 33-23-212 and 33-23-214, MCA. The statutes were enacted in order to prevent lapses in insurance coverage by supplying insureds with sufficient time to obtain insurance elsewhere. See Cantrell v. Benefit Ass'n of Ry. Employees, 136 Mont. 426, 431, 348 P.2d 345, 348 (1960). Preventing lapses in insurance coverage assures that drivers do not travel the state's highways without the benefit of insurance protection.

Many insurance policies possess similar notice provisions. As long as the terms in the policy regarding notice do not restrict the rights of Montana citizens given by the insurance notice statutes, the terms do not defeat public policy and are therefore valid. Because an insurance policy constitutes a contract between the parties, this Court will interpret the terms of the policy according to contract law. Universal Underwriters Ins. Co. v. State Farm Mut. Ins. Co., 166 Mont. 128, 135, 531 P.2d 668, 673 (1975). However, if a contractual term restricts the rights of the insured, we will construe the contract by looking to the statutes governing insurance law.

In the present case, the relevant policy provisions do not restrict the statutory rights of the insured. Therefore, we shall decide this case by construing the terms of the policy.

The applicable policy terms provided as follows:

Non-renewal. If we decide not to renew or continue this policy, we will mail notice to the named insured shown in the Declarations at the address shown in this policy. Notice will be mailed at least 20 days before the end of the policy period. If the policy period is other than 1 year, we will have the right not to renew or continue it only at each anniversary of its original effective date.

Automatic Termination. If we offer to renew or continue 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 or continuation premium when due shall mean that you have not accepted our offer. (Emphasis added.)

The policy was unambiguous. The clause concerning automatic termination required USAA to offer to renew the policy. Yovish's obligation to pay the premium was contingent upon USAA's offer to renew. Once USAA offered to renew the policy, Yovish could accept the offer by paying the renewal premium. The policy could automatically expire only if USAA extended an offer of renewal to Yovish and Yovish rejected that offer by failing to pay the premium when due.

USAA acknowledges that it failed to send Yovish any written offer of renewal. It neglected to forward Yovish either a premium notice or a renewal declarations page, as had been its practice in previous dealings with Yovish. Because USAA failed to offer to renew the policy, it failed to comply with the terms of the automatic termination clause. Thus, it cannot rely on that clause for the proposition that the policy automatically expired on August 1, 1984, the final day of...