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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Blood v. Kenneth A. Murray Insurance, Inc. (11/03/2006) sp-6067
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| JAMES D. BLOOD, | ) |
| ) Supreme Court Nos. S- 11733/11763 | |
| Appellant, | ) |
| ) | |
| v. | ) Superior Court No. |
| ) 4FA-99-1306 CI | |
| KENNETH A. MURRAY INSURANCE, | ) |
| INC., and PROGRESSIVE INSURANCE | ) |
| COMPANIES, | ) |
| ) | |
| Appellees. | ) |
| ) | |
) O P I N I O N
KENNETH A. MURRAY INSURANCE, )
INC., )
)
Cross-Appellant,)
)
v. )
)
JAMES D. BLOOD, )
) No. 6067 - November 3, 2006
Cross-Appellee. )
)
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Fairbanks, Charles R. Pengilly, Judge.
Appearances: Robert John, Law Office of
Robert John, and Ward Merdes, Merdes &
Merdes, P.C., Fairbanks, for Appellant and
Cross-Appellee Blood. Michael C. Kramer,
Cook Schuhmann & Groseclose, Inc., Fairbanks,
for Appellee and Cross-Appellant Kenneth A.
Murray Insurance, Inc. Aisha Tinker Bray,
Guess & Rudd, P.C., Fairbanks, for Appellee
Progressive Insurance Companies. Susan
Orlansky, Feldman Orlansky & Sanders,
Anchorage, Richard A. Hodyl, Jr., Meckler
Bulger & Tilson LLP, Chicago, for Amicus
Curiae Property Casualty Insurers Association
of America.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, and Fabe, Justices. [Carpeneti,
Justice, not participating.]
MATTHEWS, Justice.
I. INTRODUCTION
This appeal follows a jury trial to determine whether
James Bloods automobile insurance coverage remained in effect,
despite his failure to pay premiums, because the insurer sent
notice of termination to the wrong address. The jury returned a
verdict in favor of the insurer after concluding (1) that the
insurer had not met its obligation to notify Blood but (2) that
the failure did not cause Bloods lack of coverage. The parties
ask us to review whether the insurers efforts to notify were
examined under the proper legal standard and whether it was error
to include causation as an element of Bloods claim. We conclude
that the jury was instructed on the wrong legal standard, but
that the insurer satisfied its notice obligations as a matter of
law. We therefore affirm the judgment without considering the
causation issue.
II. FACTS AND PROCEEDINGS
This case is here for the second time. The following
statement of facts is taken largely from our prior opinion, Blood
v. Kenneth Murray Insurance, Inc. (Blood I).1
James Blood purchased an automobile liability insurance
policy from Kenneth A. Murray Insurance, Inc. (KMI), on March 28,
1996. Progressive Insurance Company issued the policy. The
policy term was six months. Blood did not pay the renewal
premium on his policy, and Progressive sent three
termination-of-coverage notices to him at the address in
Progressives files. Blood no longer lived at that address, and
the letters were returned undelivered. Although Progressive
mailed the notices, they were returned to KMI.2 The policy
expired by its terms on September 28, 1996. On November 4, 1996,
Blood appeared in person at KMIs office and renewed the lapsed
policy for another six-month term. Blood prepaid the premium for
this new term. On March 13, 1997, and April 20, 1997,
Progressive sent Blood notices that his coverage would expire on
May 5, 1997, and that in order to renew his coverage he would
have to submit renewal premiums by that date. On May 5, 1997,
Progressive sent Blood a notice that his coverage was terminated
effective May 16, 1997. These notices were sent to Blood at the
address in Progressives files, which was Bloods old address.
These notices were returned to KMI marked undeliverable.
On August 2, 1997, Blood was injured in an automobile
accident while riding in a car driven by an uninsured driver.3
He filed a claim against Progressive and demanded arbitration
under the uninsured motorist coverage of his then-lapsed
insurance policy. Progressive denied the claim on the ground
that Bloods coverage under the policy ended before the accident
because he did not pay the renewal premium.4 Progressive denied
the arbitration request on the theory that arbitration only
applied to liability and damages issues, not coverage disputes.5
Blood then filed suit against Progressive and KMI
seeking a declaration of coverage and an award of damages. Blood
argued that he was covered by the insurance policy at the time of
the accident because KMI was negligent in failing to use
reasonable efforts to obtain his last known address,and that
therefore Progressives attempts to cancel his policy for non-
payment under AS 21.36.220[6] [or AS 21.36.240,7] and AS
21.36.260[8] were ineffective.9 Although the complaint sought
damages, Bloods counsel ultimately took the position that he
wanted only a declaration of coverage so that he could proceed to
arbitration on his damages claims.10 Blood moved for summary
judgment on the coverage issue, arguing (1) that KMI had a duty
to exercise reasonable care and diligence when notifying him, as
the insured, of termination of coverage11 and (2) that KMI
breached its duty as a matter of law because it had three pieces
of returned mail in its files when it mailed Bloods termination
notice to the same address. Without ruling on the validity of
Bloods duty theory, the superior court denied his summary
judgment motion on the ground that factual issues remained as to
whether such a duty was breached.
Next, Progressive and KMI argued that Blood waived his
right to arbitration on his damages claims because he filed a
lawsuit seeking damages and indicated an intention to litigate
damages up until the day of trial.12 The superior court agreed
and held that Blood had to prove his damages in court.13 Bloods
counsel responded that he was not prepared to present a damages
case, and so the court dismissed the case, noting that Blood
could not prevail if he could not prove damages.14
Blood appealed, and in Blood I we concluded that Blood
did not waive his right to arbitrate, but we affirmed the
superior courts denial of Bloods summary judgment motion on the
coverage issue because material issues of fact remained in
dispute.15 We therefore remanded the case for further
proceedings, including trial on the coverage issue.16
In the resulting coverage trial, the superior court
ruled on the duty question as follows. First, the court found
that KMI satisfied its statutory duty, meaning that notices of
nonrenewal and cancellation were mailed to Blood to his last
known address as required by AS 21.36.260. Second, the court
concluded that KMI also owed a separate, non-statutory, duty to
exercise reasonable care, skill, and diligence to inform the
insured of termination of coverage. Whether KMI satisfied this
second duty was a question for the jury, which was instructed
that [u]nder Alaska law, an insurance agent may terminate an
insurance policy only by mailing notice to the last known address
of the insured. It is also required by Alaska law that the
insurance agent exercise reasonable care, skill and diligence to
inform the insured of termination of coverage. In order to
prevail in this lawsuit, Mr. Blood must show not only that [KMI]
breached a duty owed to him, but also that the breach was a legal
cause of harm to him.
The jury returned a special verdict, finding that KMI
failed to exercise reasonable care, skill, and diligence to
inform [Blood] of termination of coverage, but that the failure
was not a legal cause of harm to Blood. The superior court
entered judgment in favor of KMI and Progressive.
Blood appeals and argues that causation should not have
factored into whether KMIs breach of its non-statutory duty to
provide notice of terminated coverage resulted in his continued
coverage under the policy. Instead, he claims that KMIs breach,
alone, establishes continued coverage. Blood also argues that
KMI did not meet its separate obligations under AS 21.36.260.
KMIs cross-appeal contends that an insurer does not owe a non-
statutory duty of due diligence to inform an insured of
terminated coverage, and so the jury was improperly instructed on
that point.
III. DISCUSSION
We conclude that the superior court erred by imposing a
non-statutory duty of care and due diligence to inform the
insured of terminated coverage and therefore do not reach Bloods
argument that the court erred by including causation as an
element in his claim for breach of such a duty. Because we also
conclude that the superior court properly found KMI to have
satisfied its statutory notice obligations, we affirm the
judgment in favor of KMI and Progressive.17
A. KMI Met Its Statutory Notice Obligations.
Alaska Statute 21.36.220 requires an insurer to notify
an insured before terminating coverage or failing to renew a
policy.18 According to AS 21.36.260, notice under .220 or .240 is
ineffective unless the insurer (1) mail[s] the notice by first
class mail to the last known address of the insured; and (2)
obtain[s] a certificate of mailing from the U.S. Postal Service.
The superior court found KMI to have substantially complied with
section .260 as a matter of law. We affirm this decision because
the evidence is such that no other decision is reasonably
possible.19
Blood does not dispute that Progressive mailed several
notices to his former address. Progressive mailed each notice
via first class mail. The first two notices indicated that
Bloods policy would lapse if payment was not received before May
5, 1997. The third, mailed May 5, stated that his coverage was
terminated effective May 16. Although Progressive sent these
notices to an address at which Blood no longer resided, Blood
admits that it was the only address he ever provided to KMI or
Progressive. On these facts, the requirement that notice of
cancellation or nonrenewal be mailed to Bloods last known address
has plainly been satisfied.
Alaska Statute 21.36.260(2) also requires an insurer to
obtain a certificate of mailing, and KMI appears not to have
complied with this subsection. KMI offered no proof at the
coverage trial of having obtained a certificate of mailing.
Blood contends that the missing certificate renders KMIs
termination of his insurance ineffective. But, again, Blood does
not dispute that Progressive mailed notice to him at his old
address. The returned letters were introduced as evidence in the
first trial and are in the record before us. A certificate of
mailing from the U.S. Postal Service serves only as proof of
mailing. When, as here, returned mail directly establishes that
an insurer has mailed notice, the purpose of AS 21.36.260(2)
establishing proof of mailing is accomplished. In this
circumstance compliance with the certificate of mailing
requirement may be excused.20 To hold otherwise would be to put
form over substance.
For these reasons, we affirm the superior courts
conclusion that KMI substantially complied with the notice
requirements under AS 21.36.260.
B. The Superior Court Erred by Holding KMI to a Separate
Duty of Care.
The superior courts conclusion that an insurer must
satisfy a duty to exercise reasonable care that is separate from
AS 21.36.260 resulted from an inference the court drew from our
first opinion. Noting Bloods legal theory, we said that Blood
relies on Jefferson v. Alaska 100 Insurance., Inc.[21] in arguing
that an insurance agent has a duty to exercise reasonable care,
skill, and diligence . . . to inform the insured of termination
of coverage. 22 On remand, the superior court concluded that we
agreed with Bloods theory. But because in Blood I the superior
court had denied Bloods summary judgment motion due to disputed
material facts, the validity of his legal theory was not an issue
before us. Instead of ruling on it, we said that [e]ven if
Blood is correct that KMI and Progressive owed him such a duty,
there remains the question whether the defendants exercised due
diligence.23
According to Blood, the superior courts mistaken belief
that Blood I imposes an extra duty of care is harmless because
the duty can be found elsewhere in our case law. He renews his
argument from Blood I that Jefferson imposes a duty to exercise
reasonable care, skill, and diligence . . . to inform the insured
of termination of coverage.24 But this reading of Jefferson
conflates the two duties discussed in that case. We noted in
Jefferson that an insurers duty to use reasonable diligence to
procure insurance is coupled with an equally important duty to
inform the insured of cancellation.25 The two duties are
distinct. And while the duty to procure insurance requires
reasonable diligence, Jefferson does not state or imply that the
duty to inform the insured of cancellation requires more than
compliance with AS 21.36.260.26
Blood relies on Rosenberg v. Smidt,27 as an alternative
source for the extra duty of care. In that case, we considered
the phrase last known address as it is used in AS 34.20.070(c),28
which requires a deed of trust trustee to mail notices of
default to the last known addresses of certain interested parties
before a nonjudicial foreclosure sale of real estate. In
Rosenberg the owners of real estate scheduled for a foreclosure
sale did not receive notice mailed to their former address.29
They sued and argued that subsection .070(c) required an
affirmative effort on the part of the trustee to determine their
correct address.30 We agreed, holding that under AS 34.20.070(c)
the last known address is that address most likely to give the
affected party notice. The trustee is obligated to exercise due
diligence to determine that address. Failure to impose such a
requirement, we reasoned, would not balance adequately the
competing interests involved.31
Blood argues that Rosenbergs definition of last known
address applies to that phrase as it is used in AS 21.36.260.32
Under this theory, KMI was bound to both follow the specific
terms of section .260, and satisfy an extra duty to use
reasonable care and due diligence to determine Bloods correct
address. But we reject the argument because real estate deed of
trust foreclosures are not comparable to the termination or
nonrenewal of liability insurance policies.
As we noted in Rosenberg, the law generally regards
real estate forfeitures to be abhorrent and will seize upon
slight circumstances to relieve a party therefrom.33 No similar
doctrine attends the cancellation or nonrenewal of policies of
insurance, especially for nonpayment of premiums. Relatedly, the
equity of the owner of real property that is subject to a deed of
trust is often substantial. By contrast, the insured under a
liability insurance policy typically has received what he has
paid for, and stands to lose no equity interest. Moreover, the
owner of real estate, as in Rosenberg, may not actually be in
default and thus may have no notice that a foreclosure will
occur. But the insured is typically aware that his insurance
will terminate when premiums are not paid, even without notice
from the insurer. In addition, a long period of time often
passes between the execution of a deed of trust, or the
establishment of subordinate interests to property subject to a
deed of trust, and a deed of trust foreclosure. Thus it is to be
anticipated that the addresses of owners and other parties in
interest will have changed and addresses on file may not be
accurate. This is much less likely to be the case with respect
to liability insurance where policies are typically issued on an
annual or semi-annual basis. Further, compared to cancellation
or nonrenewal of liability insurance policies, a nonjudicial
foreclosure of real estate under a deed of trust is a relatively
rare event. Requiring insurers to track down the new addresses
of its insured would impose a significant burden on a routine
transaction, whereas real estate foreclosures are much less
routine. For these reason we decline to extend the holding of
Rosenberg to notices required under AS 21.36.260.
Our conclusion on this point renders Bloods causation
arguments moot. Because we hold that KMI owed no separate duty
of care, we need not consider whether it was appropriate for the
superior court to instruct the jury that coverage could only be
found if a breach of that duty caused Bloods loss of coverage.
IV. CONCLUSION
The coverage trial in this case proceeded under an
erroneous legal theory because the superior court held KMI to a
non-statutory duty that does not exist. Yet because the jury
returned a verdict in favor of KMI and we conclude that KMI met
its notice obligations under AS 21.36.260, we AFFIRM the judgment
below.
_______________________________
1 68 P.3d 1251 (Alaska 2003).
2 Id. at 1253.
3 Id.
4 Id.
5 Id.
6 AS 21.36.220 prevents an insurer from cancelling
insurance without first giving notice to the insured. It
provides in relevant part:
(a) An insurer may not exercise its
right to cancel a personal insurance policy
unless, for a named insured who is
(1) less than 70 years of age, a written
notice of cancellation is mailed to the named
insured as required by AS 21.36.260 at least
30 days before the effective date of
cancellation; however, if cancellation is for
nonpayment of premium, the notice shall be
mailed to the named insured as required by AS
21.36.260 at least 20 days before the
effective date of cancellation . . . .
7 AS 21.36.240 requires an insurer to notify the insured
when insurance will not be renewed. It provides in relevant
part: An insurer may not fail to renew a policy unless a written
notice of nonrenewal is mailed to the named insured as required
by AS 21.36.260 at least 20 days for a personal insurance policy
. . . before the expiration date of the policy . . . .
8 AS 21.36.260 reads as follows: If a notice is required
from an insurer under this chapter, the insurer shall (1) mail
the notice by first class mail to the last known address of the
insured; and (2) obtain a certificate of mailing from the U.S.
Postal Service.
9 Blood I, 68 P.3d at 1253.
10 Id.
11 Id. at 1258.
12 Id. at 1253.
13 Id. at 1254.
14 Id.
15 Id. at 1257.
16 Id. at 1258.
17 In this appeal Blood also attacks some of the superior
courts evidentiary rulings in the coverage trial. Our conclusion
that the superior court erred by imposing a non-statutory duty in
this case renders the coverage trial superfluous because it was
conducted exclusively to determine whether KMI breached the non-
statutory duty. We therefore reach no conclusion on Bloods
evidentiary claims.
18 AS 21.36.220(a). There is some dispute between the
parties as to whether KMI terminated Bloods insurance policy or
simply failed to renew the policy. Yet the distinction makes no
difference here because AS 21.36.260 applies whenever notice is
required from an insurer under [AS 21.36] and therefore sets the
same requirements regardless of whether notice is due under AS
21.36.220 for terminated insurance or AS 21.36.240 for non-
renewed insurance.
19 See Bennett v. Hedglin, 995 P.2d 668, 672 (Alaska 2000)
(noting that courts may decide facts as a matter of law when the
evidence is such that there can be no reasonable difference of
opinion. (quoting Ruhlig v. American Cmty. Mut. Ins. Co., 696
N.E.2d 877, 880 (Ind. App. 1998)).
20 See Travelers Indem. Co. v. Guess, 255 S.E.2d 55, 56
(Ga. 1979) (concluding that written notice of cancelled insurance
mailed to and actually received by the insured is effective even
if the insurance company fails to obtain a post office receipt as
the governing statute requires because where it is admitted such
notice was received, the purpose of the statute has been
accomplished).
21 717 P.2d 360, 364 (Alaska 1986).
22 Blood I, 68 P.3d at 1258 (alteration in original).
23 Id. (emphasis added).
24 Blood I, 68 P.3d at 1258 (quoting Jefferson, 717 P.2d
at 364).
25 Jefferson, 717 P.2d at 364 (emphasis added).
26 Id.
27 727 P.2d 778 (Alaska 1986).
28 Id. at 780.
29 Id. at 779.
30 Id. at 780.
31 Id. at 783.
32 See AS 21.36.260 (The insurer shall . . . mail the
notice . . . to the last known address of the insured.).
33 727 P.2d at 783.
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