| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
This site is possible because of the following site sponsors. Please support them with your business.
|
| Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions |
|
|
|
|
|
This site is possible because of the following site sponsors. Please support them with your business.
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Amos v. Allstate Insurance Company (05/23/2008) sp-6267
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
| CASEY AMOS and JOHN TICE, | ) |
| ) Supreme Court No. S- 12396 | |
| Appellants and Cross-Appellees, | ) |
| ) Superior Court No. 3PA-02- 914 CI | |
| v. | ) Consolidated with |
| ) Superior Court No. 3AN-01- 7223 CI | |
| ALLSTATE INSURANCE COMPANY | ) Superior Court No. 3PA-01- 1100 CI |
| and BETH LANCASTER, BERTHA | ) |
| TATUM, JACK TATUM, and JOE | ) O P I N I O N |
| TATUM, | ) |
| ) No. 6267 May 23, 2008 | |
| Appellees and Cross-Appellants. | ) |
| ) | |
ALLSTATE INSURANCE COMPANY, )
) Supreme Court No. S-12415
Appellant and Cross-Appellee, )
)
v. )
)
JOHN TICE, CASEY AMOS, BERTHA )
TATUM, JACK TATUM, JOE TATUM, )
and BETH LANCASTER, )
)
Appellees and Cross-Appellants. )
)
BERTHA TATUM, JACK TATUM, )
and JOE TATUM, ) Supreme Court No. S-12465
)
Appellants and Cross-Appellees, )
)
v. )
)
ALLSTATE INSURANCE COMPANY, )
BETH LANCASTER, JOHN TICE, )
and CASEY AMOS, )
)
Appellees and Cross-Appellants. )
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District, Palmer,
Eric Smith, Judge.
Appearances: Steven D. Smith, Anchorage, for
Appellants and Cross-Appellees Casey Amos and
John Tice. Alfred Clayton, Jr., Bliss,
Wilkens & Clayton, Anchorage, for Appellant
and Cross-Appellee Allstate Insurance Company
and Beth Lancaster. C.R. Kennelly,
Anchorage, for Appellants Bertha, Jack and
Joe Tatum.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Bryner,
Justice, not participating.]
MATTHEWS, Justice.
I. FACTS
The main question presented in this appeal is whether a
river boat driven by Jack Tatum was insured when it collided with
a river boat driven by John Tice. The accident occurred on
August 9, 2000, in a narrow bend of the Little Susitna River.
Tatum was alone in his boat; Casey Amos was a passenger in Tices
boat. All three men were injured in the collision.
Jack Tatum co-owned his boat with his brother Joe. The
boat had been insured under a boat owners policy issued by
Allstate Insurance Company to Joe Tatum and his wife Bertha in
1999. The policy was purchased at the Stan Tebow Agency in
Palmer and included property, liability, and medical payments
coverage. The boat owners policy was subject to a short rate
table under which the entire premium for the annual premium
period is earned if the policy is in effect for a minimum of five
months during the annual period.
In the year 2000 the Tatums were to pay the annual
premium of $289 in six installments, including a $3.50 payment
fee for each installment, beginning on April 6. Allstate did not
receive the payment that was due on June 6, 2000. On June 16
Allstate mailed to Joe and Bertha Tatum notice that the policy
would be cancelled for nonpayment on July 15 unless payment in
the minimum amount of $99.84 was received before then. When on
June 19 Allstate received a payment of $51.67, Allstate sent a
notice to the Tatums that acknowledged receipt of this amount,
and stated that the policy would still be cancelled on July 15
unless an additional $51.67 was received.
Allstate received no additional payments until August
14, 2000. On that day Bertha Tatum visited the Tebow Agency in
order to make a payment. She did not mention the accident.1 She
was told that the payment for reinstatement of the policy would
be $51.67 and wrote a check for that amount. In exchange, Bertha
Tatum was handed a document captioned Conditional Receipt that
provided:
our acceptance of this payment does not (a)
reinstate the policy, or (b) afford coverage
for any accident, occurrence, or loss which
took place before this receipt was issued. A
refund will be provided if coverage is not
reinstated. Notification will be provided if
the coverage is reinstated.
The next day, on August 15, 2000, Allstate mailed to Joe and
Bertha Tatum a reinstatement notice stating that the policy was
cancelled effective July 15, 2000, and reinstated on August 15,
2000.2
On August 26, 2000, Allstate received and cashed a
check from Joe and Bertha Tatum for $54.09. This check was
numbered 722 and was referred to as such in the ensuing
litigation. It was dated July 10, 2000, signed by Bertha Tatum,
and written on the Tatums Warren Federal Credit Union account.
The jury found that this check was actually mailed after the
August 9 accident.
On September 6 Bertha Tatum personally delivered
another check in the amount of $49 to the Tebow Agency. This
payment was the balance of the annual premium. On that same day
Allstate received its first notice of the accident.3
The file was assigned to Allstate employee Beth
Lancaster. On September 11, 2000, Lancaster wrote Joe and Bertha
Tatum, stating that according to Allstates records the policy was
in cancellation status as of the date of the accident. Lancaster
noted that the Tatums had advised her that the payment had been
mailed on time and that this claim was being investigated. On
October 9, 2000, Allstate mailed a letter to Joe and Bertha Tatum
stating that the policy had been cancelled as of the August 9,
2000 accident and that Allstate would not pay claims arising out
of the accident.
The Tatums remained in contact with Allstate in an
effort to attempt to convince Allstate that check number 722 was
timely mailed. On January 23, 2001, Bertha Tatum faxed to the
Tebow Agency what purported to be checks number 721and 723
written on the Warren account. Check 721 showed that it was
written on June 8, 2000, and check 723 indicated that it was
written on July 10, 2000. One could infer from these checks that
check 722 was therefore written on or before July 10. During the
ensuing litigation Allstate learned that the copies of the checks
that had been faxed to its agent had been altered with the dates
and other information changed. Ultimately both the jury and the
court concluded that the checks supplied by Joe and Bertha Tatum
had been falsified.
Meanwhile, Casey Amos and John Tice hired attorney
Steven Smith to represent them in personal injury claims against
Jack Tatum. Amoss suit against Tatum was filed in May 2001 and
Tices was filed in October of the same year. Tatum consulted
counsel who advised him that filing for bankruptcy might be
advisable in light of Allstates position that the accident was
not covered. Alternatively, counsel suggested that bankruptcy
might be avoided if Amos and Tice would accept a confession of
judgment and an agreement to proceed against Allstate based on an
assignment of any claim that Jack Tatum might have against
Allstate for declining coverage. Smith, on behalf of Amos and
Tice, refused to accept a confession of judgment and suggested
instead that Jack Tatum simply allow default judgments to be
taken against him. This proposal was agreed to. After hearings
at which only each plaintiff testified, the superior court
entered default judgments in favor of Amos and Tice. Amoss
judgment amounted to $100,000 and Tices was more than $1,000,000.
Jack Tatum had not tendered the defense of the suits to Allstate
and Allstate had received no notice of them.
II. PROCEEDINGS
In July 2002 Jack Tatum filed a complaint against
Allstate and Beth Lancaster.4 This complaint forms the basis for
the case presently under review. Tatum alleged breach of
contract, negligence, and bad faith, and asked for compensatory
damages including the amount of the two judgments entered against
him and punitive damages. Allstate answered, denying breach of
contract, negligence, and bad faith, and asserted a number of
affirmative defenses.
In November 2002 Allstate took the depositions of Jack,
Joe, and Bertha Tatum. Jack was represented by counsel but Joe
and Bertha were not. Allstate questioned the Tatums concerning
representations that they had made on their application for
insurance. Allstate had already notified the Tatums of its
position that the accident was not covered because of its
cancellation for late payment. But Allstate had not told the
Tatums that it was interested in developing facts that might show
that material misrepresentations were made on the application
that could result in the policy being declared void ab initio.
As the litigation progressed, Amos, Tice, and Joe and
Bertha Tatum were added as parties. Amos and Tice asserted
claims directly against Allstate as partial assignees of Jack
Tatum. Allstate added a counterclaim against the Tatums for
material misrepresentations in the application for insurance and
for fraud in the claims process. Allstate sought as relief a
declaration that the policy was void ab initio, or,
alternatively, void because of fraud on the part of the Tatums
during the processing of the claim. Allstate also sought a
declaration that there was no coverage for the August 9, 2000
accident based on the cancellation of the policy effective July
15, 2000. Once joined, Joe and Bertha Tatum counterclaimed
against Allstate for bad faith, malicious prosecution, and abuse
of process.
A number of motions for summary judgment were made
during the pretrial proceedings. Most relevant to our decision
here is Jack Tatums motion for partial summary judgment of March
26, 2003, seeking a ruling that the policy was in effect on
August 9, 2000, because of Allstates acceptance of payments
subsequent to the accident. With respect to this motion, the
court ruled that Allstate waived any claim that the premium was
not paid on time because Allstate accepted the premium payment
and the policy did not contain a provision allowing for a lapse
in coverage. The court explained:
The parties focus on acceptance of check
722 as the relevant one for waiver purposes.
But given the case law, the focus must be on
the partial payment on August 14 of $51.67,
for it was that payment that reinstated the
policy. Indeed, given the subsequent billing
and payment history, Allstate basically
accepted that payment as the payment that
should have been made on July 15. After they
made their May payment, the Tatums had to pay
four more premiums: June, July, August and
September. The June payment was not made,
and so two payments had to be made by July
15. Bertha made one such payment; whether
she made the second one on time (check 722)
is in dispute. Assuming for present purposes
that check 722 did not arrive in July, then
only the June payment had been made as of
July 15. There were three more payments:
August 14, August 26, and September 6. The
latter payments were made after Allstate
notified the Tatums that two payments
remained due. Those payments accordingly
must be deemed to be the August and September
premiums, which entails that the August 14
payment was a late payment of the July
premium.
Allstate relies on the fact that it
conditioned receipt and acceptance of the
August 14 payment upon a lapse in the
premium, but that condition cannot have any
force or effect for at least two related
reasons. First, the case law indicates that
the condition must be in the policy itself.
Second, by seeking to impose a lapse in the
policy when accepting the payment when no
provision authorizing such a lapse appears in
the policy, Allstate has effectively amended
the policy; and this it may not do.
The case law speaks in terms of both
waiver and estoppel. Whichever term is used,
the fact remains that having accepted and
cashed the August 14 payment, Allstate may
not now argue that the policy lapsed. This
conclusion is buttressed by Allstates
subsequent behavior, for Allstate cashed
check 722 on August 26 and credited it to the
remaining amount that was due, and it
accepted a final payment on September 6.
Allstate thereby was fully paid on the
premium, which was to provide an entire year
of coverage. Allstate cannot properly accept
that full payment, but only impose a one-
month lapse in coverage that is not contained
in the policy.
The court recognizes that the short
table indicates that Allstate is entitled to
keep the entire premium once the policy has
been in effect for 148 days. But again, the
policy does not authorize Allstate to require
a lapse in the policy. The short table is
best read instead as a statement to the
policy holder as to what refund he or she can
expect should the policy be canceled for the
three reasons set forth in the policy.
The court also is cognizant of the case
law holding that an insurance company can
decline to cover a loss which is incurred
between the termination and payment dates.
See, e.g., Dolan v. Utica Mut. Ins. Co., 650
F. Supp. 851 (D. Mass 1986). But it is
virtually impossible to square this doctrine
with the general rule disfavoring lapses in a
policy if the payment is unconditionally
received. After all, the only reason why the
issue of a lapse arises is because there was
a loss during the period of the alleged
lapse. If the company could always refuse
coverage during the lapse, there would be
absolutely no point to the well-settled rule
against allowing a lapse upon unconditional
receipt of the late payment. The court
accordingly declines to apply the rule
articulated in Dolan. (Footnote omitted.)
In sum, by receiving and accepting the
August 14 payment, as well as cashing the
August 26 and September 6 payments, Allstate
may not now contend that the policy lapsed
between July 15 and August 15, 2000. It
therefore could not properly deny coverage of
the accident on the grounds that the policy
had lapsed. There being no facts in dispute
on this issue, plaintiff is entitled to
partial summary judgment on this score.
Earlier, in support of the proposition that provisions
authorizing a lapse in coverage for nonpayment must be set forth
in the body of the insurance policy, the court cited a treatise
on insurance as follows:
In the absence of a controlling
statutory or contract provision to the
contrary, the general rule is that an insurer
which receives, accepts, and retains past-due
premiums, assessments, or dues, paid
subsequent to the expiration of the grace
period, if any, renews the contract and
waives the forfeiture for nonpayment,
provided such acceptance is unconditional and
the material facts are known to the
insurer.[5]
In explanation of the relevance of this language, the court
stated:
The case law cited in Couch indicates that
the relevant conditions must be set forth in
the policy. Compare, e.g., Mixson v.
Allstate, 388 So. 2d 608 (Fla. App. 1980) (no
provision for lapse in policy), with Gurley
v. State Farm, 428 N.E.2d 916 (Ill. App.
1981) (policy stated that no lapse if payment
made within 10 days after termination date).
Although the courts ruling mooted the issue of when
check 722 was mailed, the court recognized that its ruling that
Allstate could not deny coverage on the ground that the policy
had lapsed was one of first impression in Alaska and it might be
reversed on appeal. To avoid the need for a new trial in that
event, and because a jury trial was necessary on other issues,
the court ruled that the trial jury should also address and
decide issues related to check 722.
In a later pre-trial order the court ruled that
Allstate had breached its duty to the Tatums by deposing them in
2002 concerning questions in the application for insurance
without first notifying them that it was interested in claiming
that the application contained material misrepresentations. As a
remedy the court ruled that Allstate was precluded from claiming
that the policy was void ab initio based on material
misrepresentations in the application.
At the conclusion of the trial, the jury entered a
special verdict that determined that Bertha Tatum mailed check
722 after the accident and Allstate received it on August 26,
2000. The jury also determined that Allstate was first notified
of the accident on September 6, 2000, and first gave notice that
it would not cover the accident on October 9, 2000. The jury
found that Lancaster was not negligent and that Allstate did not
act in bad faith. The jury also determined that Bertha and Joe
Tatum had made material misrepresentations by providing falsified
documents to Allstate and that the default judgments obtained by
Amos and Tice were collusive and obtained by a fraud on the
court. Further, the jury determined that the amounts of the
default judgments were not reasonable and that reasonably Amos
should have received $20,000 and Tice should have received
nothing. Finally, the jury found that Jack Tatum had suffered
damages of $5,000.
Tice and Amos moved for judgment notwithstanding the
verdict. The court granted their motion in part, overturning the
special verdict insofar as it held that the default judgments
were the product of fraud and collusion, and as to the reasonable
amount of the judgment that Tice should have received. The court
changed the jurys zero determination to an award of $35,389.49.
Allstate was thus ordered to pay $5,000 to Jack Tatum,
$20,000 to Amos, and $35,389.49 to Tice, plus prejudgment
interest. With respect to attorneys fees and costs, the court
ruled that Jack Tatum, Tice, and Amos were not prevailing parties
as against Allstate. The court ruled that Allstate was the
prevailing party as against Joe and Bertha Tatum and that Beth
Lancaster (separately) was the prevailing party as against Jack
Tatum, Tice, and Amos. With respect to Lancasters fees and
costs, the court limited them to those matters that directly
involved her, noting that it would be unfair and inappropriate to
award fees that really were incurred by Allstate in defending
[the] case. Using these limitations, the court awarded Lancaster
fees of $8,495. Allstate was awarded attorneys fees of $14,736
against Joe and Bertha Tatum. This represented an enhanced fee
of fifty percent of actual fees thirty percent is the norm6
because the court found that Joe and Bertha Tatums fraud led to
unnecessary work.
All parties appeal.
III. DISCUSSION
We here summarize the parties points on appeal,
reframing and combining points where it seems appropriate to do
so.
On appeal Allstate contends
(1) that the court erred in ruling that Allstate was
precluded from reinstating the cancelled policy with a gap in
coverage;
(2) that the court erred in refusing to declare the policy
void ab initio because of misstatements in the insurance
application; and
(3) that the court erred in granting judgment
notwithstanding the verdict as to the jurys findings that the
default judgments were the product of fraud and collusion.
Amos and Tice contend
(1) that Allstate should be liable for the entire amount of
the default judgments, not merely the amounts found to be
reasonable; and
(2) that they were prevailing parties as against Allstate
and therefore were entitled to an award of attorneys fees under
Civil Rule 82.
Joe and Bertha Tatum contend
(1) that issues concerning check 722 should not have been
submitted to the jury;
(2) that their counterclaims for malicious prosecution and
abuse of process should not have been dismissed;
(3) that they were entitled to actual reasonable attorneys
fees; and
(4) that Lancaster should not be regarded as a prevailing
party since it was her action that precipitated the breach.
Jack Tatum contends that Allstate should be liable for
the whole amount of the default judgments.
A. There Was No Coverage for the August 9 Accident.
We turn first to Allstates contention that the court
erred in ruling that Allstate was precluded from contending that
the policy was not in effect on the day of the accident. The
superior court ruled on this claim as a question of law,
acknowledging that if its ruling on the applicable law was not
accepted on appeal, certain facts would be relevant. As the case
is now presented, those facts have been determined by the jury.
Thus the question before this court is whether based on the
established facts Allstate should be precluded from contending
that the policy was cancelled on July 15 and reinstated on August
15 and that there was therefore no coverage for the August 9
accident. As presented, this claim is a question of law which we
review de novo, adopting the rule of law that is most persuasive
in light of precedent, reason, and policy.7
Allstates position on this issue starts with the
proposition that the policy was properly cancelled on July 15.
After the policy was cancelled Allstate contends that it had a
right to either reinstate or refuse to reinstate the policy and
that if it reinstated the policy it could do so on any terms
mutually agreed to. According to Allstate, [b]ecause the policy
did not obligate Allstate to reinstate the policy under any
circumstance, Allstate was free to impose conditions upon any
request for reinstatement, just as the Tatums were free to reject
the conditions and look elsewhere for insurance coverage. It
follows, Allstate argues, that the condition imposed by the
conditional receipt and the reinstatement notice that there
would be no coverage between July 15 and August 15 was
effective. The appellees, on the other hand, generally support
the rationale of the trial court.8
For the reasons that follow we conclude that Allstates
position is correct. Under AS 21.36.220(a)(1) an insurer may
cancel an insurance policy for nonpayment of premiums by mailing
written notice of cancellation to the named insured at least
twenty days before the effective date of cancellation. Allstates
policy provides that it may be cancelled for nonpayment upon
mailing notice of cancellation to the insured at least ten days
before the date of cancellation. Coverage terminates on the
effective date and hour stated on the cancellation notice. The
letters from Allstate of June 16 and June 19, both stating that
the policy would be cancelled on July 15, 2000, complied with the
method of cancellation set out in the statute and the policy.
Therefore the policy was cancelled as of July 15, 2000.
Once Allstate had cancelled the policy, did acceptance
of subsequent premiums necessarily mean that coverage was
reinstated retroactively to July 15 or could Allstate specify
another date as the effective date of reinstatement? The trial
courts answer was that retroactive reinstatement was Allstates
only option once it decided to reinstate the policy. The courts
reason for this conclusion was that without a provision in the
policy authorizing a gap in coverage, a gap may not be required.9
The court based this conclusion on its interpretation of case law
from other states.
We think the court has read too strictly what the cases
have required. A good summary of what may be regarded as a
consensus view of the decision law is the statement quoted
earlier in this opinion taken from Couch on Insurance.10 This
statement makes it clear that an unconditional acceptance of past
due premiums reinstates coverage, presumably with no time gap.
But this statement implies that the acceptance of past due
premiums may be conditioned on an effective date for renewed
coverage that leaves a gap in coverage. The case law that the
superior court relied on is in accordance with this view.
For example, in Mixson v. Allstate Insurance Co., the
court made it clear that it was the unconditional acceptance of
the late payment that constituted a waiver of the insurers right
to contend the policy has lapsed.11 Another case cited by the
superior court, Gurley v. State Farm Mutual Automobile Insurance
Co.,12 likewise does not support the constraint on reinstatement
imposed by the superior court. In Gurley a renewal premium was
due on October 7. When it was not paid the insurer sent the
insured
a notice which stated that his policy had
expired on October 7, 1974, at 12:01 a.m.
The notice further provided that payment
within 10 days after expiration date
reinstates this policy as of the expiration
date for six months, if paid thereafter, you
will be advised if payment has been accepted
for reinstatement.[13]
The insured made the payment more than ten days after the
expiration date, and the insurer gave an unconditional receipt
for the payment, but the court held in accordance with the notice
that the payment beyond the ten-day grace period did not
reinstate the policy retroactively. The only two other cases
cited by the superior court also recognize the rule that when an
insurer notifies its insured that acceptance of a late payment
will cause the expired policy to be reinstated with a gap in
coverage, and the notice is given either before or
contemporaneously with the tender of the late payment, the notice
will be effective.14 There are a number of other cases
recognizing this rule.15
In the present case, the conditional receipt given to
Bertha Tatum when she tendered the premium check on August 14,
2000, stated that acceptance of the check would not afford
retroactive coverage. The conditional receipt also provided that
acceptance of the payment would not reinstate the policy and that
notice would be given if coverage was reinstated. The next day
Allstate issued notice of reinstatement that defined the gap in
coverage as beginning at 12:01 a.m. July 15, 2000, and ending at
12:01 a.m. on August 15, 2000.16 There seems to be no reason why
the conditional receipt and the reinstatement notice should not
be enforced in accordance with their terms.
The superior court, however, suggested one possible
reason why such enforcement might be inappropriate. Pointing to
Allstates later acceptance of premium checks on August 26 and
September 6, 2000, the court observed that Allstate was thereby
fully paid for an entire year of coverage and acceptance of the
whole premium for one year should estop Allstate from contending
that the policy had lapsed for a month.17 The case law in many
jurisdictions holds that an insurer waives its right to insist on
a gap in coverage as a condition of reinstatement when the
insurer holds onto premiums paid by the insured for the time
period for which the insurer denies coverage.18 If acceptance of
the full premium for one year were inconsistent with providing
coverage for only eleven months in this case, there would be a
plausible argument in favor of an estoppel.19 Estoppel requires
an assertion of a position by word or deed and when successfully
invoked precludes the party making the assertion from taking a
position inconsistent with it.20 But there was no inconsistency
here because under the policy the full premium is earned in any
year in which the policy is in effect for five months or more.21
Thus Allstates acceptance of the full premium did not serve to
communicate a position that was inconsistent with a one-month gap
in coverage.
For these reasons, the superior courts decision that
the insurance was in effect on the day of the accident was
erroneous. As a result, the judgment against Allstate should be
reversed. As this conclusion moots Allstates other points on
appeal, we turn at this point to the appeals of the other
parties.
B. Amos and Tices Appeal Is Moot.
Amos and Tice argue that Allstate should be liable for
the entire amount of the default judgments taken against Jack
Tatum, not merely the amounts found by the jury and court to be
reasonable. But since we have concluded that Allstates policy
did not cover the accident, Allstate is not liable for any part
of the default judgments. This argument is therefore moot.
Amos and Tice also argue that they were prevailing
parties as against Allstate and therefore were entitled to court-
awarded attorneys fees from Allstate. Again, in light of our
conclusion concerning Allstates appeal, this argument is moot.
C. The Tatums Appeal
1. Should the issues concerning check 722 have been
submitted to the jury?
Joe and Bertha Tatums first point on appeal is that Joe
and Bertha Tatum were not [n]ecessary [p]arties for the [t]rial.
Their argument is not that the court erred in joining them as
parties but that once the superior court ruled that Allstate was
estopped from claiming fraud in the application process and
estopped as well from contending that there was a gap in policy
coverage, the issues surrounding check 722 should not have been
submitted to the jury. Joe and Bertha Tatum claim that
submitting these issues to the jury was an abuse of discretion
because advisory opinions are usually to be avoided and further
that it is the function of the court to simplify, not
unnecessarily complicate, the issues for trial.
In response Allstate argues that the questions as to
when check 722 was mailed and whether Joe and Bertha Tatum
committed fraud in trying to convince Allstate that it was mailed
before the accident were not merely conditionally relevant.
Allstate points to a superior court order issued subsequent to
the courts decision concerning the conditional submission of the
check 722 issues. The later order recognized that the check 722
issues would be relevant to other issues that would be tried,
namely, whether the Tatums sought to defraud Allstate, whether
the investigation was negligent, and whether Allstates refusal to
cover was in bad faith. The court stated in this order:
Indeed, having evaluated the matter
further, it is clear to the court that in
fact the jury in all likelihood will have to
address and resolve the factual matters
raised by Joe and Bertha Tatum. Allstate is
claiming that the Tatums tried to defraud
Allstate by submitting altered checks 721 and
723 the jury cannot decide this issue
without determining when those three checks
actually were mailed. Similarly, the date on
which Bertha Tatum actually mailed the check
is an important element of the competence of
Allstates investigation of the matter, and
both the date the check was mailed and the
date that Allstate learned of the accident
will undoubtedly figure into the jurys
evaluation of whether Allstate denied
coverage in bad faith.
In so ruling the court did not abuse its discretion.
Similarly, even if the issues surrounding check 722 were merely
of conditional relevance, we would not find that the court abused
its discretion by ordering them tried because doing so held the
potential to avoid a second trial and involved only limited
additional costs.22
2. Did the court err in dismissing the counterclaims
for abuse of process and malicious prosecution?
Joe and Bertha Tatums second point on appeal is that
the court erred in dismissing their counterclaims for abuse of
process and malicious prosecution against Allstate. The
underlying conduct they complained of relates to Allstates
deposition of them in November 2002. The superior court, as
noted, found that
Allstate breached its duty to defend the
Tatums because it did not notify them prior
to the deposition that the information it
would seek might be used to void the policy
altogether. That breach prejudiced the
Tatums because Allstate was able to obtain
information it later used to void the policy.
There are two elements to the tort of abuse of process:
an ulterior purpose and a willful act in the use of the process
not proper in the regular conduct of the proceeding. 23 The
second element requires some overt act done in addition to the
initiating of the suit. 24 The trial court ruled that the
deposition questions concerning the application did not satisfy
the willful act element of the tort.25 We agree. For an insurer
to ask its insured questions about an application for insurance
without advance warning but after it has denied coverage on other
grounds is not a sufficient deviation from acceptable litigation
objectives to amount to an abuse of process.26
With respect to malicious prosecution, favorable
termination of the proceeding alleged to be malicious is a
requirement for any such claim.27 The trial court properly ruled
that this element had not been satisfied.
3. The Tatums other points lack merit.
Joe and Bertha Tatum contend that they should have been
entitled to an award of actual reasonable attorneys fees on their
claims for abuse of process and malicious prosecution. Our
ruling that these claims were properly dismissed moots this
contention.
Joe and Bertha Tatums final point on appeal is that
Lancaster should not have been held to be a prevailing party
because it was her conduct that caused Allstate to decline
coverage. This argument is not well developed. The jury in its
special verdict found that Lancaster was not negligent. The
argument may be that Lancaster was necessarily negligent because
Allstate wrongfully denied coverage. If so, its premise is
incorrect in light of our conclusion that Allstate was justified
in denying coverage. If another argument is intended, we are
unable to determine what it is and it must be considered waived
for insufficient briefing.28
Jack Tatum claims on appeal that Allstate should have
been held liable for the whole amount of the default judgments
that he allowed to be taken against him. This point is moot in
light of our conclusion that the policy did not cover the
accident.
IV. CONCLUSION
For the reasons expressed above, the judgment of the
superior court in favor of Jack Tatum, Casey Amos, and John Tice
against Allstate is REVERSED. In all other respects the judgment
is AFFIRMED.
_______________________________
1 This fact was contested but the jury so found in a
special verdict that is not challenged on appeal.
2 The reinstatement notice provided in relevant part:
Your policy was cancelled effective at 12:01 a.m. Standard Time
on July 15, 2000. Your policy was reinstated at 12:01 a.m.
Standard Time on August 15, 2000.
3 This fact was also contested and resolved by the
special verdict.
4 Allstate and Lancaster were defended by the same
attorneys; unless otherwise indicated we refer to them
collectively as Allstate.
5 5 Couch on Insurance 78:43 (3d ed. 2003).
6 Alaska R. Civ. P. 82(b).
7 Petrolane Inc. v. Robles, 154 P.3d 1014, 1018 (Alaska
2007).
8 See supra pages 7-9.
9 See supra pages 8-9.
10 See supra page 9.
11 388 So. 2d 608, 609 (Fla. App. 1980).
12 428 N.E.2d 916 (Ill. App. 1981).
13 Id. at 918.
14 See Hennessey v. Dairyland Ins. Co., 904 S.W.2d 73, 76
(Mo. App. 1995) ([B]ecause the insurer accepted the late premium
without first notifying the insured there would be a gap in
coverage caused by late payment, the policy was renewed with
coverage effective from the original renewal date without a
lapse.) (discussing Mitchell v. Farmers Ins. Exch., 396 S.W.2d
647, 652 (Mo. 1965)); Hangley v. Am. Family Mut. Ins. Co., 872
S.W.2d 544, 549 (Mo. App. 1994) (Having accepted the
policyholders delinquent premium, the insurance company could not
impose on the policyholder an uncommunicated condition, i.e.,
that coverage lapsed during the interval between the payment
deadline and receipt of the check. Because the insurance company
had accepted the premium without first informing the policyholder
that there would be a gap in coverage due to late payment, the
policy was renewed without a gap in coverage and was in effect on
the date of the accident. (emphasis in original, internal
citation omitted) (discussing Mitchell, 396 S.W.2d at 651-52)).
15 See Pajcic v. Am. Gen. Life Ins. Co., 419 F. Supp. 2d
1380, 1382 (M.D. Fla. 2006) (In the insurance context, Florida
courts look to whether an insurers acceptance of a late payment
was unconditional, which would constitute waiver, or whether the
acceptance was conditioned on the performance of something else
by the insured or the insurer, which would not constitute
waiver.); Am. Nat. Ins. Co. v. Cooper, 458 P.2d 257, 262 (Colo.
1969) (Under the terms of the policy, the company . . . could
have required an application for reinstatement and issued a
conditional receipt for the tendered premium. Had the company
followed this procedure, its contention, that since the accident
occurred prior to the payment of the premiums the insured was not
covered before reinstatement, would have had considerably more
appeal.); Kansas City Life Ins. Co. v. Johnson, 480 P.2d 122, 125
(Colo. App. 1970) (stating that routine deposit of a late check
did not constitute waiver by insurer when insurer immediately
notified the insured that the default existed and instructed the
insured that reinstatement was necessary and that if the
reinstatement were approved, the remittance would then be applied
to the policy premiums.); Hanson v. Cincinnati Life Ins. Co., 571
N.W.2d 363, 368 (N.D. 1997) (stating that there is no waiver of
an insurers right to treat a policy as lapsed for nonpayment of a
premium if the insurer conditionally accepts and retains a late
premium subject to reinstatement); Sedgwick Claims Mgmt. Servs.
v. Hayes, 143 P.3d 567, 568 (Or. App. 2006) (holding that letter
stating that lapsed policy would be reinstated does not imply
retroactive coverage when letter itself noted the gap in
coverage).
16 See supra note 2.
17 See supra page 8.
18 See Pajcic, 419 F. Supp. 2d at 1382-83 ([A]n insurer
cannot permanently retain the benefits of a late premium and
still deny coverage to the insured . . . .); Travelers Indem. Co.
v. Dana, 434 So. 2d 48, 48 (Fla. App. 1983) (Where . . . the
insured was injured after the past-due premium had been paid to
the insurer, and there was evidence to support the trial courts
finding that the insurer retained the past-due premium and was
thus estopped to deny coverage, the judgment for the insured will
be affirmed.); Mixson, 388 So. 2d at 609 (An insurer cannot
retain a past-due premium and at the same time claim that a
forfeiture of the policy has occurred.); Kende Leasing Corp. v.
A.I. Credit Corp., 524 A.2d 1306, 1314 (N.J. Super. App. Div.
1987) (An insurers retention of premiums covering a period beyond
the effective date of its notice of cancellation (i.e. the
insurers failure to return unearned premiums) estopped the
insurer from denying coverage for an accident occurring
subsequent to the purported cancellation date. (citing
Englishtown Auction Sales v. Mt. Vernon Fire Ins., 271 A.2d 292
(N.J. Super. App. Div. 1970))).
Other jurisdictions have held that an insurer only
waives its right to insist on a gap in coverage when the insurer
retains the premiums and had prior knowledge of the intervening
loss. See Van Hulle v. State Farm Mut. Auto. Ins. Co., 254
N.E.2d 457, 460 (Ill. 1969) (In many jurisdictions waiver of a
forfeiture has been upheld under certain circumstances where the
insurer, with knowledge of an intervening loss, accepts a premium
tendered for the purpose of covering the loss. (citing Alabama
Farm Bureau Mut. Cas. Ins. Co. v. Hicks, 133 So. 2d 221 (Ala.
1961); M.F.A. Mut. Ins. Co. v. Quinn, 259 S.W.2d 854 (Mo. App.
1953); Seavey v. Erickson, 69 N.W.2d 889 (Minn. 1955); Johnson v.
Phelps County Mut. Ins. Co., 88 N.W. 142 (Neb. 1901); Contl Ins.
Co. v. Chew, 38 N.E. 417 (Ind. App. 1894); Joliffe v. Madison
Mut. Ins. Co., 39 Wis. 111 (Wis. 1875); Am. Nat. Ins. Co. v.
Cooper, 458 P.2d 257 (Colo. 1969))).
19 The appellees might still need to explain why their
failure to inform Allstate of the boat accident prior to paying
the late premium would not have defeated their claim for estoppel
in this case. See, e.g., Van Hulle, 254 N.E.2d at 460 (In many
jurisdictions waiver of a forfeiture has been upheld under
certain circumstances where the insurer, with knowledge of an
intervening loss, accepts a premium tendered for the purpose of
covering the loss. (emphasis added)).
20 See, e.g., Jamison v. Consol. Utils., Inc., 576 P.2d
97, 101-02 (Alaska 1978).
21 According to Couch, an insurer may waive the forfeiture
of the entire policy by accepting premiums, reinstating coverage
as of the date of the receipt of the payment, and returning the
unearned premium for the intervening period of noncoverage. 5
Couch on Insurance 78:43 (3d ed. 2003). Because of the short-
rate table, there was no unearned premium that Allstate was
required to return.
22 The court weighed these considerations as follows:
The issue of whether Allstate was
required to cover the accident once it
received payment from Bertha Tatum, even if
that payment was late and Allstate had not
learned of the accident prior to receiving
the payment, is one of first impression in
Alaska and one over which courts in other
states are split. If the courts ruling on
this issue is incorrect and the Alaska
Supreme Court reverses on this issue, then
the normal procedure would be a remand to
hold an entirely new trial. Given the
narrowness of the issues, the limited
testimony required, and the substantial
expense involved in a remand, it is entirely
appropriate to have the jury deliver a
special verdict on these factual issues so
that if the Court reversed this court, a
remand would not be necessary.
23 Caudle v. Mendel, 994 P.2d 372, 376 (Alaska 1999)
(quoting Koolodge v. State, 757 P.2d 1024, 1026 (Alaska 1988)).
24 Id.
25 We set out here the superior courts ruling on this
question:
Plaintiffs counterclaims makes no
reference to a claim of abuse of process.
However, given the liberal standards
regarding interpretation of pleadings, the
court will address the issue. The two
elements of abuse of process are an ulterior
purpose and a willful act in the use of the
process not proper in the regular conduct of
the proceeding. Sands v. Living Word
Fellowship, 34 P.2d 955, 961 (Alaska 2001).
The willful act cannot be the filing of the
litigation it must be a claim that the
defendant misused process to attain some
separate ulterior purpose independent of the
process for example, to extort the plaintiff
and force him to take some action by the use
of the process as a threat. Id. Thus, in
Sands, the court rejected a claim that
publicizing a lawsuit could not be the
requisite willful act as it did not
constitute extortion or coercion. Id.
Plaintiffs do not specify the ulterior
motive here presumably, given plaintiffs
pleadings, the motive was to cancel the
policy if at all possible. The willful act
was deposing Joe and Bertha Tatum regarding
their application, without giving them notice
that those questions would be asked or that
their policy could be called into question.
The court ruled that this portion of the
deposition was improper and that, pursuant to
Lloyds v. Fulton, Allstate would be estopped
from voiding the policy ab initio due to
alleged misrepresentations in the
application. The court did not, however,
specifically term Allstates action one of bad
faith.
The question before the court is whether
the deposition questions constitute a willful
act. The difficulty with plaintiffs claim is
that Allstates questions were not used to
compel plaintiffs to take or to refrain from
some action indeed, Allstate did not attempt
to force plaintiffs to do anything. Rather,
it took what the court found to be some
improper actions in the course of an
otherwise lawful action, the taking of a
deposition. And any advantage Allstate may
have attempted to gain from those questions
has been negated by the courts ruling that
Allstate cannot use the information it
gleaned to void plaintiffs policy ab initio.
As such, even taking all of their allegations
in the pleadings as true, plaintiffs
therefore have not made out a prima facie
case of abuse of process. (Footnote
omitted.)
26 We reach this conclusion assuming, without deciding,
that such questions violated the insurers duty of disclosure to
its insureds.
27 Caudle, 994 P.2d at 375-76.
28 Wirum & Cash, Architects v. Cash, 837 P.2d 692, 713-14
(Alaska 1992) (Where a point is not given more than a cursory
statement in the argument portion of a brief, the point will not
be considered on appeal.).
 |
| Case Law Statutes, Regs & Rules Constitutions Miscellaneous |
|
