Minnesota Joint Underwriting Association v. Jacy, LLC ( 2016 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A15-1627
Minnesota Joint Underwriting Association,
Respondent,
vs.
Jacy, LLC, et al.,
Appellants.
Filed June 13, 2016
Affirmed
Ross, Judge
Ramsey County District Court
File No. 62-CV-14-5881
Suzanne L. Jones, Hinshaw & Culbertson LLP, Minneapolis, Minnesota (for respondent)
Britton D. Weimer, Jones Satre & Weimer, PLLC, Bloomington, Minnesota; and
Matthew W. Moehrle, Britton D. Weimer, Rajkowski Hansmeier, Ltd, St. Cloud.
Minnesota (for appellants)
Considered and decided by Reyes, Presiding Judge; Ross, Judge; and Smith, Tracy,
Judge.
UNPUBLISHED OPINION
ROSS, Judge
A company that operates an adult residential care facility carried liability insurance
under a claims-made policy issued by the Minnesota Joint Underwriting Association, but
the association notified the company in early April 2011 that the policy would expire in
July 2011 and that the company had until the end of April to apply for continued coverage.
A communication exchange ensued, resulting in the association’s decision that the
company failed to renew the policy followed by the company’s challenge to that decision.
In the meantime, family members of a client who had died at the company’s residential
facility notified the company that they intended to bring a wrongful-death action against it,
and the company in turn notified the association of the claim. The association denied
coverage for the claim, and, after the association sued for a declaratory judgment, the
district court held that the association was not required to cover the claim because the
company failed to make the claim during the policy period. We affirm because the
association gave the company sufficient notice of nonrenewal, triggering a 60-day period
during which the company could have, but did not, adequately apply for renewed coverage.
FACTS
Carmen Wilson created Jacy LLC in 2006 to operate South Rock, a Litchfield adult
residential care facility. The Minnesota Joint Underwriting Association (MJUA) is a
creature of the legislature established to provide insurance coverage for people and entities
who are required by law to carry insurance but who are unable to obtain it. See Minn. Stat.
§ 62I.02, subd. 1 (2014). The MJUA first issued a claims-made liability annual insurance
policy to Jacy in 2007, and Jacy renewed the policy several times. The MJUA issued the
last of these policies to Jacy in 2010.
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The 2010 policy identifies the named insured as “Jacy, LLC” and the policy period
as July 1, 2010, to July 1, 2011. It states that the policy covers only those claims made
either during the policy period or during an extended reporting period.
Wilson formed Tomorrow LLC in February 2011 during Jacy’s July 2010 to 2011
policy period. She intended to combine Jacy and another limited liability company into the
single entity—Tomorrow—to operate the South Rock care facility. But Tomorrow did not
immediately obtain a license to operate the facility. Two months before Tomorrow
obtained its operational license on May 1, 2011, a resident client at South Rock (which was
still being operated by Jacy) died in the home. Wilson learned of the death immediately,
but she did not report it to the MJUA because the resident’s family had made no claim.
The MJUA sent Jacy a letter on April 7, 2011, notifying it that its insurance policy
would expire on July 1, 2011. The expiration letter explained that Jacy must complete and
return its policy-renewal application form, with specified attachments (including Jacy’s
license to operate the facility) by April 30, 2011, to continue coverage. Wilson sent an
email to an MJUA employee on April 18, attaching a renewal application referencing the
policy number held by Jacy but identifying the name of the insured as “Tomorrow, LLC
dba South Rock (Formerly Jacy, LLC).” Wilson’s email stated that she had merged Jacy
and another company into a new company, and she asked if she could merge into a single
policy the policies that separately insured Jacy and the other company. Wilson did not
attach a copy of any operational license for the South Rock facility.
Wilson wrote to the MJUA again on May 9, 2011. Her letter again referenced the
merger between Jacy and the other company she managed, asking the MJUA to cancel the
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policy covering the other company and to add its information to the policy that covered
Jacy. Wilson’s letter stated that the two companies were merging into the single company,
named Tomorrow. And she explained that an operational license for South Rock had been
applied for in Tomorrow’s name but not yet received. Wilson attached a copy of the South
Rock license under Jacy, not under Tomorrow.
The MJUA sent Jacy a letter on July 11, 2011, informing Jacy that its policy was
not renewed, effective July 1, 2011. The letter offered Jacy the extended reporting period
endorsement, which would facilitate coverage for claims that Jacy might make to the
MJUA after the policy expired on July 11. Wilson checked the box indicating that Jacy
was declining the extended reporting period endorsement, and she returned the letter on
July 14. Jacy paid no premiums to the MJUA for coverage after July 1, 2011. A
communication exchange between the MJUA and Jacy’s insurance agent ensued in
February 2012, and during this exchange the MJUA detailed the Jacy-policy nonrenewal,
Jacy’s failure to complete the renewal application, and Jacy’s rejection of extended
reporting coverage. The MJUA then issued a claims-made policy to Tomorrow with a new
policy number.
Wilson received notice that the decedent’s estate was bringing a wrongful-death
action against Jacy and Tomorrow, and on June 6, 2012, she contacted the MJUA and
informed it of the claim. The MJUA replied, denying coverage because Jacy’s policy
terminated in July 2011 and Jacy declined extended reporting coverage.
The wrongful-death lawsuit commenced in March 2014 against Jacy and against
Tomorrow as Jacy’s successor in interest. The MJUA asked the district court for a
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judgment declaring that it is not obliged to indemnify Jacy or Tomorrow in the action. The
parties stipulated to certain facts, and, based on that stipulation and other undisputed facts,
the district court granted the MJUA’s motion for summary judgment. It held that the MJUA
had no duty to indemnify Jacy for liability arising out of the resident’s death.
Jacy and Tomorrow appeal.
DECISION
Jacy and Tomorrow challenge the district court’s grant of summary judgment. We
review a district court’s grant of summary judgment de novo, determining whether the
court properly applied the law and whether material fact disputes exist. Riverview Muir
Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn. 2010). Our decision
turns in part on the 2010 insurance contract between Jacy and the MJUA. Contract
interpretation is a question of law reviewed de novo. Caldas v. Affordable Granite & Stone,
Inc., 820 N.W.2d 826, 832 (Minn. 2012).
Although the resident died during the policy period, coverage under a claims-made
policy is triggered when the claim is made, not when the event creating the potential
liability occurred. In re Silicone Implant Ins. Coverage Litig., 667 N.W.2d 405, 409 (Minn.
2003). So the MJUA can be obligated to cover the wrongful-death claim only if the claim
was made during the policy period or during an extended reporting period. Jacy
acknowledges that the wrongful-death claim was not made until June 2012 and that Jacy
purchased no extended reporting coverage. So unless Jacy’s policy renewed, its claim fell
outside the policy period and the MJUA is not obligated to cover Jacy for any liability it
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incurred because of the alleged wrongful death. We turn to the policy and the operative
statute.
The parties interpret differently the renewal provision of the insurance policy and
the requirements of Minnesota Statutes section 60A.37 (2014). The statute provides for a
60-day nonrenewal notice period:
At least 60 days before the date of expiration provided in the
policy, a notice of intention not to renew the policy beyond the
agreed expiration date must be made to the policyholder by the
insurer. If the notice is not given at least 60 days before the
date of expiration provided in the policy, the policy shall
continue in force until 60 days after a notice of intent not to
renew is received by the policyholder.
Minn. Stat. § 60A.37, subd. 1. We need not consider which statute controls as between this
provision governing insurance contracts generally and section 62I.13, subdivision 5
(2014), which governs MJUA insurance contracts specifically and calls for a 30-day notice
of intent not to renew. This is because the Jacy-MJUA insurance policy itself includes the
longer, 60-day nonrenewal notice period.
Jacy argues that because MJUA failed to provide the 60-day nonrenewal notice
required by statute and the policy, the policy automatically renewed for an additional year
and was therefore in effect when Jacy made its claim for the wrongful-death lawsuit in
June 2012. The MJUA counters, arguing that it was not required to give a nonrenewal
notice. It urges that section 60A.37 specifically indicates that the 60-day notice is required
only when the insurer (rather than the insured) has an “intention not to renew the policy
beyond the agreed expiration date.” Minn. Stat. § 60A.37, subd. 1. The MJUA points to
the exception listed in section 60A.37, subdivision 2, which provides that the section “does
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not apply if the policyholder has insured elsewhere, has accepted replacement coverage, or
has requested or agreed to nonrenewal.” The Jacy-MJUA policy includes a materially
identical list of exceptions. The MJUA asserts that Jacy essentially requested or agreed not
to renew its policy in responding to the renewal application by applying for coverage for
an entity other than Jacy (Tomorrow). Jacy parlays the argument with its own.
But we need not decide whether Jacy or the MJUA has the better position here over
whether or not Jacy requested or agreed to nonrenewal. This is because we are satisfied
that, either way, the MJUA eventually sufficiently notified Jacy that the policy was not
renewing, and after this notice Jacy failed to act to renew or extend within 60 days. The
statute establishes the length of a policy extension that follows an insurer’s tardy
nonrenewal notice: “If the notice is not given at least 60 days before the date of expiration
provided in the policy, the policy shall continue in force until 60 days after a notice of
intent not to renew is received by the policyholder.” Id. (emphasis added). For the following
reasons, we believe that the MJUA’s letter of July 11, 2011, indicating that coverage had
ceased, is sufficient notice that the Jacy policy was not being renewed.
We consider whether the July 11, 2011 letter constitutes adequate notice de novo,
as a question of law. See Benton v. Mut. of Omaha Ins. Co., 500 N.W.2d 158, 160 (Minn.
App. 1993) (analyzing the adequacy of written notice of reduction in coverage), review
denied (Minn. July 19, 1993). The parties’ policy establishes two technical requirements
for a valid nonrenewal notice: The 60-day notice of nonrenewal must be in writing, and the
notice must be delivered or mailed first class to the named insured’s last known mailing
address. The record satisfies us that the July 2011 letter met both these requirements.
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We know of no authority defining the substantive adequacy of a 60-day nonrenewal
notice under section 60A.37, but for guidance we look to caselaw governing the analogous
notice of cancellation. Cancellation notice is sufficient if it “positively and unequivocally”
informs the insured that coverage is ceasing. Lievers v. Nat’l Ins. Underwriters, 257 Minn.
268, 270, 101 N.W.2d 817, 819 (1960). The notice’s sufficiency is tested by the meaning
it reasonably conveys. Id. at 271, 101 N.W.2d at 819. The MJUA’s July 11 letter identified
the Jacy policy number and declared that the “insurance policy was non-renewed by you
effective 7/1/2011.” The letter informed Jacy that because Jacy’s policy was a claims-made
policy, incidents occurring during the policy period must be reported while the policy was
in force, or during the policy’s automatically extended 60-day reporting period after the
end of the policy period, or during any extended reporting period if Jacy purchases
extended reporting coverage. The letter positively and unequivocally informed Jacy that
its policy was not renewed. Jacy necessarily was informed of two things: (1) coverage
under the policy has ended; (2) and no unreported claims will be covered unless Jacy
purchases an extended reporting period or the claim is made within 60 days after the end
of the policy period on July 1, 2011. The letter therefore is sufficient notice of nonrenewal.
The record shows that Jacy received the letter on or before July 14, 2011, which is
the date Wilson signed and indicated that Jacy did not wish to purchase extended reporting
coverage. This began the 60-day extension for making claims, required under section
60A.37. Jacy did not make its claim regarding the wrongful-death action until almost a
year later, well beyond the statutory 60-day extension. We therefore hold that the district
court did not erroneously conclude that the MJUA is not bound to cover the claim.
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The parties have forwarded other arguments, but our holding makes their
consideration unnecessary.
Affirmed.
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