Seth Layman And Molly Layman v. 21st Century North America Insurance Co. ( 2014 )

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IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
SETH LAYMAN and MOLLY
LAYMAN, husband and wife, No. 70540-7-I
Appellants, DIVISION ONE
21st CENTURY NORTH AMERICA
INSURANCE CO.; and FARMERS UNPUBLISHED OPINION
INSURANCE COMPANY OF
WASHINGTON, FILED: July 7, 2014
Respondents.
Leach, J. — Seth and Molly Layman appeal the trial court's summary
dismissal of their claims against 21st Century North America Insurance
Company. They raise multiple issues, including a claim that 21st Century failed
to inform them properly about renewal of their automobile insurance as required
by RCW 48.18.292. Because the Laymans have demonstrated a genuine issue
of material fact about whether they agreed to receive policy renewal
communications from 21st Century through its paperless delivery system, the
trial court erred in granting summary judgment. We reverse.
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FACTS
The Laymans first purchased auto insurance from 21st Century in July
2008. In May 2010, they renewed this policy, effective July 3, 2010, through
January 3, 2011. The insurance policy included this provision:
C. Automatic Termination
1. If we offer to renew or continue your policy and you or your
representative do not accept by making timely payment of the
premium due, 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.
21st Century offers its policyholders a paperless delivery system. A
policyholder can elect to receive policy, billing, and/or correspondence
documents through this system. A policyholder participating in the system
affirmatively chooses which categories of documents to receive electronically and
does not receive the selected categories of documents through the United States
Postal Service, unless required by law or unless 21st Century needs to deliver
physical documents, such as an insurance identification card.1 To access
electronically delivered documents, a policyholder must log onto a 21st Century
website. 21st Century does not send the documents directly to the policyholder,
either as an attachment to an e-mail or otherwise.
On November 17, 2010, Molly Layman enrolled in 21st Century's
paperless delivery system. As explained more fully later in this opinion, the
121st Century mailed an insurance identification card to the Laymans.
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No. 70540-7-1/3
parties dispute which categories of documents she elected to receive
electronically. The Laymans never logged into the paperless delivery system
between November 17, 2010, and February 24, 2011.
On December 1, 2010, 21st Century processed and posted to its web site
a policy renewal offer to the Laymans for the period January 3, 2011, through
July 3, 2011. This document required the Laymans to pay a $494.12 renewal
payment before January 3, 2011, to avoid expiration of their policy. Once 21st
Century posted the renewal offer, the paperless system automatically generated,
on December 2, 2010, a generic e-mail to the Laymans notifying them that
documents were available on line for their review. The e-mail provided no
information about the nature of these documents and contained no reference to
the subject of policy renewal. At the same time, 21st Century mailed an
insurance identification card to the Laymans as part of this renewal offer. The
Laymans received the identification card, but the record is silent about what
information, if any, 21st Century provided with it.
On January 7, 2011, after receiving no renewal premium, 21st Century
processed and posted to its web site a second billing invoice. This document
notified the Laymans that their policy had expired for failure to pay the renewal
premium. It also notified the Laymans that they could avoid a lapse in coverage
if 21st Century received the premium before January 26, 2011. 21st Century
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sent an e-mail to the Laymans on January 8, 2011, indicating that documents
were available online for review. As with the earlier e-mail, this one provided no
information about the nature of these documents and contained no reference to
the subject of policy renewal. 21st Century received no renewal premium.
On February 23, 2011, the Laymans' son was involved in a motor vehicle
accident. The other driver's insurance company filed a claim with 21st Century
on February 24, 2011. In a letter mailed to the Laymans' home dated February
25, 2011, 21st Century denied the claim, stating, "Our records reveal and
investigation confirms your policy cancelled for nonpayment of premium effective
January 3, 2011. Therefore, since the cancellation was prior to the loss, we will
be unable to consider any claims made by or against you as a result of this
loss."2
On March 2, 2011, the Laymans complained to the Washington State
Office of the Insurance Commissioner about the denial of the insurance claim.
21st Century responded to this complaint, asserting, "Mrs. Layman signed up for
the paperless system and in doing so agreed to receive policy notifications via
2 After 21st Century notified the other driver's insurance company that no
coverage was available, that insurance company sought payment from the
Laymans directly. The Laymans have not paid the claim. We note that although
both the insurance policy and the legislature use the British spelling,
"cancellation," we use the American English spelling, "cancelation."
No. 70540-7-1/5
e-mail." The Office of the Insurance Commissioner found no violation of the
Washington insurance regulations, explaining,
[21st Century] has provided a brief chronology of the handling of your
account. They have concurred that you switched your account to
paperless billing, policy and correspondence on November 17, 2010. The
company sent you an email that advised that those items would now be
sent electronic paperless. The company sent a notice that you had
electronic documents to view in your account. The company included
copies of the policy renewal notice, reminder and notice that your policy
had expired effective 1-3-11.
The company is maintaining the denial of coverage for your accident as
your policy was not in force at the time of the accident.
On February 29, 2012, the Laymans filed this lawsuit against 21st
Century. They requested a declaration that 21st Century's paperless delivery
system did not satisfy the notice requirements of RCW 48.18.291 for policy
cancelation and that 21st Century's policy provided coverage for the February
23, 2011 claim. They also asserted claims for breach of contract, violation of the
Consumer Protection Act,3 violation of the Insurance Fair Conduct Act,4 and bad
faith.5
3Ch. 19.86 RCW.
4 Ch. 48.30 RCW.
5 21st Century removed this action to federal court. At the close of
discovery, the parties filed cross motions for summary judgment. On March 12,
2013, the United States District Court for the Western District of Washington
remanded the case to state court for lack of subject matter jurisdiction. The court
concluded that the disputed coverage amount was $15,000. 21st Century failed
to show by a preponderance of the evidence that the amount in controversy
exceeded $75,000.
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The parties filed cross motions for summary judgment. The trial court
denied the Laymans' motion for partial summary judgment and granted 21st
Century's motion for summary judgment, dismissing the case with prejudice.6
The Laymans appeal.
STANDARD OF REVIEW
We review summary judgment orders de novo, engaging in the same
inquiry as the trial court.7 Summary judgment is proper if, viewing the facts and
reasonable inferences in the light most favorable to the nonmoving party, no
genuine issues of material fact exist and the moving party is entitled to judgment
as a matter of law.8 A genuine issue of material fact exists if reasonable minds
could differ about the facts controlling the outcome of the litigation.9
In reviewing summary judgment orders, we consider supporting affidavits
and other admissible evidence based upon the affiant's personal knowledge.10 A
party opposing a motion for summary judgment may not rely upon speculation,
argumentative assertions that unresolved factual issues remain, or its affidavits
6 The court awarded no costs or attorney fees.
7 Michak v. Transnation Title Ins. Co.. 148 Wash. 2d 788, 794, 64 P.3d 22
(2003).
8 CR 56(c); Michak, 148 Wash. 2d at 794-95.
9 Mart. v. Dematic. 178 Wash. App. 646, 653, 315 P.3d 1126(2013) (citing
Hulbert v. Port of Everett. 159 Wash. App. 389, 398, 245 P.3d 779 (2011)), review
granted, 180 Wash. 2d 1009 (2014).
10 Int'l Ultimate. Inc. v. St. Paul Fire & Marine Ins. Co.. 122 Wash. App. 736,
744, 87 P.3d 774 (2004).
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No. 70540-7-1/7
considered at face value.11 Rather, the nonmoving party must set forth specific
facts that sufficiently rebut the moving party's contentions and disclose that a
genuine issue of a material fact exists.12
The denial of a summary judgment "has no preclusive effect on further
proceedings . . . . It does not end proceedings, but rather permits them to
proceed. The denial of a summary judgment motion is not a final order that can
be appealed."13
ANALYSIS
The trial court accepted 21st Century's argument that it had fully complied
with the statute it claimed controls this case, RCW 48.18.292, titled "Refusal to
renew private automobile insurance by insurer—Change in amount of premium
or deductibles." (Boldface omitted.) The Laymans make 11 assignments of error
to the dismissal of their claims. These include claims that (1) RCW 48.18.291
instead of RCW 48.18.292 applies, (2) 21st Century cannot comply with RCW
48.18.292 by electronic delivery of documents, and (3) the record shows a
genuine issue of material fact about what documents the Laymans agreed to
11 Herman v. Safeco Ins. Co. of Am.. 104 Wash. App. 783, 787-88, 17 P.3d
631 (2001) (quoting Seven Gables Corp. v. MGM/UA Entm't Co.. 106 Wash. 2d 1,
13,721 P.2d 1 (1986)).
12 Herman. 104 Wash. App. at 788 (quoting Seven Gables. 106 Wash. 2d at
13).
13 In re Estate of Jones. 170 Wash. App. 594, 605, 287 P.3d 610 (2012)
(citing Zimnv v. Lovric. 59 Wash. App. 737, 739, 801 P.2d 259 (1990)); Roth v. Bell,
24 Wash. App. 92, 104, 600 P.2d 602 (1979)); RAP 2.2(a).
No. 70540-7-1/8
receive electronically. Because we agree with the Laymans that the record
shows a genuine issue of material fact about what documents they agreed to
receive electronically, we reverse and remand without deciding many of the
issues they present.
As a threshold matter, we agree with 21st Century that RCW 48.18.292
instead of RCW 48.18.291 applies to this case.
RCW 48.18.291(1) states:
A contract of insurance predicated wholly or in part upon the use of a
private passenger automobile may not be terminated by cancellation by
the insurer until at least twenty days after mailing written notice of
cancellation to the named insured at the latest address filed with the
insurer by or on behalf of the named insured, accompanied by the reason
therefor. If cancellation is for nonpayment of premium, or is within the first
thirty days after the contract has been in effect, at least ten days['] notice
of cancellation, accompanied by the reason therefor, shall be given. In
case of a contract evidenced by a written binder which has been delivered
to the insured, if the binder contains a clearly stated expiration date, no
additional notice of cancelation or nonrenewal is required.[14]
In Safeco Insurance Co. v. Irish.15 the court explained that the term
"cancellation" "refers to a unilateral act of the insurer terminating coverage during
the policy term." The court determined that neither RCW 48.18.291 nor
insurance policy provisions addressing cancelation applied to a situation where
14
The Laymans do not allege that 21st Century unilaterally refused to
renew their insurance contract either under the terms of the policy or under RCW
48.18.292(1)(a).
15 37 Wash. App. 554, 558, 681 P.2d 1294 (1984).
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No. 70540-7-1/9
the insured fails to pay a premium as a condition of renewal.16 The court held,
"Thus, the general rule is that failure of an insured to pay a renewal premium by
the due date results in a lapse of coverage as of the last day of the policy
period."17
The court in Irish held that RCW 48.18.292(1 )(b) governs situations
involving nonrenewal of continuous private automobile insurance.18 This
provision states,
Each insurer shall be required to renew any contract of insurance subject
to RCW 48.18.291 unless one of the following situations exists:
(b) At least twenty days prior to its expiration date, the insurer has
communicated its willingness to renew in writing to the named insured,
and has included therein a statement of the amount of the premium or
portion thereof required to be paid by the insured to renew the policy,
including the amount by which the premium or deductibles have changed
from the previous policy period, and the date by which such payment must
be made, and the insured fails to discharge when due his or her obligation
in connection with the payment of such premium or portion thereof.1191
16 jrish, 37 Wash. App. at 558 (citing Shelly v. Strait. 634 P.2d 1017 (Colo.
App. 1981); Sampson v. State Farm Mut. Ins. Co.. 205 Neb. 164, 286 N.W.2d 746
(1980); Farmers Ins. Co. v. Hall. 263 Ark. 734, 567 S.W.2d 296, (1978); Sereno
v. Lumbermens Mut. Cas. Co.. 132 Ariz. 546, 647 P.2d 1144 (1982)). Irish's
insurance provision governing cancelation stated, "AUTOMATIC TERMINATION.
If we offer to renew 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 premium when due shall mean that you have not accepted our
offer." Irish. 37 Wash. App. at 556 (emphasis omitted).
17 Irish. 37 Wash. App. at 558 (citing Thomason v. Schnorr. 41 Colo. App.
546, 587 P.2d 1205 (1978)).
18 Irish, 37 Wash. App. at 558.
19RCW48.18.292(1)(b).
No. 70540-7-1/10
The Laymans argue, "When the 21st Century Claim Manager was
questioned on the reasons why 21st Century denied this claim, he specifically
disclaimed non-renewal as a basis for the denial, reiterating that it was canceled
by the insurer for non-payment of the premium." They claim, "21st Century now
argues that the Laymans 'elected' not to renew their policy, and that 21st
Century's conduct should be evaluated under RCW 48.18.292. ... 21st Century
should be estopped from making this argument." The record indicates that the
claim manager testified in a deposition, in response to a question about the
reason for denying the insurance claim, "The letter says the policy canceled for
nonpayment of a premium."
Although the letter and the claim manager used the term "canceled," the
purpose of the letter was to notify the Laymans that (1) they did not accept 21st
Century's offer to renew their automobile insurance policy, (2) the policy lapsed,
and (3) 21st Century would not cover the loss, which occurred after the automatic
termination date. This case involves the Laymans' failure to renew the insurance
contract by failing to pay the premium by the due date, not cancelation. No
evidence shows that 21st Century terminated the coverage unilaterally during the
policy term.
As the moving party, 21st Century has the initial burden of showing that it
complied with RCW 48.18.292 when it did not renew the Layman policy. To
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No. 70540-7-1/11
meet this burden, 21st Century presented to the trial court evidence that it
claimed established as a matter of law the Laymans' consent to receive policy
renewal information electronically and the electronic delivery of that information.
This evidence consisted of the declaration of Diana Yeager, a 21st Century
employee, and various attachments to her declaration.
Ms. Yeager stated that the Laymans "elected to receive policy documents,
billing documents, and correspondence documents via the paperless delivery
system, as shown in their paperless delivery system history." To support this
assertion Ms. Yeager identified and described four documents attached to her
declaration. The first, a chronological log titled "Paperless Delivery CSR
Interface," has four columns, labelled "Date," "Action," "CSRID," and
"Comments." Under the action heading, it contains a brief summary of each
policyholder action. This is the only document in the record purporting to show
which documents Molly Layman elected to receive electronically. It has four
entries for November 17, 2010. The first reads, "Customer elects to suppress
billing documents paper mailings," and a second reads "Customer elects to
suppress policy paper mailings." The third reads, "Customer enrollment with a
prerequisite of accepting policy Terms and Conditions" and the fourth reads,
"Customer elects to suppress correspondence documents paper mailings."
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The second and third attachments are screen shots of specimen pages
from 21st Century's web site purporting to illustrate the forms completed by a
policyholder enrolling in the paperless delivery system. The page illustrated by
the second attachment allows the policyholder to select the categories of
documents to be received electronically by checking a box next to each of three
categories, "Policy," "Billing," and "Correspondence." The record does not
contain any copies of these forms as completed by Molly Layman. Ms. Yeager
described the process for completing these forms to illustrate her testimony
about how Ms. Layman enrolled in 21st Century's paperless system.
The fourth attachment is a copy of "Paperless Terms and Conditions,"
which includes the following provisions pertinent to the parties' arguments:
Which documents will I receive electronically?
You will only receive the categories of documents that you have elected to
receive electronically. There may be some documents that we cannot
deliver electronically due to legal and technological constraints in your
state. These documents will be delivered to you via USPS to your postal
address.
How do I access my documents?
Your bills are sent to you via e-mail and provide the option to pay online
(login required) or over the phone (via our Automated Billing System). If
you have selected the documents and bills option, we will send you an e-
mail message with a link to our Web site when new documents are
available to review, print, or save to your computer. It is your
responsibility to log in to our Web site to view your documents.
To controvert 21st Century's contention that Molly Layman elected to
receive all three categories of documents electronically by checking all three
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boxes, the Laymans provided the trial court with excerpts from a transcript of
Molly Layman's deposition testimony. She testified that she only checked the
box for "Correspondence" and not the boxes labelled "Policy" or "Billing" when
completing the form shown in attachment 2 to Yeager's declaration.
21st Century offers the following argument why Molly Layman's testimony
does not create a disputed issue of fact.
Although the Laymans claim they only elected to receive
"correspondence" documents via the 21st Century paperless delivery
system, their contention is contrary to the unrebutted testimony of how
enrollment in the paperless delivery system works and the documented
elections that the Laymans made with respect to the enrollment process.
The Laymans provide no documentary evidence that they only signed up
to receive correspondence documents via the paperless delivery system,
and they cannot provide competent testimonial evidence because they
admit that they never logged on to the system to confirm their delivery
elections or review the documents they were sent.
21st Century offers no explanation why Molly Layman's deposition
testimony is not competent testimonial evidence of which boxes she did and did
not check when she enrolled in the paperless delivery system. 21st Century
cites no authority for its claim that the Laymans must produce documentary
evidence to dispute how Molly Layman completed the electronic form. We
assume that 21st Century searched and found none. We find 21st Century's
contention somewhat ironic when, as the party with the burden of proving the
contents of that completed form, it has not produced a copy.
21st Century relies upon the claimed consent of the Laymans to justify its
purported compliance with the requirements of RCW 48.18.292 with electronic
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No. 70540-7-1/14
documents. Because the record demonstrates a genuine issue of fact as to
whether the Laymans provided this consent, the trial court erred by granting
summary judgment. In view of our resolution of this issue, we do not reach the
remaining issues raised by the Laymans, including whether the requirements of
RCW 48.18.292 can be satisfied with electronic documents.20
The Laymans have requested attorney fees and damages under Olympic
Steamship Co. v. Centennial Insurance Co..21 RCW 48.30.015, and RCW
19.86.090. Because neither party has yet prevailed in this case, this request is
premature.
CONCLUSION
Because the Laymans raised a genuine of material fact about which
documents they agreed to receive electronically from 21st Century, we reverse
and remand for further proceedings consistent with this opinion.
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WE CONCUR:
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20 Neither party has addressed the applicability of 15 USC § 7001 to this
issue.
21 117 Wash. 2d 37, 53-54, 811 P.2d 673 (1991).
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