v. American Standard Insurance Company of Wisconsin

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
January 24, 2019
2019COA11
No. 17CA2089, Brown v. American Standard Insurance
Company of Wisconsin — Insurance — Motor Vehicles —
Automobile Insurance Policies — Basis for Cancellation
In this insurance coverage dispute, the division concludes that
when an insurer provides the reason for cancellation of an
automobile insurance policy either with the notice of cancellation or
in response to a request from the insured, the reason given must be
accurate, or the notice of cancellation is ineffective.
COLORADO COURT OF APPEALS 2019COA11
Court of Appeals No. 17CA2089
City and County of Denver District Court No. 17CV30099
Honorable Michael A. Martinez, Judge
Michael D. Brown,
Plaintiff-Appellant,
v.
American Standard Insurance Company of Wisconsin,
Defendant-Appellee.
JUDGMENT REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division V
Opinion by JUDGE BERGER
Román and Richman, JJ., concur
Announced January 24, 2019
McDivitt Law Firm, P.C., David E. McDivitt, Edward Lomena, Colorado Springs,
Colorado, for Plaintiff-Appellant
Campbell, Latiolais & Averbach, LLC, Colin Campbell, Phillip Khalife,
Greenwood Village, Colorado, for Defendant-Appellee
¶1 This insurance dispute arises from plaintiff Michael D.
Brown’s motorcycle accident, and the purported cancellation of his
motorcycle insurance policy by defendant, American Standard
Insurance Company of Wisconsin.
¶2 After Brown sued for benefits under the policy, the trial court
granted American Standard’s summary judgment motion,
concluding that no coverage was in effect on the date of the
accident because American Standard had previously given written
notice of cancellation on the ground that Brown did not have a valid
driver’s license. But Brown contested that fact, and offered
admissible evidence that he had a valid driver’s license at the time
of the cancellation and on the date of the accident.
¶3 We conclude, as a matter of first impression in Colorado, that
when an insurer notifies an insured that it is cancelling an
automobile insurance policy and specifies the reason for the
cancellation, the validity of the cancellation turns on the accuracy
of the information underlying the cancellation. Under these
circumstances, a policy cancellation based on inaccurate
information is no cancellation at all.
1
¶4 Because there is a disputed issue of material fact whether the
stated reason for American Standard’s cancellation of Brown’s
policy was true, we reverse the trial court’s summary judgment.
I. Relevant Facts and Procedural History
¶5 In March 2014, Brown purchased a motorcycle insurance
policy from American Standard for his Suzuki motorcycle.1 On
August 5, 2014, American Standard mailed a notice to Brown that
it was cancelling that policy effective August 20, 2014. The stated
reason for cancellation was “DOES NOT HAVE A VALID DRIVER’S
LICENSE.” Brown does not contest that he received the notice of
cancellation and that, before the lawsuit that underlies this appeal,
he took no action to dispute the cancellation.
¶6 On September 6, 2014, Brown was involved in an accident
while driving the motorcycle. He allegedly sustained significant
injuries. Apparently because the other driver was either uninsured
or underinsured, Brown made a claim against the American
Standard uninsured/underinsured motorist coverages.
1This was policy number XXXX-XXXX-06-04-SCYC-CO, for a “2013
SUZUKI MOTORCYCLE.”
2
¶7 Approximately a month and a half after the purported policy
cancellation, Brown received a letter dated October 3, 2014, from
American Family Mutual Insurance Company regarding an
automobile insurance policy issued to Brown by that company.2
The letter stated: “Please disregard the termination notice recently
sent to you. Information recently received enables us to continue
this policy without interruption in coverage.”
¶8 When American Standard denied coverage, Brown filed a
complaint against American Standard for, among other things,
breach of contract. American Standard moved for summary
judgment, contending that coverage was not in force on the date of
the accident because it had previously cancelled the policy.
¶9 Brown filed a written response to American Standard’s
summary judgment motion, supported by Brown’s affidavit
attesting that he had a valid Colorado driver’s license both at the
time of the cancellation and on the date of the accident.
2 This was policy number XXXX-XXXX-04-98-FPPPA-CO, for a
“2009 CADI AF6.” American Standard contends that “2009 CADI
AF6” refers to a 2009 Cadillac, a contention not disputed by Brown.
3
¶ 10 The trial court concluded that there were no disputed issues of
material fact and granted American Standard’s summary judgment
motion. Brown appeals.
II. Standard of Review
¶ 11 We review a grant of summary judgment de novo. P.W. v.
Children’s Hosp. Colo., 2016 CO 6, ¶ 11.
¶ 12 “Summary judgment is appropriate only if there is no genuine
issue of material fact and the moving party is entitled to judgment
as a matter of law.” Id. The party requesting summary judgment
has the initial burden of showing that there is no genuine issue of
material fact. Gibbons v. Ludlow, 2013 CO 49, ¶ 11.
¶ 13 If this initial burden is met, the burden shifts to the
nonmoving party to demonstrate the existence of a disputed issue of
material fact. Civil Serv. Comm’n v. Pinder, 812 P.2d 645, 649
(Colo. 1991). A material fact is one that impacts the outcome of the
case. Mt. Emmons Mining Co. v. Town of Crested Butte, 690 P.2d
231, 239 (Colo. 1984).
4
III. There Is a Disputed Issue of Material Fact Regarding the
Effectiveness of American Standard’s Cancellation of the Policy
¶ 14 In its summary judgment motion, American Standard argued
that there was no disputed issue of material fact because insurance
coverage was not in effect on the date of the accident. To support
this contention, American Standard submitted the written notice of
cancellation.
¶ 15 As noted above, Brown did not contest in the trial court, and
concedes on appeal, that American Standard mailed the notice of
cancellation to his last known address and that he did not
challenge the cancellation either before the effective date of the
cancellation or at any time before the filing of the lawsuit
underlying this appeal.
¶ 16 Thus, American Standard met its initial summary judgment
burden by establishing that the policy was not in effect on the date
of the accident. To avoid summary judgment, Brown was required
to establish a disputed issue of material fact. Pinder, 812 P.2d at
649.
¶ 17 To meet his summary judgment burden, Brown did three
things. First, Brown supported his opposition to summary
5
judgment with his affidavit stating that, contrary to the reason
given for the policy cancellation, he had a valid Colorado driver’s
license at the time of cancellation and on the date of the accident.
Second, he argued that, despite American Standard’s attempted
cancellation, coverage in fact continued through the date of the
accident because American Family told him on October 3, 2014, to
disregard the previous cancellation letter. Third, he asserted that
American Standard continued to accept payments from Brown after
the cancellation, which reinstated the policy retroactive to the date
of the accident.
¶ 18 Brown’s first contention raises a disputed issue of material
fact requiring reversal. We do not decide the issues presented by
Brown’s second and third contentions because they are not
necessary to our disposition.
A. The Validity of American Standard’s Policy Cancellation Turns
on the Accuracy of the Underlying Reason for Cancellation
¶ 19 As noted, Brown supported his opposition to summary
judgment with his affidavit attesting that, contrary to the stated
basis for cancellation, he had a valid Colorado driver’s license at all
relevant times.
6
1. Preservation
¶ 20 Before addressing the merits of this argument, we must first
confront whether Brown sufficiently preserved this argument in the
trial court.
¶ 21 It is axiomatic that in civil cases, issues not raised in or
decided by the trial court generally will not be addressed for the
first time on appeal. Melat, Pressman & Higbie, L.L.P. v. Hannon
Law Firm, L.L.C., 2012 CO 61, ¶ 18. If a party raises an argument
to such a degree that the court has the opportunity to rule on it,
that argument is preserved for appeal. Battle N., LLC v. Sensible
Hous. Co., 2015 COA 83, ¶ 13.
¶ 22 Brown’s response to American Standard’s motion for summary
judgment stated that “Plaintiff has provided a sworn affidavit
stating that he did have a valid driver’s license” at the time of
cancellation, but it did not explain what, if any, legal significance
that fact had. Despite the absence of meaningful argument
regarding the legal impact of a policy cancellation premised on false
information, we discern no reason for the submission of Brown’s
affidavit other than to challenge the effectiveness of the
cancellation.
7
¶ 23 The trial court recognized this contention and addressed it,
reaching the legal conclusion that the validity of Brown’s license at
the time of cancellation was immaterial and that American
Standard “had effectively cancelled [Brown’s] motorcycle insurance
policy prior to the accident.” Because the trial court ruled on this
question, we conclude that the issue raised on appeal –– the validity
of the cancellation based on the allegedly incorrect information that
Brown did not have a valid driver’s license –– was preserved.
2. Merits
¶ 24 If Colorado law provides that the purported cancellation of an
automobile insurance policy is ineffective when the claimed basis
for cancellation is factually incorrect, then summary judgment was
unwarranted. We now turn to that legal question.
¶ 25 Colorado law requires that insurers comply strictly with
statutory and contractual requirements when cancelling an
automobile insurance policy. See, e.g., Geiger v. Am. Standard Ins.
Co. of Wis., 117 P.3d 16, 18 (Colo. App. 2004); Rotenberg v. Am.
Standard Ins. Co. of Wis., 865 P.2d 905, 907 (Colo. App. 1993).
¶ 26 Section 10-4-602(1), C.R.S. 2018, limits the reasons an
insurer may rely on to cancel an automobile insurance policy. A
8
notice of cancellation is invalid unless based on one of the reasons
listed in the statute.3 § 10-4-602(1). A notice of cancellation, other
than a notice of cancellation for nonpayment of premium, must
include either the reason for the cancellation or a statement that
the insurer will provide the reason upon timely written request.4
§ 10-4-603(1), C.R.S. 2018.
¶ 27 No published Colorado case addresses whether a notice of
cancellation that includes a reason for cancellation is ineffective if
the reason given is inaccurate.
¶ 28 Courts from other states, however, have held that cancellation
of an insurance policy premised on incorrect facts is no cancellation
at all.5 See, e.g., Peterson v. Allstate Ins. Co., 330 P.2d 843, 846
3 Section 10-4-602(2), C.R.S. 2018, provides that the statute does
not apply when the policy has been in effect less than sixty days.
The statute is also inapplicable to the nonrenewal of a policy. § 10-
4-602(3).
4 A notice of cancellation for nonpayment of premium must include
the reason for cancellation or a statement that the policy will be
cancelled if the premium is not paid. § 10-4-603(1), C.R.S. 2018.
5 We do not address whether a policy provision requiring a reason
for cancellation invokes a similar rule because the American
Standard policy is not part of the record on appeal.
9
(Cal. Dist. Ct. App. 1958); Nassau Ins. Co. v. Hernandez, 408
N.Y.S.2d 956, 957-58 (N.Y. App. Div. 1978).
¶ 29 In New York, like in Colorado, an insurer must, under various
circumstances, state a reason for cancelling an automobile
insurance policy. See § 10-4-603; N.Y. Ins. Law § 3425 (McKinney
2018). A New York intermediate appellate court held that implicit
in a statutory requirement that a reason be given for cancelling an
insurance policy is a requirement that the noticed reason be
accurate. Nassau Ins., 408 N.Y.S.2d at 957. If the reason given for
the purported cancellation is factually inaccurate, the cancellation
is invalid. Id. at 957-58.
¶ 30 Similarly, a California intermediate appellate court held that a
cancellation of an automobile insurance policy, based on the
mistaken premise that the premium was unpaid, was ineffective.
Peterson, 330 P.2d at 846. Put another way, “a cancellation by
mistake is no cancellation at all.”6 Id.
6 The California holding does not appear to be limited to those
situations in which a statute requires the notice of cancellation to
include a statement of the reason for cancellation.
10
¶ 31 In other jurisdictions where insurers must, by statute, give
insureds a reason for the cancellation of insurance, courts have
held cancellations ineffective because (1) insurers did not describe
the reasons for cancellation with sufficient specificity, e.g., Fields v.
Parsons, 234 N.E.2d 744, 745 (Mass. 1968); (2) the reasons given
by insurers were not consistent with those permitted by statute,
e.g., Gen. Star Indem. Co. v. Thunderbutte Enters., LLC, 221 F.
Supp. 3d 1174, 1182 (E.D. Cal. 2016); and (3) information required
to be included in the notices of cancellation was incorrect, e.g.,
Argenzio v. Aetna Cas. & Sur. Co., 318 N.Y.S.2d 64, 67 (N.Y. Civ. Ct.
1971).
¶ 32 In short, courts have widely held that an insurer’s attempt to
cancel an insurance policy must strictly comply with statutory
requirements and, when required by statute, accurately apprise the
insured of the reason for cancellation.
¶ 33 In Colorado, at least in certain circumstances, an automobile
liability insurer is required by statute to state the reason for
cancellation; indeed, the statute limits cancellation to those
circumstances enumerated in the statute. §§ 10-4-602(1), 10-4-
603(1), (2). Consistent with the reasoning of the court in Nassau
11
Insurance and other courts that have considered the implications of
similar statutes, we believe that implicit in such requirements is
that the stated reason for cancellation must be factually accurate,
and if it is not, there is no cancellation at all. See Gen. Star, 221 F.
Supp. 3d at 1182; Fields, 234 N.E.2d at 745; Nassau Ins., 408
N.Y.S.2d at 957-58; Argenzio, 318 N.Y.S.2d at 67; see also 2 Steven
Plitt et al., Couch on Insurance § 32:42, Westlaw (3d ed. database
updated June 2018).
¶ 34 Therefore, we hold, as a matter of first impression in Colorado,
that when an insurer provides the reason for cancellation of an
automobile insurance policy either with the notice of cancellation or
in response to a request from the insured, the reason given must be
accurate, or the notice of cancellation is ineffective.
¶ 35 We recognize that some decisions from other jurisdictions
apply a rule that if the insurer is not required to state the reason for
cancellation, either by statute or by the terms of the policy, it is
immaterial if the insurer states a reason for cancellation that is
factually inaccurate. See, e.g., Gibbons v. Kelly, 101 N.E.2d 497,
499 (Ohio 1951). We reject this rule. It contravenes basic
principles of good faith and fair dealing in commercial transactions.
12
See § 4-1-304, C.R.S. 2018; U.C.C. § 1-304 (Am. Law Inst. & Unif.
Law Comm’n 2001). Moreover, we can discern no logical basis for
such a rule and find no support for it in Colorado law.
¶ 36 The stated reason for American Standard’s cancellation of the
policy was that Brown did not have a valid driver’s license, which, if
true, would be a proper basis for policy cancellation. See § 10-4-
602(1)(b). But Brown controverted that factual premise in his
affidavit. As a result, there is a disputed issue of material fact as to
whether Brown had a valid driver’s license at the time of
cancellation, and the trial court erred in treating the notice of
cancellation as dispositive on summary judgment.
3. The Question Whether Brown Had a Valid Motorcycle
Endorsement on His Driver’s License Is Not Properly Before Us
¶ 37 In its answer brief, American Standard argues that it cancelled
Brown’s insurance coverage not because he did not have a valid
driver’s license, but because he did not have a valid motorcycle
endorsement on his license. But American Standard made no such
argument in the summary judgment proceedings.7
7Because the question is not properly before us, we do not address
whether lack of a motorcycle endorsement would be sufficient
13
¶ 38 While an appellee may defend the trial court’s judgment on
any ground supported by the record, whether or not that ground
was addressed by the trial court, Farmers Grp., Inc. v. Williams, 805
P.2d 419, 429 (Colo. 1991), that rule has no bearing when, as here,
there is nothing in the trial court record that addresses motorcycle
endorsements to drivers’ licenses.
4. Brown Did Not Waive His Right to Sue or Ratify American
Standard’s Purported Cancellation
¶ 39 American Standard also contends, in essence, that its
cancellation of Brown’s policy was effective, regardless of whether
the reason for cancellation was factually accurate, because Brown
did not contest the cancellation until well after the accident, and
indeed, not before bringing the suit that underlies this appeal. But
American Standard supplies no legal support for that proposition,
and we have independently found none. To the contrary, divisions
of this court have recognized (albeit in different factual settings)
that an insured who received a defective notice of cancellation of an
grounds under section 10-4-602(1)(b) to cancel a motorcycle
insurance policy. It is for the district court to determine, whether
by pleading amendment or otherwise, American Standard may
repursue this argument on remand.
14
insurance policy nevertheless may bring suit against the insurer
under the policy without having previously challenged the
cancellation. See, e.g., Geiger, 117 P.3d 16; Rotenberg, 865 P.2d
905.
¶ 40 In other jurisdictions, when insurers have cancelled
automobile policies on the basis of incorrect factual information or
without providing a sufficient description of the reason for the
cancellation, and an accident occurred following the purported
cancellation, insureds have successfully sued to enforce those
policies. See, e.g., Fields, 234 N.E.2d at 745; Argenzio, 318
N.Y.S.2d at 67. And as a general matter, courts across multiple
jurisdictions have recognized that one remedy available to insureds
facing wrongful cancellation is to wait until the policy is actionable
and sue to enforce it.8 2 Plitt et al., § 31:28; 17 Richard A. Lord,
8 The insured’s right to sue may be subject, under various
circumstances, to requirements that the insured continued to
tender premiums following cancellation or that the policy would
have continued in effect through the time of the payable event. 2
Steven Plitt et al., Couch on Insurance § 31:28, Westlaw (3d ed.
database updated June 2018); 17 Richard A. Lord, Williston on
Contracts § 49:137, Westlaw (4th ed. database updated Nov. 2018).
We do not further address these questions because the record is not
sufficiently developed.
15
Williston on Contracts § 49:137, Westlaw (4th ed. database updated
Nov. 2018).
¶ 41 Based on these authorities, we hold that, standing alone, the
uncontested fact that Brown did not challenge the cancellation
before bringing suit on the policy did not constitute either a waiver
of his right to sue under the policy or a ratification of the allegedly
improper cancellation.9
B. In View of Our Reversal of the Summary Judgment, We Do Not
Adjudicate Brown’s Arguments That American Standard’s
Actions Reinstated the Motorcycle Policy; However, the Trial
Court May Treat Its Prior Rulings on These Issues As the Law
of the Case
¶ 42 With respect to Brown’s claim that the October letter from
American Family reinstated his motorcycle policy, that letter
addresses a different insurance policy than the motorcycle policy at
issue here and was issued by a different insurance company.
American Standard pointed out this obvious fact in its summary
judgment briefing. The trial court reached the same obvious
conclusion it its summary judgment order. We are perplexed that,
9We do not address any other defenses that American Standard
has raised or may by proper amendment raise.
16
on appeal, Brown continues to advance this same meritless
argument without even colorably addressing the fact that the letter
(a) references a different policy number, (b) references a different
vehicle,10 and (c) is from a different insurance company.
¶ 43 As to Brown’s claim that American Standard continued to
accept premium payments after cancellation, thereby reinstating
the policy, the trial court ruled that Brown did not meet his burden
to demonstrate a disputed issue of material fact. Inexplicably,
Brown submitted no cancelled checks (or other relevant evidence) in
support of this argument. Brown’s argument is premised solely on
line items from bank statements showing payments from his
account to “AFM*AM FAMILY INSURANC” on October 14, 2014, and
November 19, 2014. But these entries demonstrate payments made
to American Family Mutual Insurance Company, not American
Standard, and we know, as addressed above, that American Family
issued a separate automobile policy to Brown. Nor did Brown
10Both the vehicle identification number and vehicle description in
the motorcycle policy are different than the information referenced
in the October letter. See supra notes 1 & 2.
17
demonstrate any correlation between any premiums due under the
motorcycle policy and the payments made to American Family.
¶ 44 Brown also contends without providing any support that
American Standard and American Family are one and the same.
While American Standard appears to concede that American
Standard is an affiliate of American Family, that alone is
insufficient to establish a disputed issue of material fact that
American Standard reinstated the motorcycle policy when American
Family accepted premium payments after the date of purported
cancellation.11
¶ 45 Neither party has addressed whether a Colorado appellate
court has the authority to affirm a component part of a summary
judgment when the judgment itself is reversed. We think it prudent
not to address this question, which may be an issue of first
impression in Colorado, without the benefit of briefing.
11 Initial disclosure documents filed by American Standard under
C.R.C.P. 26(a)(1) show that Brown’s motorcycle policy continued
from November 17, 2014, forward, but these documents do nothing
to demonstrate that Brown’s motorcycle policy was in effect on the
date of the accident.
18
¶ 46 Regardless, the trial court afforded Brown a full and fair
opportunity to establish his claims that the policy was reinstated
both because of acceptance of premiums and the insurer’s
purported revocation of the prior cancellation. Brown failed to
convince the trial court, and there is no impediment to the trial
court considering those prior rulings as the law of the case, under
that discretionary doctrine. See Kuhn v. State Dep’t of Revenue, 897
P.2d 792, 795 n. 5 (Colo. 1995).
IV. Attorney Fees
¶ 47 Because Brown has prevailed on this appeal, we reject
American Standard’s request for attorney fees.
V. Conclusion
¶ 48 The summary judgment is reversed, and the case is remanded
for further proceedings consistent with this opinion.
JUDGE ROMÁN and JUDGE RICHMAN concur.
19