Court Opinion

ID: 9631711
Source: CourtListenerOpinion
Date Created: 2023-08-22 10:47:00.443837+00
Date Added: 2024-06-11T18:07:59.278576
License: Public Domain

JACOBSON, Judge,
dissenting.
I must respectfully dissent because the majority opinion appears to rely upon a factual issue that was not raised in the trial court and first surfaced in VNB’s reply brief; that is, whether VNB was misled by the notice of cancellation it received. This factual issue aside, in my opinion the majority misconstrues the law in this area.
First, as to the factual issue, the majority opinion takes the position that:
[T]here is no evidence that VNB was ever notified that the cancellation of the policy for nonpayment of premiums was to apply to anyone other than the insured. Second, the notice itself never refers to VNB as the mortgagee payee, or that VNB’s interest is being terminated. Nothing in the notice was sufficient to put VNB on notice that INA was intending to cancel coverage not only to the one who failed to pay the premiums, but also to cancel the interest of the mortgagee payee which was also insured by the same policy.
The issue whether VNB was somehow misled by the cancellation notice was not raised in the trial court. In the trial court, this matter was submitted upon a stipulated set of facts. In so far as the cancellation notice was concerned, that stipulation provided:
7. On May 28, 1985, INA mailed notices of cancellation of the policy to Wholesale Building Materials, Inc. and VNB. The cancellation notices were sent by INA because plaintiff’s [sic] Kinshella were in default in payment in premium on the policy.
*2188. The notices stated that the INA policy was being cancelled effective June 10, 1985. A true and correct copy of the notice sent to VNB is attached as exhibit B....
9. VNB received a copy of the notice mailed to it by INA.
The contested issues presented to the trial court by VNB were:
1. Whether coverage exists for VNB’s interests under the INA policy for the fire loss that occurred on July 3, 1985.
2. Whether VNB is entitled to forty-five days notice of INA’s cancellation of the policy based on Kinshella’s default in the payment of the policy premium.
The issue was never raised whether the notice, by reasons of its terms alone, was insufficient to cancel any interest VNB might have. Rather, the sole issue presented to the trial court was whether VNB was entitled to a 45-day notice, a 10-day notice, or a reasonable notice. This was also the only issue raised in the opening brief on appeal. Only in the reply brief is it first hinted that the notice did not alert VNB as to the reason for cancellation.
The law is well-established that issues not raised in the trial court or raised for the first time in the reply brief on appeal are waived. Quila v. Schafer’s Estate, 7 Ariz.App. 301, 302, 438 P.2d 770, 771 (1968); see also Rule 13(c), Arizona Rules of Civil Appellate Procedure.
This leaves us with the bare legal issue of the period of time an insurer must extend to a mortgagee payee before its interest can be canceled, where the mortgagor has failed to pay premiums. Again, for ease of reference, the applicable provision of the policy is repeated:
We can cancel the policy by sending to you, at the address shown in the Declarations, notice of the effective date of cancellation. We must do this at least 45 days prior to the cancellation date unless we are cancelling the policy because you failed to pay your premiums. In that case, we will give you only 10 days’ notice. Mailing or delivery of the notice will be proof that you were informed of the cancellation. We mil also notify any mortgagee shown in the Declarations.
(Emphasis added).
The majority opinion correctly points out that the policy does not contain a specific provision dealing with what type of notice the mortgagee was entitled to receive or how much notice was required. However, a simple reading of the foregoing provision leaves one with the reasonable assumption that the 45-day notice applies to any cancellation reason other than failure to pay premiums, and in that case only a 10-day notice is required and the mortgagee will receive that same type of notice.
Even assuming this provision does not set forth the requisite notice to the mortgagee, then it is submitted that the only case cited by either party that deals with this situation points to the correct resolution. In Standard Fire Insurance Co. v. United States, the court held that where cancellation of a policy is the result of nonpayment of premiums, the interest of the mortgagee payee could not be canceled without giving “reasonable” notice. 407 F.2d 1295, 1299 (5th Cir.1969).
The majority rejects a reasonable notice on the basis among others, that the bank should not be subjected to the whims of its debtor, specifically the failure to pay premiums, citing Appleman. In my opinion, the majority reads too much into the “separate contract” principle. VNB has never contended that INA could not cancel the policy because of the failure of the property owner to pay premiums. The parties’ only disagreement is how much notice VNB was entitled to receive because of this “neglect” by the property owner.
The majority, relying upon the contention that VNB did not receive sufficient notice that its interest was to be canceled, both rejects the clear legislative intent that 10-day notice of cancellation is commercially reasonable, A.R.S. section 20-1674(A), and opts for a 45-day notice. As previously pointed out, this simply is not an issue in this lawsuit.
*219In my opinion, the sufficiency of the notice given to VNB is a red herring. Legally, VNB, as mortgagee payee, was entitled to reasonable notice that the policy under which it claimed an interest was to be canceled. It received such notice. A.R.S. section 20-1674(A) establishes 10 days as a commercially reasonable time to give notice.
If public policy reasons are to be examined in determining the reasonableness of the time, then it is submitted that an insured who has mortgaged property and is unable to pay premiums may have an incentive to see that its debts are paid through insurance. Providing a relatively short period of time before such incentives become overwhelming appears to be in the public interest.
I would affirm.
APPENDIX A
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