Court Opinion

ID: 4712940
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:38:48.572799+00
Date Added: 2024-06-11T08:07:14.703162
License: Public Domain

Bridge, J.
(dissenting) — By concluding that RCW 48.18.320 applies to all insurance contracts regardless of policy type, the majority has obliterated the distinction between claims-made policies and occurrence policies. I would conclude that RCW 48.18.320 applies only to those insurance contracts in which risk has already attached. Because I would answer the first certified question in the negative and would not answer the second certified question, I respectfully dissent.
I
I agree with the majority that occurrence and claims-made policies are fundamentally different. Occurrence policies provide coverage for the insured’s negligence, no matter when damage is discovered or when the insurer is notified, so long as the damage occurred within the policy period and notification is given within a reasonable time. Safeco Title Ins. Co. v. Gannon, 54 Wn. App. 330, 337-38, 774 P.2d 30, review denied, 113 Wn.2d 1026 (1989).
Coverage under a claims-made policy, on the other hand, is dependent upon the claim being reported to the insurer during the effective policy period. Id. at 338. Critical to a claims-made policy is that notice of the claim must be given to the insurer during the policy period itself. Id. When an insured becomes aware of any event that could result in liability, it must give notice to the insurer. Id. That notice must be given within a reasonable time or as soon as practicable within the policy period. Id. If the claim is not reported during the policy period, no liability attaches. Id.
In this case, the type of policy in dispute is a claims-made policy. The undisputed record does not indicate that American Continental Insurance Company (ACIC) received no*528tice of any “claim” or “circumstance” regarding either Steven Steen’s treatment or his death prior to the cancellation of the policies at issue.9 New American Health Care Corporation’s (NAHC) claims-made policies with ACIC were unambiguously conditioned upon such notice.10 Absent notice within the policy period, I would find that ACIC is not liable for Steen’s wrongful death claim.
II
The main issue in this case is whether the cancellation of a claims-made policy is included within the prohibition of RCW 48.18.320 for retroactive annulment if the injury, *529death, or damage occurred during the policy period but notice was not received during the effective policy period. After examining the plain language of RCW 48.18.320, the majority concludes that such cancellation is prohibited by RCW 48.18.320. Majority at 522. I disagree.
The term “retroactively annulled,” as utilized in RCW 48.18.320, is not defined within the statute or chapter nor does it appear elsewhere in chapter 48.18 RCW. Relying on Black’s Law Dictionary (3d ed. 1933), the majority finds that “annul” is defined as “cancel” and, therefore, the prospective cancellation of a claims-made policy is prohibited “after the occurrence of the peril insured against.” Majority at 519-20, 521-22.
In interpreting a statute, the court gives effect to the intent and purpose of the legislature in creating it. Kilian v. Atkinson, 147 Wn.2d 16, 20, 50 P.3d 638 (2002). If the statute is clear on its face, its meaning is to be derived from the language of the statute alone. Id. Legislative definitions included in the statute are controlling. However, in the absence of a statutory definition, the term is given its plain and ordinary meaning ascertained from a standard dictionary. State v. Watson, 146 Wn.2d 947, 954, 51 P.3d 66 (2002). An unambiguous statute is not subject to judicial construction, and the court will not add language to an unambiguous statute even if it believes the legislature intended something else but did not adequately express it. Kilian, 147 Wn.2d at 20. A statute is ambiguous if it may be reasonably interpreted in more than one way. Id. However, it is not ambiguous simply because different interpretations are conceivable. Id. at 20-21. If the court finds that a statute is ambiguous, it resorts to rules of statutory construction, legislative history, and relevant case law to assist in the interpretation of the statute. Id. at 21. In any case, it is fundamental that statutes be given a rational and sensible interpretation. State v. Thomas, 121 Wn.2d 504, 512, 851 P.2d 673 (1993); State v. Smalls, 99 Wn.2d 755, 766, 665 P.2d 384 (1983); Krystad v. Lau, 65 Wn.2d 827, 844, 400 P.2d 72 (1965).
*530RCW 48.18.320 is clear on its face. Therefore, its meaning is derived from the language of the statute alone. Kilian, 147 Wn.2d at 20. It is observed that RCW 48.18.320 uses the term “retroactively annulled.” This term does not appear anywhere else in chapter 48.18 RCW. Because the term is not defined within the statute or chapter, we look to a dictionary for the plain and ordinary meaning. See Watson, 146 Wn.2d at 954. “Retroactive” is defined as “retrospective.” Black’s Law Dictionary 1184 (5th ed. 1979). “Retrospective,” in turn, is defined as “[l]ooking backward; contemplating what is past.” Id. “Annul” is defined as “[t]o reduce to nothing; annihilate; obliterate; to make void or of no effect; to nullify; to abolish; to do away with.” Id. at 83. Therefore, “retroactive annulment” may be defined as “abolishing or voiding what is past.”
To relate this term to RCW 48.18.320, what is prohibited is an agreement that abolishes or voids liability of the insured after the occurrence of any injury, death, or damage for which the insured may be liable.11 RCW 48.18.320 does not prohibit the prospective cancellation of a policy for which injury, death, or damage has yet to occur. The dispute in this case stems from whether the statute applies to situations in which the claims-made policy is cancelled despite future claims that have yet to be made regarding an injury, death, or damage that occurred during the policy period. To settle this dispute, it needs to be considered when risk attaches to create liability.
For claims-made policies, risk does not attach until a claim is made or notice of a circumstance is given during the requisite policy period. Therefore, if an insurer does not receive any notice for a claim or circumstance regarding potential liability during the policy period, no risk attaches. This is most likely true even though the injury, death, or *531damage occurred during the policy period but notice was not received during the policy period.12 Steen concedes that the general rule is that cancellations operate prospectively. However, she asserts that “a request for cancellation communicated to the insurer after a loss has already occurred does not absolve the company from liability for losses that have already occurred.” Appellant’s Opening Br. at 18. This assertion is true for occurrence policies, but it is not true for claims-made policies. In the case of claims-made policies, if the insurer does not receive any notice of a claim or circumstance within the policy period, risk does not attach and, therefore, liability cannot attach.
It should be noted that cancellation of insurance policies is generally not prohibited. In fact, the claims-made policies in question contain the following provision:
(A) The NAMED INSURED may cancel. . . this Policy by mailing the Company written notice stating when such cancellation . .. will be effective.
(D) If the NAMED INSURED cancels the Policy, premium refund will be calculated in accordance with the customary short rate procedure.
ACIC Excerpts of Record (AER) at 82-83. In the insurance arena “cancellation” generally refers to a policy on which there is no pending loss claim at the time the policy is abrogated. Jeffrey W. Stempel, Interpretation of Insurance Contracts: Law and Strategy for Insurers and Policyholders § 4.1.2 (1994). In other words, the cancellation of a policy operates prospectively only.
In its plain language analysis, the majority ignores the elementary rule that where the legislature uses certain statutory language in one instance and different language in another, there is a difference in legislative intent. As stated before, the term “retroactively annulled” is found *532only in RCW 48.18.320 and not anywhere else in chapter 48.18 RCW. The term “cancellation,” however, is found in other statutes within the chapter. See, e.g., RCW 48.18.300, .310. “[W]here the Legislature uses certain statutory language in one instance, and different language in another, there is a difference in legislative intent.” United Parcel Serv., Inc. v. Dep’t of Revenue, 102 Wn.2d 355, 362, 687 P.2d 186 (1984).13 Thus, it is assumed that by using “retroactively annulled,” the legislature did not mean “cancellation.” Two reputable treatises accurately distinguish the two terms:14
Rescission is the abrogation of a contract ab initio (from the outset). It is the judicial equivalent of an annulment rather than a divorce. If the court declares a contract rescinded, the contract is treated as if it never existed and the parties are placed back in their original position.
Stempel § 4.1 (footnote omitted).
The primary difference, connotatively, between a rescission and cancellation is that one normally speaks of “rescinding” or “avoiding” a policy on which the policyholder has made a claim for loss. Cancellation is the preferred term when referring to policies on which there is no pending loss claim at the time the policy is abrogated.
Stempel § 4.1.2.
In other words, cancellation of a policy operates prospectively, while rescission, in effect, operates retroactively to the very time that the policy came into existence ....
2 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 30:3 (3d ed. 1995). Therefore, it would be illogical to find that the *533legislature meant “cancellation” when they used the term “retroactively annulled.”
Reviewing the plain language of the statute, I must conclude that RCW 48.18.320 does not apply automatically to all insurance contracts regardless of type. If this were the case, the distinction between occurrence policies and claims-made policies would be negated, which would not be a rational nor sensible interpretation of the statute. The distinction between the two types of insurance policies must be acknowledged. In recognizing the distinction, RCW 48.18.320 does not affect the cancellation of claims-made policies where the insurer had no notice of a claim or circumstance that occurred during the term of the policy.
Ill
There is a fundamental distinction between an occurrence policy and a claims-made policy. Risk for an occurrence policy attaches at the time that the injury, death, or damage occurs. Risk for a claims-made policy does not attach until the claim or circumstance is received by the insurer during the effective policy period. I would conclude that RCW 48.18.320 applies to those insurance contracts in which risk has already attached. Thus, the statute does not apply to claims-made policies in which no notice has been received by the insurer. Therefore, I would answer the first certified question in the negative.
Owens and Fairhurst, JJ., concur with Bridge, J.
After modification, further reconsideration denied July 30, 2004.
Reconsideration denied October 27, 2004.

 Julie Rhodes is the custodian of New American Health Care Corporation’s (NAHC) patient and risk management files. In her declaration she stated that the hospital has no record of any complaint relevant to Steven Steen’s treatment. ACIC Excerpt of Record (AER) at 21. She also stated that the hospital has no record of reporting to ACIC any event, circumstance, or claim that is relevant to Steven Steen’s treatment. Id. Further, Rhodes knows of “no other files or collection of records ... that could conceivably relate to Steven Steen’s hospitalization ... or any claims arising from that hospitalization.” Id.
The record reflects that Joseph D. Hampton, attorney for NAHC, asked Michael E. Withey, Steen’s attorney, to provide evidence of NAHC being on notice of Steen’s potential wrongful death claim during the period NAHC was covered by ACIC. AER at 22-24. There is no evidence that Withey provided such evidence.

 The actual policies that NAHC held with ACIC contain the following language:
THIS IS A CLAIMS MADE AND REPORTED POLICY. This Policy applies only to CLAIMS that are first made against the INSURED and reported to the Company during the POLICY PERIOD, and that arise out of a MEDICAL INCIDENT or EVENT happening on or after the RETROACTIVE DATE.
If a CLAIM is first made against the INSURED during the POLICY PERIOD, the INSURED must, as a condition precedent to its right to coverage under this Policy: (i) immediately give the Company written notice of the CLAIM; and (ii) immediately forward to the Company every demand, notice, summons, complaint, or other process received by the INSURED or the INSURED’s representative.
If the INSURED first becomes aware during the POLICY PERIOD of a CIRCUMSTANCE, the INSURED must, as a condition precedent to its right to coverage under this Policy, give the Company written notice of the CIRCUMSTANCE during the POLICY PERIOD.... If the INSURED does so, any CLAIM resulting from that CIRCUMSTANCE will be deemed to have been first made against the INSURED and reported to the Company during the POLICY PERIOD.
AER at 58, 80.

 It is not disputed that RCW 48.18.320 applies to occurrence policies. As stated above, occurrence policies provide coverage for any losses that occur within the policy period. The condition of receiving notice during the policy period is not required under such a policy. Thus, if there is injury, death, or damage that occurred during the occurrence policy period, no agreement may effectively annul the coverage of such injury, death, or damage.

 Where claims-made policies require notice within the term of the policy, courts have generally given this provision stringent and literal enforcement. Jeffrey W. Stempel, Interpretation of Insurance Contracts: Law and Strategy for Insurers and Policyholders § 31.3.3 (1994).

 The majority’s conclusion that ECW 48.18.320 applies to even the proper cancellation of a claims-made policy would render the above-mentioned cancellation provision as well as RCW 48.18.300 (cancellation by insured) a nullity.

 RCW 48.18.320 is unique in that it uses the term “annul” to mean “rescind”—a more commonly used term in contract law. “Annul” and “rescind” are basically the same. “Rescission means to abrogate or annul and requires the court to fashion a remedy to restore the parties to the relative positions they would have occupied if no contract had ever been made.” Busch v. Nervik, 38 Wn. App. 541, 547, 687 P.2d 872 (1984) (emphasis added). See also Willener v. Sweeting, 107 Wn.2d 388, 397, 730 P.2d 45 (1986).