Court Opinion

ID: 9775363
Source: CourtListenerOpinion
Date Created: 2023-08-29 18:55:27.328892+00
Date Added: 2024-06-11T07:32:25.399404
License: Public Domain

COOPER, Justice,
dissenting.
Respectfully, I must dissent.
The majority opinion leaves the impression that Motorists Mutual issued only one policy of insurance to Appellant; and that in each instance in which a late payment was accepted, it was given retroactive application so that there were never any periods in which she was uninsured. In fact, four separate policies were issued to Appellant, all of which lapsed because of nonpayment; never was a late payment applied retroactively to reinstate a lapsed policy; and on three occasions, she was uninsured for a period of time before a new policy was issued. On two occasions, late payments were accepted in lieu of cancellation of unexpired policies. The following is a summary of the history of each policy:

1. Policy No. 1830-06-337229-00A.

April 29, 1989. Appellant submitted an application for a six-month policy of insurance with Motorists through Doctrow-Rich Insurance Agency. She filled out an application and gave Doctrow-Rich her personal check for $127.00 for the first three months’ premium. Doctrow-Rich issued a binder and forwarded the application and check to Motorists. When the cheek was returned for insufficient funds, Motorists notified Appellant in writing that the policy was cancelled retroactively to April 29, 1989. Appellant was uninsured from April 29 through June 9, 1989.

2. Policy No. 1830-06-.U2298-00A.

June 9, 1989. Appellant again submitted an application for a six-month policy of insurance with Motorists through Doctrow-Rich, this time tendering $127.00 cash with her completed application. Doctrow-Rich again issued a binder and submitted the application and the premium payment to Motorists. The policy was issued providing coverage for the period June 9 through December 9, 1989. The next premium payment of $134.68 was due on September 5,1989.
September 5, 1989. The premium was not paid.
September 12, 1989. Motorists sent Appellant written notice that the policy would be cancelled if the premium was not paid by September 28,1989.
October k, 1989. The premium was paid and the policy remained in effect.
*530November 6, 1989. Motorists sent Appellant a thirty day written notice that she could renew the policy for another six months by paying a premium of $248.45 before the expiration date of December 9,1989.
December 9, 1989. The renewal premium was not paid. The policy lapsed.
December 19, 1989. Pursuant to KRS 304.20-040(7), Motorists notified Appellant and Doctrow-Rich that the policy had lapsed effective December 9, 1989. Appellant was uninsured from December 9 through December 21,1989.

3. Policy No. 1830~06-3m98-10A..

December 21, 1989. Appellant applied for a new policy with Motorists through Doc-trow-Rich. She filled out a new application and paid Doctrow-Rich $126.22 as three months’ premium. Doctrow-Rich issued a binder and submitted the new application and the premium payment to Motorists. On January 5, 1990, Motorists issued a new policy providing coverage from December 21, 1989 through June 21,1990.
March 2, 1990. Motorists notified Appellant in writing that the next premium of $121.25 was due March 23,1990.
March 23, 1990. The premium was not paid.
March 29, 1990. Motorists gave Appellant written notice that the policy would be can-celled on April 14, 1990 if the premium was not received. The premium was received before that date and the policy remained in effect.
May 17, 1990. Motorists sent Appellant a thirty day written notice that she could renew the policy for another six months by paying another three months’ premium before the policy expiration date of June 21, 1990.
June 21, 1990. The premium was not paid. The policy lapsed.
July 2, 1990. Pursuant to KRS 304.20-040(7), Motorists sent written notice to Appellant and Doctrow-Rieh that the policy had expired as of June 21, 1990. Appellant was uninsured from June 21 through July 19, 1990.
A Policy No. 1830-06-31f2298-20A.
July 19, 1990. Upon receipt of an application and’ a three months’ premium, Motorists issued a new policy providing coverage from July 19,1990 through January 19,1991.
October 1, 1990. Motorists sent Appellant written notice that her next three months’ premium was due by October 20,1990.
October 20, 1990. The premium was paid and the policy remained in effect.
December 17, 1990. Motorists gave Appellant a thirty day written notice that she could renew the policy for another six months by paying a three months’ premium before the expiration date of January 19, 1991. The notice contained the following in capital letters:
IF NO PAYMENT IS RECEIVED BY THE DATE DUE, YOUR INSURANCE COVERAGE WILL EXPIRE AT 12:01 A.M., S.T. ON THE “EXPIRATION DATE” INDICATED ABOVE.
Appellant admits that she received this notice.
January 19, 1991. The premium was not paid. The policy lapsed. Motorists gave written notice to the lienholder on Appellant’s vehicle that the policy was no longer in effect.
January 29, 1991. Pursuant to KRS 304.20-040(7), Motorists sent written notice to Appellant and Doctrow-Rich that the policy had expired as of January 19, 1990. The notice contained the following advice:
WE URGE YOU TO CONTACT YOUR AGENT IMMEDIATELY TO DISCUSS YOUR INSURANCE NEEDS.
February 3, 1991. Appellant went to the office of Doctrow-Rich to see if she could obtain reinstatement of her policy by paying a late premium. Jeff Doctrow knew that Motorists would not issue a new policy to Appellant because of the frequency of her past late payments and policy lapses. Therefore, he did not accept her tendered premium payment and did not issue a new binder. He told Appellant that she could try sending the check directly to Motorists, but that he did not know what they would do if she did.
*531February 5, 1991. Appellant mailed a check in the amount of $126.94 directly to Motorists unaccompanied by an application for a new policy.
February 7, 1991. The check was received at Motorists’ home office in due course of mail. A clerk used a computer to match the name on the check with the policy number of Appellant’s most recent policy and wrote that number on the check.
February 8, 1991. The check was deposited in the normal course of business.
February 18, 1991. When it was discovered that the check was for a lapsed policy, the matter was referred to a Motorists underwriter, who treated it as an application for a new policy. Because of Appellant’s past history of frequent failure to pay premiums when due and lapsed policies, the decision was made to decline the application.
February 19, 1991. Motorists sent a letter to Appellant with a copy to Doctrow-Rich advising that Motorists was unable to accept the check as a late payment because it was received after the policy expiration date. A check for $126.94 payable to Appellant was included with the copy sent to Doctrow-Rich.
February 22, 1991. Doctrow-Rich placed the check in the United States mail in an envelope addressed to Appellant. Appellant admits she received the notice from Motorists and the check from Doctrow-Rich.
Also on February 22, 1991, Appellant was involved in the automobile accident which is the subject of this litigation.
Appellant’s primary argument throughout this litigation has been that the mere acceptance and deposit of her check by Motorists required Motorists to issue her a new policy effective as of the date of receipt of her check. However, the great weight of authority on this issue, including long-standing Kentucky precedent, is to the contrary. Troutman v. Nationwide Mutual Ins. Co., Ky., 400 S.W.2d 216 (1966); Carden v. Liberty Mutual Ins. Co., 278 Ky. 117, 128 S.W.2d 169 (1939); see also, Dolan v. Utica Mutual Ins. Co., 660 F.Supp. 851 (D.Mass.1986); State Farm Fire & Casualty Co. v. Continental Insurance Co., 606 F.Supp. 155 (W.D.Ky.1985); DeTemple v. Southern Insurance Co., 154 Ariz. 79, 740 P.2d 500 (1987); Prudential Insurance Co. v. Nessmith, 174 Ga.App. 39, 329 S.E.2d 249 (1985); McMillon v. Old Republic Life Ins. Co., 33 Ill.App.3d 658, 342 N.E.2d 246 (1975); Kimball v. Kingsbury, 27 Utah 2d 70, 493 P.2d 300 (1972); Harris v. Criterion Insurance Co., 222 Va. 496, 281 S.E.2d 878 (1981); R. Long, 4 The Law of Liability Insurance, § 17.37, (1966). These authorities hold that once a policy has lapsed, the tender of a premium payment by the former policyholder is but an “offer” to make a new contract, which is accepted only by some affirmative act by the insurer indicating an intent to accept the offer. The retention of the tendered payment by the insurer for a reasonable period of time necessary to investigate the possible risk does not constitute an acceptance of the risk.
American Life and Accident Ins. Co. v. Clark, Ky., 407 S.W.2d 433 (1966) and Equitable Life Assurance Society v. Brewer, 225 Ky. 472, 9 S.W.2d 206 (1928), discussed at length in the majority opinion, do not hold to the contrary and are easily distinguishable on their facts. In Clark, the insurer not only had received and deposited the premium, but also had approved the reviver of the policy, and had withdrawn the policy from the record of lapsed policies and returned it to the record of reinstated policies. Notice of the reinstatement had been sent to and received by the company’s local agent before the loss occurred. The company denied payment on the basis of an internal rule that reinstatement was not effective until entry was made in the premium receipt book and this was not accomplished until after the loss occurred. That condition was not contained in the policy-
The company was permitted a reasonable time within which to investigate the application for reinstatement or revival, and it had the right to deny the reinstatement. Upon accepting the application for reinstatement of the policy on its books and withdrawing the policy as lapsed, it was effective as of that date.
American Life and Accident Ins. Co. v. Clark, supra, at 436.
*532In Brewer, the policy contained a provision providing for reinstatement upon payment of the past due premium. The insurer accepted the premium after the policy lapsed, but claimed after the loss that reinstatement was conditioned upon receipt of a completed cer-tifícate of the insured’s good health. The policy provision permitting reinstatement did not contain the condition relied upon by the insurer and the loss occurred before the insured could be notified of the condition. Compare Counties Contracting and Construction Co. v. Constitution Life Ins. Co., 855 F.2d 1054, 1061 (3rd Cir.1988) (where-reinstatement provision required presentation of evidence of insurability and that requirement was unfulfilled prior to loss, the policy was not reinstated). None of the policies issued to Appellant by Motorists contained a provision permitting reinstatement after lapse. Each policy simply provided:
Automatic Termination. If we offer to renew or continue and you or your representative do not accept, this policy will automatically terminate at the end of the policy period. Failure to pay the required renewal or continuation premium when due shall mean that you have not accepted our offer.
This provision is in accord with KRS 304.20-040(7), which provides as follows:
If the insurer has manifested its willingness to renew by mailing or delivering a renewal notice, bill, certificate, or policy to the first-named insured at his last known address at least thirty (30) days before the end of the current policy period with the amount of the renewal premium charge and its due date clearly set forth therein, then the policy shall expire and terminate without further notice to the insured on the due date, unless the renewal premium is received by the insurer or its authorized agent on or before that date. When any policy terminates pursuant to this subsection because the renewal premium was not received on or before the due date, the insurer shall, within fifteen (15) days, deliver or mail to the first-named insured at his last known address a notice that the policy was not renewed and the date on which the coverage under it ceased to exist.
Unlike life insurance policies, see KRS 304.15-130, there is no legal requirement that a casualty policy contain a reinstatement provision. Since there were no reinstatement provisions in any of the policies issued to Appellant, neither of the two previous lapsed policies were reinstated as a result of Appellant’s subsequent submission of a new application. Rather, on both occasions, upon acceptance of the new application and premium, Motorists issued an entirely new policy.
The majority holds that Motorists’ is es-topped from declining to issue yet another policy to Appellant because of its two previous acceptances of her applications for new policies after lapses of previous policies. It characterizes Motorists’ failure to specifically inform Appellant that it had the right to refuse future applications as a concealed condition of coverage, as in Equitable Life Assurance Society v. Brewer, supra, and that such amounted to “a misrepresentation of material facts.” Maj. op., at p. 528. The Opinion then concludes as a matter of law that Appellant “reasonably relied” upon Motorists’ previous acceptances of such applications in acting to her detriment by not attempting to obtain insurance elsewhere. (Even if there was sufficient evidence to support a finding of “reasonable rebanee,” such would at best entitle Appellant to a jury trial, not a summary judgment. Steelvest, Inc. v. Scansteel Service Center, Inc., Ky., 807 S.W.2d 476 (1991).)
However, it is unnecessary to reach the issue of “reasonable rebanee” in this case, because this record wib not support the basic finding necessary for a contract by estoppel. In order to estabbsh an estoppel, there must have been a previous course of dealing between the parties sufficient to create a “reasonable rebanee” by Appellant which induced her to act to her detriment. In each prior instance where Motorists had issued Appellant a new pobey, she had submitted an appbeation for a new policy, she had paid her premium to Doetrow-Rich, and Doctrow-Rich had issued her a temporary binder. It strains imagination, much less logic, to assert that one who submits an appbeation for insurance coverage is entitled to assume that her appbeation will be accepted, or that failure to inform an appbeant that the company *533has a right to decline her application constitutes concealment of a material fact. Never before had Doctrow-Rich refused to accept her tendered premium or refused to issue a temporary binder pending acceptance of her application. Never before had Appellant sent a premium directly to Motorists and never before had Motorists been tendered a premium on a lapsed policy. Always after lapse, the premium had been tendered by Doctrow-Rich and had been accompanied by an application for a new policy. Thus, there was no previous course of dealing between Appellant and Motorists which would support a contract by estoppel in this ease. Travelers Fire Ins. Co. v. Bank of Louisville, Ky., 243 S.W.2d 996, 999 (1951); compare Young Industries, Inc. v. Hildebrand Company, Ky., 491 S.W.2d 841 (1973); Willey v. Terry & Wright of Kentucky, Inc., Ky., 421 S.W.2d 362 (1967). And Appellant knew this transaction was different from her previous course of dealings with Motorists and Doctrow-Rich. She admits that Jeff Doctrow told her that she could send in the check, but that he did not know what Motorists would do.
For these reasons, I would affirm the decision of the Court of Appeals.
JOHNSTONE, J., joins this dissent.