Court Opinion

ID: 4361739
Source: CourtListenerOpinion
Date Created: 2019-01-24 20:06:50.537601+00
Date Added: 2024-06-11T14:20:43.804971
License: Public Domain

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