Opinion
No. 26171-9-III.
April 8, 2008.
Appeal from a judgment of the Superior Court for Grant County, No. 06-2-00047-8, John M. Antosz, J., entered April 17, 2007.
Affirmed by unpublished opinion per Kulik, J., concurred in by Sweeney, C.J., and Schultheis, J.
This is a negligence action filed by the survivor's spouse, Debra Flaugh, alleging that an insurance agency, Basin Insurance Associates, Inc., had a duty to inform Mr. Flaugh of the impending cancellation of his life insurance policy for failure to pay the premiums. Ms. Flaugh asserts that a duty arose because of a course of conduct by Basin Insurance and its agent. Earlier, Basin Insurance, through its agent, helped the Flaughs reinstate their farm insurance policy and Mr. Flaugh's life insurance policy. The trial court granted summary judgment in favor of Basin Insurance and the agent.
We conclude that Basin Insurance had no duty to inform Mr. Flaugh that his life insurance policy had lapsed. We affirm the trial court's grant of summary judgment.
FACTS
Debra and Douglas Flaugh owned and operated a farming business in Moses Lake. In 1997, Mr. and Ms. Flaugh contacted Gerald Trautman, an insurance agent working for Basin Insurance. Mr. and Ms. Flaugh purchased farm and auto insurance through Mr. Trautman and Basin Insurance.
Due to the nature of farm insurance, the Flaughs and Mr. Trautman were in contact often to make adjustments reflecting changes in crop size and location. Mr. Flaugh also performed some custom farm work for Mr. Trautman. Mr. Trautman described their relationship as one that included "a lot of contact" when compared to other customers. Clerk's Papers (CP) at 75.
In 1999, Mr. Trautman recommended a change in Mr. Flaugh's life insurance policy. As a result, Mr. Flaugh replaced his policy from State Farm Life Insurance Company with a policy from Safeco Life Insurance Company through Basin Insurance. This policy, unlike the farm insurance, required no modifications and had a fixed premium that was billed directly to Mr. Flaugh.
In May 2000, Basin Insurance communicated with the Flaughs about payment of past due premiums for their farm insurance. Basin Insurance received notice that the Flaughs' farm policy was about to lapse for nonpayment. Basin Insurance notified the Flaughs, they made the payment, and the policy was reinstated.
Mr. Flaugh made his first payment on the life insurance policy when he applied for the replacement policy. However, Mr. Flaugh missed the first billed premium payment due on August 9, 2000. Safeco sent a past due reminder to Mr. Flaugh advising him that his policy would lapse if payment was not received by October 10, 2000. Safeco did not receive payment. Safeco then sent a letter to Mr. Flaugh stating that the coverage had lapsed, but that Mr. Flaugh could apply for reinstatement.
Mr. Flaugh, with Mr. Trautman's help, sent a reinstatement request on November 10, and included a payment for the amount due. Mr. Flaugh indicated on the reinstatement request that he "was busy with farm harvest and overlooked payment due." CP at 149.
Safeco sent a notice to Mr. Flaugh on January 4, 2001, stating that his life insurance had been reinstated and advising him that his next payment was due February 9. But Safeco did not receive a payment by February 9. As a result, Safeco sent out another past due reminder advising Mr. Flaugh that if he did not pay by April 12, his coverage would cease.
When Mr. Flaugh did not pay the premium for his life insurance policy by April 12, Safeco sent a third notice advising Mr. Flaugh that his coverage had lapsed.
In March, a similar incident occurred regarding the Flaughs' farm insurance. Safeco informed Basin Insurance that the Flaughs' farm policies were cancelled for nonpayment of premiums. Basin Insurance contacted the Flaughs, and Mr. Flaugh delivered a check to Mr. Trautman. This payment was sent to Safeco and the policy was reinstated.
In November 2001, Mr. Flaugh was diagnosed with leukemia. Mr. Flaugh contacted Mr. Trautman to check on his life insurance. Mr. Trautman discovered that Mr. Flaugh's life insurance policy had lapsed in April 2001. Mr. Trautman called Safeco to have the policy reinstated, but Safeco was unwilling to do so because too much time had passed. Because Mr. Flaugh was undergoing a bone marrow transplant during this time, Mr. Trautman waited until January 2002 to inform Mr. Flaugh that his life insurance policy had lapsed.
Mr. Flaugh died on May 21, 2003.
Ms. Flaugh filed this action on January 17, 2006, alleging Mr. Trautman and Basin Insurance had breached their duty to remind the Flaughs to make their farm insurance premium payments and to inform Mr. Flaugh in April 2001 that his life insurance policy had lapsed.
Basin Insurance and Mr. Trautman filed a motion for summary judgment. The trial court granted summary judgment and dismissed Ms. Flaugh's claims. Ms. Flaugh appeals.
ANALYSIS
When reviewing an order of summary judgment, this court engages in the same inquiry as the trial court. Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982). All facts and inferences are considered in the light most favorable to the nonmoving party. Yakima Fruit Cold Storage Co. v. Cent. Heating Plumbing Co., 81 Wn.2d 528, 530, 503 P.2d 108 (1972). A summary judgment should be granted only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Wilson, 98 Wn.2d at 437.
Agent's Duty. "Generally, an insurance agent or broker assumes only those duties normally found in any agency relationship. Those duties include the obligation to exercise good faith and carry out instructions." AAS-DMP Mgmt., L.P. v. Acordia Nw., Inc., 115 Wn. App. 833, 839, 63 P.3d 860 (2003). However, an enhanced duty can arise when the insurance agent and the customer have a special relationship. A special relationship arises when (1) an agent holds himself out as a specialist and receives a special fee on top of the premiums normally paid by the customer, or (2) there is a longstanding relationship with some interaction regarding coverage, coupled with the insurance agent giving advice and the customer's detrimental reliance on that advice. Id. (quoting Suter v. Virgil R. Lee Son, Inc., 51 Wn. App. 524, 528, 754 P.2d 155 (1988)).
In AAS-DMP, the court found a special relationship between the insurance company and the insured. All Alaskan Seafoods (AAS) was one of the largest crabbing entities in the world. Because of the nature and size of AAS's business, the insurance company and AAS spoke almost every day for 16 years regarding AAS's insurance coverage. When a fire damaged AAS's crab processor, the insurance company advised AAS that there was no time limit for submitting lost profits claims. As a result, AAS did not file suit until after the statute of limitation had run. The court held that the insurance company had breached its duty to AAS. AAS-DMP, 115 Wn. App. at 843.
Here, Mr. Trautman assisted the Flaughs with their complicated farm insurance, but there is no evidence the Flaughs paid an additional fee to Mr. Trautman beyond their insurance premiums or that Mr. Trautman held himself out as a specialist. The facts do not support the existence of a special relationship based on Mr. Trautman's advice. Mr. Trautman did not advise Mr. Flaugh that he could fail to pay his life insurance premiums and yet maintain his policy. On two occasions, Safeco sent Mr. Flaugh billing, late notices, and cancellations notices about his life insurance. But there is no assertion that Mr. Trautman suggested that Mr. Flaugh should not pay the life insurance premium or that Mr. Flaugh relied on any such advice.
Ms. Flaugh next argues that a duty was created by Mr. Trautman's course of conduct. This duty arises under the principle of equitable estoppel. Under this theory, if an insurance company has allowed the insured to repeatedly make late payments, and the insured comes to rely on that, the insurance company has a duty to either continue accepting late payments or to give notice to the insured before they stop accepting late payments. Saunders v. Lloyd's of London, 113 Wn.2d 330, 336, 779 P.2d 249 (1989) (quoting Blomquist v. Grays Harbor Med. Serv. Corp., 48 Wn.2d 718, 720, 296 P.2d 319 (1956)).
To prove equitable estoppel, the insured must show (1) conduct inconsistent with the claim afterward asserted; (2) action by the insured on the faith of such conduct; and (3) injury to the insured resulting from allowing the insurer to contradict or repudiate such conduct. Id. at 340 (quoting McDaniels v. Carlson, 108 Wn.2d 299, 308, 738 P.2d 254 (1987)). Significantly, one instance of an accepted late payment does not establish a course of conduct. Isaacson v. DeMartin Agency, Inc., 77 Wn. App. 875, 880, 893 P.2d 1123 (1995).
Mr. Trautman and Basin Insurance point out that there was only one instance when Mr. Trautman helped Mr. Flaugh send a reinstatement request related to Mr. Flaugh's life insurance policy. They contend that this one incident fails to establish a routine or course of conduct. Ms. Flaugh asserts there were several incidents of late payment if the farm and life insurance are both considered. Ms. Flaugh acknowledges that Mr. Flaugh received notice of the overdue payment and the lapse of the life insurance policy directly from Safeco.
In May 2000, Basin Insurance notified the Flaughs that their farm insurance was about to lapse, the Flaughs made payment, and the policy was reinstated. In October 2000, Safeco informed Mr. Flaugh that his life insurance had lapsed. Mr. Trautman helped Mr. Flaugh send a reinstatement request and the life insurance policy was reinstated in January 2001. At the same time, Safeco informed Mr. Flaugh that a premium was due February 9. Mr. Flaugh did not make the payment. After the due date, Mr. Flaugh received a notice from Safeco informing him that his life insurance policy would lapse on April 12 if payment was not made. However, Mr. Flaugh did not pay the premium payment on his life insurance policy and it lapsed.
In March 2001, Safeco informed Basin Insurance that the Flaugh's farm insurance policies had been cancelled for nonpayment of premiums. Basin Insurance contacted the Flaughs; they delivered a check to Mr. Trautman, and the farm insurance was reinstated.
Mr. Trautman stated that he watched the farm insurance carefully because it required frequent changes. Whenever Mr. Trautman received a late payment notice for the farm insurance, he would notify the Flaughs. However, he did not keep a close watch on the life insurance policy because it had a fixed premium and no changes were needed.
Mr. Flaugh received overdue notices in connection with his life insurance on two occasions. These notices were sent directly to Mr. Flaugh. Mr. Flaugh sought the help of Mr. Trautman on the first occasion. And the lapse of the policy on the second occasion is the subject of this lawsuit. Hence, Mr. Trautman helped Mr. Flaugh one time with regard to the cancellation of the life insurance policy. This evidence is insufficient to create a duty based on Mr. Trautman's conduct.
When viewed in a light most favorable to Ms. Flaugh, the evidence fails to establish a course of conduct establishing a duty owed by Mr. Trautman or Basin Insurance to notify Mr. Flaugh of past due premiums or the lapse of his life insurance policy.
Statute of Limitation. Safeco notified Mr. Flaugh of the lapse of his life insurance policy in April 2001. In January 2002, Mr. Trautman also informed Mr. Flaugh that the life insurance had lapsed in April and that he had no life insurance. Mr. Flaugh died on May 21, 2003. Ms. Flaugh filed this action for negligence on January 17, 2006. The parties agree that the applicable statute of limitation is three years. Even if we assume that Mr. Flaugh was not notified of the cancellation of the insurance policy until January 2002, this action was filed outside the three-year statute of limitation period.
A statute of limitation period starts when a cause of action accrues. A cause of action accrues when the person can ask the courts for judicial relief. Malnar v. Carlson, 128 Wn.2d 521, 529, 910 P.2d 455 (1996). Generally, a cause of action accrues when the wrongful act occurs, but sometimes the harm is unnoticed and the statute does not run until the plaintiff discovered the damage. Gazija v. Nicholas Jerns Co., 86 Wn.2d 215, 219-20, 543 P.2d 338 (1975). The discovery rule applies only in cases where the plaintiff did not know, or could not know, that a cause of action had accrued. In re Estates of Hibbard, 118 Wn.2d 737, 826 P.2d 690 (1992).
Ms. Flaugh contends the cause of action accrued when Mr. Flaugh died because that is when she suffered a loss. Basin Insurance and Mr. Trautman contend the cause of action accrued in January 2002 when it is undisputed that Mr. Flaugh was aware that the life insurance policy had lapsed.
Ms. Flaugh relies on Gazija and several cases from other jurisdictions. In Gazija, the court held that the cause of action did not accrue until the boat sank and the insurer refused to pay. Gazija, 86 Wn.2d at 222-23. In Weninegar v. S.S. Steele Co., 477 So. 2d 949, 952 (Ala. 1985), the cause of action included claims that an insurance agent failed to procure flood protection. The court concluded that the cause of action accrued when the loss was suffered rather than when the insurance policy was issued. Id. at 956-57.
In Gazija and Weninegar, the claimants had to wait until a loss occurred to have a claim. And, more importantly, the insureds did not know that they lacked coverage until the loss occurred. Here, Ms. Flaugh knew that Mr. Flaugh had no coverage in January 2002.
Ms. Flaugh also relies on Bush v. Ford Life Insurance Co., 682 So. 2d 46 (Ala. 1996). In Bush, Ms. Bush purchased credit life insurance. When she died, the insurer refused to honor the claim asserting that Ms. Bush obtained the policy when she was not in good health. Mr. Bush learned of the denial of the claim after Ms. Bush's death. The court concluded that the cause of action did not accrue until the insurer notified Mr. Bush that it would not honor his claim. Id. at 47. Ms. Bush's death, followed by the notice to Mr. Bush, triggered liability under the policy. Id. at 47-48. In Bush, like Gazija and Weninegar, the insured did not know that coverage would be denied until the insurer told them.
Ms. Flaugh argues that her cause of action accrued when Mr. Flaugh died. But the harmful act occurred when the life insurance policy lapsed, and when Mr. Flaugh learned of that lapse. By January 2002, when Mr. Trautman informed Mr. Flaugh that the policy had lapsed, Mr. Flaugh had an actionable claim against the insurer. This claim was filed outside the statute of limitation period.
We affirm the trial court's grant of summary judgment.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
Schultheis, J. and Sweeney, C.J., concur.