Appeal from Superior Court of Whitman County. Docket No: 94-2-00139-4. Date filed: 01/11/96. Judge signing: Hon. Richard W. Miller.
Authored by Dennis J. Sweeney. Concurring: John A. Schultheis, Stephen M. Brown.
The opinion of the court was delivered by: Sweeney
SWEENEY, C.J. This is a suit by an insured, Eta Chapter of Alpha Kappa Lambda, Inc., against its insurance company, Great American Insurance Company, and an insurance agency, Fidelity Associates, Inc. It follows cancellation of a building and contents property insurance policy for nonpayment of premiums and a fire loss. Alpha Kappa sued and advanced several reasons why Great American and Fidelity should be estopped from denying coverage. The trial court dismissed Alpha Kappa's complaint following Great American's and Fidelity's motions for summary judgment. Because we find genuine issues of material fact, we remand for trial.
Alpha Kappa Lambda fraternity bought a building and contents insurance policy from Great American through an authorized Great American agent, Fidelity Associates. Great American billed Alpha Kappa directly for the premiums. Alpha Kappa was to pay the premiums directly to Great American. The policy also required Great American to return unearned premiums to Alpha Kappa if the policy was canceled. On two occasions, in 1989 and 1992, Alpha Kappa paid insurance premiums to Fidelity. Both, however, were paid to Fidelity before the due dates.
In December 1993, Alpha Kappa failed to pay a renewal premium. On December 20, 1993, Great American sent a written notice canceling Alpha Kappa's policy, effective January 4, 1994. On January 3 or 4, James Collman, Alpha Kappa's corporate treasurer, called and asked Fidelity employee Shelley Rehn if she would request an extension from Great American. According to Mr. Collman, Ms. Rehn said that Great American would agree to an extension if the premium was paid on or before Jan uary 14. On January 14, Alpha Kappa paid the premium. Great American cashed the check on January 24, according to Alpha Kappa's monthly checking account statement. Mr. Collman heard nothing further from either Great American or Fidelity. Both Great American and Fidelity represent that notices of the policy cancellation were sent to Alpha Kappa on January 13 and January 18. Alpha Kappa denies receiving the notices. Great American sent a refund check in Alpha Kappa's name to Fidelity. Fidelity received the check on February 7. Fidelity returned the check to Great American asking that the money be applied to the "earned premium and the account." Great American sent a second check to Fidelity in Alpha Kappa's name. On March 7, Fidelity returned the second check to Great American and again asked that Great American deduct the "earned premium" and refund the remainder to the insured.
On April 10, fire damaged Alpha Kappa's building. Alpha Kappa reported the loss to Great American. Great American then sent a third refund check to Fidelity who finally forwarded it on to Alpha Kappa. On May 2, Great American denied Alpha Kappa's fire loss claim because of lack of coverage based on the January 4 cancellation. Alpha Kappa sued Great American and Fidelity. Great American and Fidelity moved for summary judgment. The court granted their motions. Alpha Kappa appeals.
The standard of review for a summary judgment is well settled and need not be repeated here.
Agency. Fidelity acted as the agent of Great American. It operated under an agency agreement that authorized it to "conduct business on behalf of [[Great American__ only pursuant to authority granted by this Agreement and in accordance with the underwriting rules and other written directives furnished to [[Fidelity__ by [[Great American__." Among other things, Fidelity was granted authority to solicit and deliver policies, certificates, and endorsements; cancel policies and obligations; and provide "all usual and customary services of an insurance agent on all contracts of insurance accepted by the Company from Agent." Fidelity was Great American's agent.
Equitable Estoppel. Alpha Kappa's primary argument is that Great American should be estopped from denying coverage because: (1) Great American had a history of accepting late payments; (2) Great American, through its agent, authorized Alpha Kappa to make a late premium payment; (3) Great American accepted the premium payment and kept the premium for three months until after the fire loss; (4) Great American's policy was that the insured's canceled check was its receipt; and (5) Great American did not send the premium refund directly to Alpha Kappa despite the "direct bill" policy.
Alpha Kappa's claims can be distilled into two questions: Did Great American have a history a course of dealing of accepting late payments, which would estop it from denying coverage based on this late payment? Did the failure to refund the January 14 insurance premium to Alpha Kappa, until after the fire loss, estop Great American from denying coverage?
Equitable estoppel requires a statement or act inconsistent with canceling coverage, reasonable reliance by the insured, and injury if the insurance company is allowed to repudiate the statement or act. Ellis v. William Penn Life Assurance Co. of Am., 124 Wash. 2d 1, 15, 873 P.2d 1185 (1994).
Acceptance of late payment. Alpha Kappa first argues that Great American established a practice of accepting late payments. This is based on two previous episodes in which Alpha Kappa tendered payments to Fidelity that were then forwarded to Great American, arguably after the due date set out in the premium notice. Alpha Kappa relies on two Washington cases, Evans v. State Farm Mut. Auto. Ins. Co., 16 Wash. App. 704, 707, 559 P.2d 574 (1977) and Saunders v. Lloyd's of London, 113 Wash. 2d 330, 339, 779 P.2d 249 (1989). Both cases are distinguishable. Here, it is undisputed that the premiums were, on each previous occasion, tendered to Great American's agent, Fidelity, prior to the due date. Next, even assuming that the payments were late, two instances over a course of dealing from 1989 to 1993 do ...