Richard Zeller, Jr. v. AAA Insurance Company , 40 N.E.3d 958 ( 2015 )

Aug 04 2015, 8:16 am
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Kevin W. Marshall Anthony F. Tavitas
Hobart, Indiana Adam Tavitas
Munster, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Richard Zeller, Jr., August 4, 2015
Appellant-Plaintiff, Court of Appeals Case No.
64A05-1502-CT-84
v. Appeal from the Porter Superior
Court
AAA Insurance Company, The Honorable Roger V. Bradford,
Appellee-Defendant Judge
Case No. 64D01-1209-CT-9848
Crone, Judge.
Case Summary
[1] Richard Zeller, Jr., purchased a homeowners insurance policy from AAA
Insurance Company (“AAA”) that provided for reinstatement of the policy if
the policyholder paid a premium installment after the cancellation date.
Pursuant to the policy, the reinstatement would be void and the policy would
remain cancelled if (1) the premium payment was not honored for any reason
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or (2) a claim under the policy arose from an event that occurred between the
cancellation date and the date that AAA received the payment. Zeller failed to
pay a premium installment by the cancellation date but mailed a payment that
AAA later accepted. Two days after AAA accepted payment, Zeller’s garage
was damaged by fire. He submitted a claim to AAA, which denied coverage on
the basis that the policy was “not in force” on the day of the fire. Appellant’s
App. at 82. Zeller filed a complaint against AAA alleging breach of contract
and bad faith and requesting compensatory and punitive damages. After a
bench trial, the trial court ruled against Zeller on the basis that there was no
evidence that AAA reinstated the policy.
[2] On appeal, Zeller argues that the trial court’s ruling is erroneous because the
policy was reinstated when AAA accepted his payment. We agree. Therefore,
we reverse and remand for further proceedings.
Facts and Procedural History
[3] The relevant facts are undisputed. In 2006, Zeller purchased a homeowners
insurance policy from AAA. The latest version of the policy reads in pertinent
part as follows:
2. CANCELLATION AND CONDITIONAL REINSTATEMENT
….
a. If you fail to pay any installment when due, we will cancel the
policy. Notice will be mailed at least 10 days prior to the effective date
of the cancellation.
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Conditional Reinstatement – if you make adequate payment after the
due date and we reinstate the policy, there will be no coverage during
the period of time between the date the policy cancelled and the date
and time we received the payment. However, reinstatement of the
policy is conditioned upon the following and any Notice of
Reinstatement is void if:
(1) any form of premium payment is not honored for any reason; or
(2) there is a claim under the policy arising from an event that occurred
between the policy cancellation date and the date and time we received
your payment to reinstate the policy.
If the reinstatement is void for either of these reasons, the policy
remains cancelled as of the date and time indicated on the Notice of
Cancellation, and we will not be liable for any claims or damages after
that date and time.
Id. at 64 (emphases omitted).
[4] AAA sent Zeller a Confirmation of Policy Expiration form dated November 17,
2011, that reads in relevant part as follows:
REASON FOR THIS NOTICE:
This is to confirm that your policy expired on Nov 10, 2011 because
we did not receive the renewal payment requested in the Renewal
Notice sent to you previously. You may still renew your policy
effective Nov 10, 2011 with no loss of coverage if we receive your
payment of $231.68 by the close of business on Nov 30, 2011. If we do
not receive your payment by that date, the expiration of your policy
will remain in effect and no further coverage will be provided.
IMPORTANT A check or credit/debit card which is not honored for any
reason will not constitute a payment and will not extend coverage beyond any
date when coverage would have otherwise terminated for lack of payment.
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Id. at 77. On November 25, Zeller mailed AAA a payment stub with his credit
card information. A payment to AAA for $231.68 was posted to Zeller’s credit
card account on December 7.
[5] Two days later, Zeller’s garage caught fire, resulting in over $80,000 in alleged
damages. Zeller submitted a claim to AAA, which denied coverage on the
basis that the policy was “not in force at the time of loss.” Id. at 82. Later that
month, AAA attempted to return Zeller’s premium in the form of a check with
the notation, “THIS CHECK IS ISSUED FOR THE FOLLOWING
REASON – POLICY CANCELLED[.]” Id. at 81. Zeller did not cash the
check.
[6] In September 2012, Zeller filed a complaint against AAA alleging breach of
contract and bad faith and requesting compensatory and punitive damages. In
January 2015, after a bench trial, 1 the trial court issued a judgment that reads in
relevant part as follows:
The insurance premium at issue in this cause was due from [Zeller] on
November 10, 2011. That payment was not made and [AAA] sent a
cancellation notice to [Zeller] stating that there would be no loss of
coverage if [AAA] received payment by November 30, 2011.
[Zeller] sent the payment stub attached to the cancellation notice to
[AAA] along with his credit card information on November 25, 2011,
which happened to be the Friday the day after Thanksgiving. The
1
Zeller included a portion of the trial transcript in his appellant’s appendix in contravention of Indiana
Appellate Rule 50(F), which states, “Because the Transcript is transmitted to the Court on Appeal pursuant
to Rule 12(B), parties should not reproduce any portion of the Transcript in the Appendix.”
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credit card payment was posted to [Zeller’s] credit card account on
December 7, 2011. The issue, then, is when was payment “received”.
The Court concludes that payment was received the day it was posted
to [Zeller’s] credit card account, i.e. December 7, 2011. That is seven
days after the November 30, 2011, deadline to keep the policy in effect.
Additionally, the insurance policy, in the terms of the policy in effect,
at page 26, says that if the insured makes adequate payment after the
due date and the insurance company reinstates the policy, then there
will be no loss of coverage. There has been no evidence presented that
the insurance company reinstated the policy.
Based on both of the above, the Court concludes that the insurance
policy in question was not in effect on December 8 [sic], 2011, the date
of loss at issue here, and orders judgment entered in favor of [AAA]
and against [Zeller] on [Zeller’s] Complaint.
[7] Id. at 127-28 (citations to exhibits omitted). Zeller filed a motion to correct
error, which the trial court denied. This appeal followed.
Discussion and Decision
[8] Zeller argues that the trial court erred in concluding that the insurance policy
was not in effect on the date of the fire. “Because the pertinent facts are
undisputed and this case only involves the interpretation of insurance policy
contract language, it represents a question of law and we review it de novo.”
Robinson v. Erie Ins. Exch., 9 N.E.3d 673, 675 (Ind. 2014).
[P]rovisions of insurance contracts are subject to the same rules of
construction as other contracts. We interpret an insurance policy with
the goal of ascertaining and enforcing the parties’ intent as revealed by
the insurance contract. In accomplishing that goal we must construe
the insurance policy as a whole, rather than considering individual
words, phrases, or paragraphs. If the contract language is clear and
unambiguous, it should be given its plain and ordinary meaning.
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Wright v. Am. States Ins. Co., 765 N.E.2d 690, 692-93 (Ind. Ct. App. 2002)
(citations omitted). “We must interpret the language of an insurance policy so
as not to render any words, phrases, or terms ineffective or meaningless.” Vann
v. United Family Mut. Ins. Co., 790 N.E.2d 497, 502 (Ind. Ct. App. 2003), trans.
denied.
[9] “Policy terms are interpreted from the perspective of an ordinary policyholder
of average intelligence.” Wright, 765 N.E.2d at 693. “The power to interpret
insurance policies does not extend to changing their terms.” Keckler v. Meridian
Sec. Ins. Co., 967 N.E.2d 18, 28 (Ind. Ct. App. 2012), trans. denied. “Insurance
policies are contracts between private parties; we cannot rewrite the policy nor
make a new or different policy, but must enforce the terms of the policy as
agreed upon by the parties.” Terre Haute First Nat’l Bank v. Pac. Empl. Ins. Co.,
634 N.E.2d 1336, 1339 (Ind. Ct. App. 1993). “Any doubts as to coverage shall
be construed against the insurer as the contract drafter.” Vann, 790 N.E.2d at
502.
[10] Zeller contends that the trial court erred in concluding that the policy was not in
effect on the date of the fire, noting that AAA accepted his premium payment
and that his claim arose from an event that occurred after AAA received the
payment. 2 He further contends that the policy was reinstated when AAA
accepted the payment. We agree with both contentions. The policy does not
2
The parties do not challenge the trial court’s conclusion that AAA received the payment when it was posted
to Zeller’s credit card account.
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make reinstatement contingent upon the sending or receiving of a Notice of
Reinstatement or any other externality; it merely specifies the two conditions
under which a reinstatement may be voided, neither of which applies here.
Zeller’s tender of the payment was an offer for AAA to reinstate the policy, and
AAA accepted the offer by accepting the payment. “[O]nce [an offer] is
accepted, a contract is formed.” Bain v. Bd. of Trs. of Starke Mem. Hosp., 550
N.E.2d 106, 110 (Ind. Ct. App. 1990).
[11] AAA points to the Confirmation of Policy Expiration form, which states, “If
we do not receive your payment by [November 30], the expiration of your
policy will remain in effect and no further coverage will be provided.”
Appellant’s App. at 77. But that form is not a part of or incorporated by
reference into the insurance contract between AAA and Zeller, and the contract
does not set a deadline for making (or accepting) payments for reinstatement. 3
AAA also points to the following policy provision:
Policy Expiration. If we offer to renew or continue this policy, and
you or your representative do not accept our offer, this policy will
automatically expire at the end of the current policy period. Failure to
pay the required renewal continuation premium when due shall mean
that you have not accepted our offer. Any form of premium payment
which is not honored for any reason will not constitute payment, and
3
At trial, AAA claims representative Julie Cruz acknowledged that the insurance policy, and “nothing else,”
controls “the relationship between the insured and the insurance company.” Tr. at 84. Cruz testified that
AAA’s “policy or procedure for accepting payments after [the] 20-day grace period ends” is to “accept [the
payment] but then rewrite the policy,” which was not done in this case. Id. at 80-81. This procedure is not
mentioned in the insurance policy, however.
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will not continue coverage beyond any date when such coverage
would otherwise terminate for lack of payment.
Id. at 65 (emphases omitted). As stated above, we must read the policy as a
whole and so as not to render any terms meaningless; consequently, we must
harmonize this provision with the conditional restatement provision, which
specifically allows for reinstatement of a cancelled policy upon receipt of
adequate payment.
[12] Finally, AAA urges us not to accept Zeller’s argument, “which is that [his] late
payment automatically entitled him to reinstated coverage. If that were the
case, then, … this would be an insurance-at-will state because the insured could
independently reinstate his coverage without regard for payment deadlines, late
payment requirements, or cancellation notices.” Appellee’s Br. at 8. We find
no cause for alarm here. AAA could have protected itself by drafting more
specific deadlines and requirements for reinstatement in its policy or by refusing
to accept Zeller’s payment, which it had every right to do. AAA did neither of
these things, however, so we must reverse the trial court’s judgment in its favor.
We remand for the trial court to consider Zeller’s bad faith claim and his
request for compensatory and punitive damages, which are issues that the court
did not address in its judgment.
[13] Reversed and remanded.
May, J., and Bradford, J., concur.
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