INSURANCE-RELATED COURT CASES

Digested from case reports published online

COURT DECISIONS

The fire next time

After receiving reminder notices by mail from their insurer, United Heritage Property and Casualty Company, the insureds, Terrill and Gayla Zech, failed to pay a renewal premium for their rent-ed home by the due date. Fourteen days after payment was due, the insureds mailed a check to the insurer for the late renewal premium. Six days later, but before the insurer reviewed the late payment, a fire occurred at the home. Two days after the fire, the insurer return-ed the late payment, denied coverage for the loss, and denied reinstatement of the policy.

In November 2019, the Zechs’ attorney submitted a proof of loss letter to United Heritage demanding payment for the fire loss under the policy. In January 2020, United Heritage responded by filing a complaint seeking a declaratory judgment that “no policy of insurance was in effect which provides coverage for any loss or damage” to the rental after the policy’s renewal premium due date, July 2, 2019. Within their answer, the Zechs asserted the affirmative defenses of waiver and equitable estoppel. The Zechs then counterclaimed for breach of contract and bad faith against United Heritage. Four months into litigation, the parties filed cross-motions for summary judgment. The district court granted United Heritage’s motion. The Zechs appealed.

On appeal, the Zechs argued that the district court erred in determining that the policy expired at the end of its policy period, July 2, 2019, after the Zechs failed to accept United Heritage’s offer of renewal by making a timely payment. The Zechs essentially maintained that the policy automatically renewed and United Heritage had to affirmatively cancel the policy to terminate coverage. Because of this, they contended that the notice of cancellation provisions for fire insurance in the state code and the policy extended coverage through the date of the fire.

The Zechs correctly pointed out that the policy required United Heritage to provide a 10-day notice of cancellation for nonpayment of premium, after the nonpayment occurs. The state code re-quires the same but adds, by law, that the 10-day period begins to run five days after the postmark if the notice is sent via U.S. mail. In total, under the code, the notice period is 15 days before cancellation of coverage for nonpayment takes effect. The Zechs argued that the policy was in effect past July 2, 2019,the renewal due date, and was not canceled until July 10, 2019, when United Heritage mailed the notice of cancellation. Fifteen days from this mailing was July 25, 2019. The fire occurred on July 22, 2019. Thus, if the 15-day cancellation notice requirement under the state code did apply, the Zechs were correct that coverage would exist at the time of the fire. United Heritage maintained that the policy renewed only if United Heritage offered renewal and the Zechs accepted that offer by making a timely renewal premium payment. The Zechs did not pay the renewal premium by its due date. Thus, the Zechs did not accept United Heritage’s offer, and the policy expired at the end of its term before the fire occurred. Notice of “cancellation” for nonpayment under the state code was not required to terminate coverage because no policy was in effect to cancel. The appeals court agreed with United Heritage and affirmed the district court’s decision that the policy expired on July 2, 2019.

United Heritage subsequently brought a declaratory judgment action against the insureds. The district court granted summary judgment in favor of the insurer. Finding no reversible error in that judgment, the Idaho Supreme Court affirmed.

United Heritage Property and Casualty Company v. Zech—Idaho Supreme Court—No. 48457—August 31, 2022.