No. 89-455
IN THE SUPREME COURT OF THE STATE OF MONTANA
MARK YOVISH,
Plaintiff and Respondent,
UNITED SERVICES AUTOMOBILE ASSOCIATION, Y..:,!.
- -
- . #:
Defendant and Appellant. CLERK OF Su:-RU,.I: C S ~ J R T
STATE OF Pl;SI!TAP.~a
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Thomas M. McKittrick, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Dennis Tighe, Cure, Borer & Davis, Great Falls,
Montana
For Respondent:
J. David Slovak, Urgin, Alexander, Zadick & Slovak,
Great Falls, Montana
Submitted: December 21, 1989
Decided: June 26, 1990
Filed: *
,
8 Clerk *.
L.
Justice William E. Hunt, Sr., delivered the Opinion of the Court.
Mark Yovish, plaintiff and respondent, filed suit against
United Services Automobile Association (USAA), alleging a wrongful
denial of coverage. The Eighth Judicial District Court, Cascade
County, sitting without a jury, found in favor of Yovish, awarding
him compensatory damages and attorney fees. USAA appeals. We
affirm in part and reverse in part.
We will discuss the following issues on appeal:
1. Whether USAA complied with the insurance policy provisions
governing renewal so that the policy expired of its own terms prior
to the automobile accident in question;
2. Whether the District Court abused its discretion by
awarding attorney fees to Yovish.
USAA, an insurance company with a principal place of business
in San Antonio, Texas, provides multi-line insurance coverage
exclusively to military personnel and their dependents. Mark
Yovish, a member of the United States Air Force, insured his 1983
Volkswagen Rabbit with USAA in January, 1983. Yovish paid monthly
premiums on the Volkswagen in response to premium notices sent by
USAA. The notices indicated the amount due on the policy.
Sometime around May, 1983, Yovish moved from California to
Great Falls. He retained his policy with USAA and continued to pay
his premiums in response to monthly premium notices sent by the
company. In early 1984, he moved from one Great Falls location to
another. Consequently, his February, 1984 premium notice was
returned to USAA by the post office. This notice indicated that
the policy would be renewed for six months beginning February 1,
1984. Although Yovish did not receive the notice or pay the
premium until approximately February 10, 1984, USAA backdated the
coverage to the beginning of the month, leaving the six-month
policy term running from February 1 to August 1, 1984. About this
same time, Yovish also received a renewal declarations page to
attach to his policy. The declarations page displayed a policy
period of February 1 through August 1, 1984.
As USAA did not have any local agents, Yovish occasionally
contacted the company by telephone to conduct business or obtain
general rate and coverage information. In mid-February, 1984, he
called the company for premium quotes. In April, 1984, after
securing rental insurance coverage with Farmers, he called USAA to
cancel his rental insurance policies.
On June 9 or 10, 1984, he again called the company. At trial,
the parties disputed the substance of this conversation. Yovish
maintained that he called USAA in June simply to obtain rate and
coverage information. USAA, on the other hand, contended that he
told the company not to renew the policy in August because he was
insuring the automobile with Farmers. Yovish did not receive any
written confirmation of the phone call from USAA nor did he receive
a notice of non-renewal or cancellation. In fact, the last written
notice Yovish received from USAA consisted of a May, 1984 premium
notice indicating that, due to the cancellation of his rental
policies, the balance on his auto policy was fully paid. 0 n
August 5, 1984, Yovish sideswiped a parked car on a residential
street in Great Falls. He admitted liability, and phoned USAA the
following day to report the accident. A few days later, USAA
denied coverage of the accident, maintaining that Yovishls policy
had expired on August 1, 1984, the last day of the six-month policy
period. USAA based its denial on the substance of the June
telephone conversation.
On the advice of counsel, Yovish forwarded a $408 check to
USAA on August 10, 1984 in an attempt to retain coverage from
August 1, 1984. The check was cashed by the company but the money
was returned to Yovish in late August.
Total damages incurred in the accident amounted to $3,634--
$1,843 for Yovishls vehicle and $1,791 for the other car. After
USAA refused to accept the claim, Yovish was forced to take out a
$3,000 loan at 10 percent interest to cover the damages.
On April 25, 1985, Yovish instituted suit against USAA,
asserting that USAA1s rejection of the claim and alleged failure
to comply with statutory notice provisions governing insurance
companies constituted oppressive and malicious conduct. On
December 23, 1986, the District Court denied USAA1s motion for
summary judgment. A bench trial commenced on December 31 of that
year. On February 24, 1989, over two years later, the court issued
findings of fact, conclusions of law and order, awarding Yovish
$3,384 in compensatory damages (total damages of $3,634 offset by
$250 deductible) and $322 in interest. The court denied Yovishls
prayer for punitive damages but granted his request for attorney
fees. On May 4, 1989, the court denied USAA1s motion to amend the
judgment with respect to the award of attorney fees. Following a
hearing, the court awarded attorney fees in the amount of $8,703.
USAA appealed to this Court.
USAA argues that it fully complied with both the policy
provisions and statutory law governing renewal and non-renewal of
auto insurance policies. Therefore, USAA maintains, it was not
required to provide coverage for the car accident of August 5,
1984, because the policy had expired of its own terms on August 1,
1984 due to Yovishls failure to pay the renewal premium.
Montana's insurance notice statutes provide that an insurer
may not cancel or refuse to renew an insurance policy without
furnishing adequate notice of such intent to the insured. Sections
33-23-212 and 33-23-214, MCA. The statutes were enacted in order
to prevent lapses in insurance coverage by supplying insureds with
sufficient time to obtain insurance elsewhere. See Cantrell v.
Benefit Assln of Ry. Employees, 136 Mont. 426, 431, 348 P.2d 345,
.
348 (1960) Preventing lapses in insurance coverage assures that
drivers do not travel the state's highways without the benefit of
insurance protection.
Many insurance policies possess similar notice provisions.
As long as the terms in the policy regarding notice do not restrict
the rights of Montana citizens given by the insurance notice
statutes, the terms do not defeat public policy and are therefore
valid. Because an insurance policy constitutes a contract between
the parties, this Court will interpret the terms of the policy
according to contract law. Universal Underwriters Ins. Co. v.
State Farm Mut. Ins. Co., 166 Mont. 128, 135, 531 P.2d 668, 673
(1975). However, if a contractual term restricts the rights of the
insured, we will construe the contract by looking to the statutes
governing insurance law.
In the present case, the relevant policy provisions do not
restrict the statutory rights of the insured. Therefore, we shall
decide this case by construing the terms of the policy.
The applicable policy terms provided as follows:
Non-renewal. If we decide not to renew or continue this
policy, we will mail notice to the named insured shown
in the Declarations at the address shown in this policy.
Notice will be mailed at least 20 days before the end of
the policy period. If the policy period is other than
1 year, we will have the right not to renew or continue
it only at each anniversary of its original effective
date.
Automatic Termination. If we offer to renew or continue
and you or your representative do not accept, this policy
will automatically terminate at the end of the current
policy period. Failure to pay the required renewal or
continuation premium when due shall mean that you have
not accepted our offer. (Emphasis added.)
The policy was unambiguous. The clause concerning automatic
termination required USAA to offer to renew the policy. Yovishls
obligation to pay the premium was contingent upon USAA1s offer to
renew. Once USAA offered to renew the policy, Yovish could accept
the offer by paying the renewal premium. The policy could
automatically expire only if USAA extended an offer of renewal to
Yovish and Yovish rejected that offer by failing to pay the premium
when due.
USAA acknowledges that it failed to send Yovish any written
offer of renewal. It neglected to forward Yovish either a premium
notice or a renewal declarations page, as had been its practice in
previous dealings with Yovish. Because USAA failed to offer to
renew the policy, it failed to comply with the terms of the
automatic termination clause. Thus, it cannot rely on that clause
for the proposition that the policy automatically expired on August
1, 1984, the final day of the policy period.
USAA also neglected to mail Yovish notice of its intent not
to renew as mandated by the non-renewal clause. Nevertheless, USAA
argues that it did not need to mail Yovish written notice of non-
renewal because Yovish, not USAA, had decided not to renew the
policy.
USAA bases this argument on the substance of the disputed
June, 1984 phone call. The District Court, however, found that
Yovish called USAA in June, 1984, simply to obtain rate and
coverage information and that he did not inform the company during
the conversation that he did not intend to renew or otherwise
cancel the policy. These findings are not clearly erroneous.
Yovish testified that the June telephone conversation was
extremely brief and that it concerned only ballpark estimates about
rates and coverages. He maintained throughout his testimony that
he did not request cancellation of his coverage with USAA nor did
he inform USAA that he did not wish to renew his coverage after the
next expiration date. His testimony was supported by the
deposition testimony of his roommate, who was present during the
telephone conversation in question.
Yovish's testimony was also supported by his conduct. The
record indicates that he had always taken great care to insure his
property. He cancelled his USAA rental insurance policies in
April, 1984, only after securing other insurance. Yet he did not
obtain other insurance after the June, 1984 phone call, as would
have been his normal course of conduct had he not intended to renew
his coverage with USAA. Furthermore, he contacted USAA immediately
after the accident, indicating that he believed that he was still
covered by that insurer.
Carole Thomas, the USAA employee who took the June phone call,
disputed Yovish's testimony. Thomas contended that Yovish could
not have requested or received rate information because the
computers were down at the time he called. She further testified
that he informed her that he would not be renewing his automobile
coverage, that he would be insuring with Farmers instead.
USAA contends that Thomas's testimony was inherently more
credible than Yovish's because Thomas's statement was supported by
a written memorandum of the telephone conversation. This is not
so. Although a written memorandum may lend credence to a witness's
testimony, it is not necessarily more reliable than another
witness's verbal recollection of an event.
The written memo introduced by USAA was not entirely free of
errors. The memorandum possessed at least two inaccuracies, the
wrong date and Yovish's incorrect insurance status. The District
Court could reasonably have questioned both the trustworthiness of
the memo as well as Thomas's reliability when she testified that
she incorrectly assumed that Yovish was a dependent of a subscriber
rather than a subscriber in his own right due to the immaturity of
his voice. The court could also have viewed Thomas's ability to
recall the conversation accurately with a degree of skepticism
considering the fact that she received between 40 and 50 telephone
calls per shift.
The present case is particularly appropriate for limited
review. The parties hotly contested the substance of the June
telephone conversation, thus calling the credibility of the
witnesses into question. The District Court had the opportunity
to listen to the testimony of both witnesses before making its
decision, a decision that is not clearly erroneous. We will not
second guess its judgment.
Because the District Court found that Yovish had not
communicated to USAA a desire not to renew his policy, USAA was
compelled to comply with the policy terms governing renewal. The
policy required USAA to send Yovish written notice of non-renewal.
USAA admits that it neglected to send any such notice.
Where the insurer has failed to comply with the policy terms
regarding renewal and notice of non-renewal, the insurance policy
does not expire of its own terms and the insurer cannot deny
coverage to the insured for an accident that occurs after the
renewal date. Accord Sausen v. American Family Mut. Ins. Co., 360
N.W.2d 565 (Wis. Ct. App. 1984); Barbara Corp. v. Bob Maneely Ins.
Agency, 484 A.2d 1292 (N.J. Super. App. Div. 1984); National
Automobile and Casualty Ins. Co. v. California Casualty Ins. Co.,
188 Cal. Rptr. 670 (Cal. Ct. App. 1983); Prudential Property &
Casualty Ins. Co. v. Pritchett, 313 S.E.2d 706 (Ga. Ct. App. 1983);
Shore v. Coronet Ins. Co., 288 N.E.2d 887 (Ill. App. Ct. 1972);
Nationwide Mut. Ins. Co. v. Davis, 171 S.E.2d 601 (N.C. Ct. App.
1970). Although the cases cited above refer to failure to comply
with statutory notice provisions, the same reasoning applies to
failure to comply to the contractual provisions in this case, where
the policy provided that automatic termination was contingent upon
an offer of renewal extended by the insurance company and that the
insurer was required to supply the insured with written notice of
non-renewal.
USAA next argues that the District Court abused its discretion
by awarding attorney fees to Yovish. USAA does not dispute the
reasonableness of the amount of attorney fees, for it stipulated
that the $8,703 fee was reasonable. USAA does contest the
propriety of any attorney fee award at all in this case.
Generally, attorney fees may not be awarded to a prevailing
party in the absence of a specific statute or a contractual
provision granting fees. Martin v. Crown Life Ins. Co., 202 Mont.
461, 469, 658 P.2d 1099, 1104 (1983). This action presents neither
a statutory nor a contractual basis for an award of attorney fees.
Nor does it fall within one of the narrow exceptions to the general
rule regarding attorney fees. Therefore, we agree that the
District Court abused its discretion in awarding fees.
We have approved awards of attorney fees in the absence of a
specific statute or contractual provision granting the right to
attorney fees in cases where an insurer has breached its obligation
to defend an insured. Lindsay Drilling & Contracting v. United
States Fidelity €4 Guar. Co., 208 Mont. 91, 676 P.2d 203 (1984);
Truck Ins. Exch. v. Wolstad, 212 Mont. 418, 687 P.2d 1022 (1984);
Home Ins. Co. v. Pinski Bros., Inc., 160 Mont. 219, 500 P.2d 945
(1972). The present case, however, is not a case where an insurer
has wrongfully refused to defend an insured but where an insurer
has wrongfully refusedto provide coverage to an insured. Although
the distinction may be slight, we hesitate to expand the exception
to the general rule without legislative authority. See Martin, 202
Mont. at 469, 658 P.2d at 1104; Tynes v. Bankers Life Co., 224
Mont. 350, 369, 730 P.2d 1115, 1127 (1986).
We understand that the failure to award attorney fees in cases
such as the present one may result in circumstances where the
entire compensatory award is consumed by the costs of litigation.
We also recognize that the failure to grant attorney fees may force
insureds with modest claims to simply accept an insurer's erroneous
denial of coverage. Nonetheless, the legislature, not the courts,
must remedy the wrongs created by this situation.
Affirmed as to the award of compensatory damages. Reversed
as to the award of attorney fees. /
Justice
We Concur: /'