Lynette Spurs v. Farmers Insurance Exchange

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

03-1267 CW 03-1493

LYNETTE SPURS A/K/A LYNETTE SPURS HAMPTON, ET AL.

VERSUS

FARMERS INSURANCE EXCHANGE

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ON APPLICATION FOR SUPERVISORY WRITS FROM THE
SEVENTH JUDICIAL DISTRICT COURT,
PARISH OF CONCORDIA, NO. 38602,
HONORABLE LEO BOOTHE, DISTRICT JUDGE

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JIMMIE C. PETERS
JUDGE

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Court composed of Jimmie C. Peters, Marc T. Amy, and Elizabeth A. Pickett, Judges.

WRIT DENIED.

J. W. Seibert, III
Attorney at Law
307 Texas Street
Post Office Box 2038
Vidalia, LA 71373
(318) 336-9676
ATTORNEY FOR PLAINTIFFS/APPELLEES:
Lynette Spurs a/k/a Lynette Spurs Hampton
Delta Bank f/k/a Louisiana Central Bank

John G. McLure
Attorney at Law
Post Office Box 1525
Alexandria, LA 71309
(318) 445-5317
ATTORNEY FOR DEFENDANT/APPELLANT:
Farmers Insurance Exchange

PETERS, J.

This matter originally came before us through an application for supervisory

writs by the defendant, Farmers Insurance Exchange (Farmers Insurance). Thereafter,

Farmers Insurance filed an appeal, and we consolidated the two proceedings. In both

proceedings, Farmers Insurance seeks the reversal of a trial court judgment denying

its motion for summary judgment and granting a motion for summary judgment filed

by the plaintiffs, Lynette Spurs and Delta Bank. For the following reasons, we deny

the writ application from the judgment denying Farmers Insurance’s motion for

summary judgment and concomitantly affirm the summary judgment granted in favor

of Ms. Spurs and Delta Bank.

DISCUSSION OF THE RECORD

Lynette Spurs is the owner of a 1999 Chrysler Concorde automobile. On June

15, 2001, a vehicle driven by Lasheka Jefferson left the highway and struck Ms.

Spurs’ automobile as it sat in the driveway of her Clayton, Louisiana home, causing

extensive damage. Ms. Spurs had previously obtained a policy of liability and

collision insurance from Farmers Insurance on her Chrysler Concorde. When she

acquired the policy, Ms. Spurs chose to pay the insurance policy premium on a

monthly basis pursuant to a Farmers Insurance “EasyPay” plan. Delta Bank was

named loss payee in the policy.

When presented with a claim for the damages sustained, Farmers Insurance

denied coverage on the basis that the policy had been cancelled prior to the accident.

The reason given for the cancellation was Ms. Spurs’ failure to timely pay the monthly

premium due May 7, 2001, covering the period from May 22, 2001 to June 21, 2001,

as well as her failure to additionally pay the monthly renewal premium of $80.82

covering the period from June 22, 2001 to July 21, 2001. Thereafter, Ms. Spurs and

Delta Bank brought this suit to recover for the damages sustained as well as penalties,

exemplary damages, and attorney fees.

During the course of the litigation, both sides filed motions for summary

judgment addressing the coverage issue. Ms. Spurs and Delta Bank sought a summary

judgment declaring that the policy issued by Farmers Insurance provided coverage for

the June 15, 2001 accident. Farmers Insurance sought the opposite result in its motion

for summary judgment. After a hearing, the trial court granted the plaintiffs’ motion

and rejected Farmers Insurance’s motion. Farmers Insurance’s application for

supervisory writs and appeal followed the rendition of that judgment.

OPINION

Louisiana Revised Statutes 22:636.1(D)(1) provides:

No notice of cancellation of a policy to which Subsection B or C
of this Section applies shall be effective unless mailed by certified mail
or delivered by the insurer to the named insured at least thirty days prior
to the effective date of cancellation; however, when cancellation is for
nonpayment of premium at least ten days notice of cancellation
accompanied by the reason therefor shall be given. In the event of
nonpayment of premiums for a binder, a ten day notice of cancellation
shall be required before the cancellation shall be effective. Notice of
cancellation for nonpayment of premiums shall not be required to be sent
by certified mail. Unless the reason accompanies the notice of
cancellation, the notice of cancellation shall state or be accompanied by
a statement that upon written request of the named insured, mailed or
delivered to the insurer within six months after the effective date of
cancellation, the insurer will specify the reason for such cancellation.
This Subsection shall not apply to nonrenewal.

The Farmers Insurance policy at issue provides in pertinent part in Section

A(2)(a)(1):

A. Cancellation. This policy may be cancelled during the policy
period as follows:
....
2. [The insurer] may cancel by mailing to the named insured
shown in the Declarations at the address shown in this policy:
a. At least 10 days notice:
(1) If cancellation is for nonpayment of premium . . . .

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The record establishes that Ms. Spurs failed to timely pay a premium payment

due May 7, 2001, and covering the period from May 22, 2001 to June 21, 2001.

Farmers Insurance responded to Ms. Spurs’ failure to timely pay her premium by

mailing her a document entitled “Notice of Cancellation” on May 22, 2001, which

stated in part:

We have not received full payment of your premium on the policies
listed below. Therefore, your insurance indicated by the policy
number(s) listed which has been issued by the undersigned company(ies)
will be cancelled effective at . . . 12:01 A.M. . . . ON 06-07-01.

The notice then described the Farmers Insurance policy at issue and listed the amount

due as follows:

Prior Month Activity
Billed Last Month $86.29

Prior Month Balance
Current Month Activity $86.29

Vehicle 158954855
1999 CHRYSLER Premium 6-22 to 7-06 $40.02
Renewal Premium 7-07 to 7-21 $40.80

Sub Total $80.82

Service Charge $9.00

Minimum Amount Due $176.11

The notice appears to require Ms. Spurs to pay not only the past-due premium but also

a renewal premium for future coverage in order to avoid cancellation of the policy on

June 7, 2001.

Ms. Spurs in fact paid $86.29 by check to Farmers Insurance on May 25, 2001,

which payment included an $81.79 premium charge and a $4.50 service charge. This

premium payment was to cover the period from May 22, 2001 to June 21, 2001.

Farmers Insurance cashed the check on May 30, 2001, and applied the proceeds to Ms.

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Spurs’ policy. The accident involving Ms. Spurs’ vehicle occurred on June 15, 2001.

Interestingly, not until June 21, 2001, did Farmers Insurance inform Ms. Spurs that

it had taken further action on the account, which action consisted of forwarding Ms.

Spurs a check in the amount of $31.54 as a refund of the unused premium. It is

unclear how Farmers Insurance arrived at this refund figure, but it is clear that

Farmers Insurance deemed the policy cancelled at some point after cashing the check.

Without discussing the issues of whether Farmers Insurance issued a proper

notice of cancellation, whether Ms. Spurs even received such notice, or whether

Farmers Insurance was entitled to require payment of a past-due premium as well as

a future renewal premium in order to keep the coverage in effect through the date of

the accident, the undisputed evidence reveals that, as a matter of law, Farmers

Insurance waived any right it may have had to cancel the policy effective prior to June

21, 2001. Specifically, in Maddox v. Keen, 33,072, p. 7 (La.App. 2 Cir. 4/7/00), 756

So.2d 1279, 1284-85 (citation omitted), the second circuit explained the concept of

waiver, as distinguished from estoppel,1 as follows:

Waiver is generally understood to be the intentional
relinquishment of a known right, power or privilege. Waiver occurs
when there is an existing right, a knowledge of its existence and an
actual intention to relinquish it or conduct so inconsistent with the intent
to enforce the right as to induce a reasonable belief that it has been
relinquished. A waiver may apply to any provision of an insurance
contract, even though this may have the effect of bringing within
coverage risks originally excluded or not covered.

In the instant case, Ms. Spurs forwarded a check for $86.29 to Farmers

Insurance on May 25, 2001, to cover the period from May 22, 2001 to June 21, 2001.

1
“In Louisiana, the doctrine of equitable estoppel applies to situations where an insurer’s
custom of accepting overdue premiums reasonably leads an insured to believe his policy will remain
in effect even though he has not paid the premiums when due.” Maddox, 756 So.2d at 1283.
Whether Farmers Insurance should be estopped from denying coverage in the instant case involves
genuine issues of material fact not proper for disposition by way of summary judgment.

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Despite the untimeliness of the payment, Farmers Insurance nevertheless cashed the

check on May 30, 2001, and applied it to Ms. Spurs’ policy. Importantly, the accident

occurred (1) after Ms. Spurs had made the payment and Farmers’ Insurance had

cashed the check, (2) during the period for which the payment was applicable, and (3)

before Farmers Insurance refunded a portion of the proceeds from the check to Ms.

Spurs. At no time prior to the accident did Farmers Insurance give any express

written statements of its intent not to waive the June 7, 2001 termination of the policy

through its receipt of Ms. Spurs’ check. Thus, assuming Farmers Insurance had the

right to cancel the policy effective June 7, 2001, its conduct in accepting and cashing

the check, applying it to the policy, failing to thereafter expressly waive the June 7,

2001 cancellation of the policy, and refunding only a portion of the proceeds and then

only after the accident had occurred demonstrated an actual intention to relinquish that

right or at least demonstrated conduct that was so inconsistent with its intent to

enforce the right as to induce a reasonable belief that the right had been relinquished.

We note that the court in Maddox found no waiver under the facts of that case.

However, Maddox is distinguishable from the instant case. In Maddox, James Keen

purchased a six-month automobile insurance policy from Allstate Insurance Company,

effective July 7, 1997 through January 7, 1998. Mr. Keen failed to pay his premium

for November 1997, and Allstate sent him a cancellation and renewal notice, dated

December 18, 1997, which informed Mr. Keen that the policy would be cancelled on

January 7, 1998, unless timely payment was made that included an amount for the

renewal of the policy. Mr. Keen failed to make a payment before January 7, 1998, and

on January 14, 1998, Mr. Keen’s vehicle was involved in an accident. On January 19,

1998, Mr. Keen gave Allstate a check for the full amount that Allstate had previously

requested in order to avoid cancellation of the policy. Allstate then posted the

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payment, reinstated the policy with a lapse in coverage from January 7 to January 31,

1998, and credited the policy with an amount in the form of an unearned premium for

the period in which the policy had lapsed. The trial court granted a motion for

summary judgment finding insurance coverage at the time of the accident, and Allstate

appealed.

On appeal, the second circuit in Maddox addressed, among other things,

whether the receipt of Mr. Keen’s check amounted to an implied waiver of Allstate’s

right to cancel the policy. The court cited La.R.S. 22:636.1(E)(2), which provides:

“Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds

for cancellation which existed before the effective date of such renewal.” The court

ultimately concluded that Allstate’s receipt of Mr. Keen’s check did not amount to an

implied waiver. The court noted that before Mr. Keen’s delivery of the check

following the accident, the policy had already terminated, unlike in the case presently

before us. Additionally, unlike in the case presently before us, after the accident and

prior to applying Mr. Keen’s check to renew the policy, Allstate had forwarded to Mr.

Keen express written statements of its intent not to waive the January 7 termination

of the policy. Thus, the court held that policy indeed terminated and that Allstate did

not waive the termination right.

The Maddox court additionally cited our case of American Surety Co. of New

York v. Fowler, 135 So.2d 663 (La.App. 3 Cir. 1961), in which we held that there was

no waiver of the defense of policy cancellation under the facts of that case. In Fowler,

State Farm had issued an automobile liability policy to Edgar Fowler. However, State

Farm sent Mr. Fowler a cancellation notice for nonpayment dated February 19, 1959,

terminating the policy effective as of 12:01 A.M. on March 4, 1959. At about 9:00

A.M. on March 4, 1959, Mr. Fowler’s vehicle was involved in an accident. Several

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hours after the accident, Mr. Fowler gave State Farm a check in an amount sufficient

to cover the balance due on the policy. At that time, a State Farm agent issued a

receipt upon which he wrote “renewal.” Additionally, the back of the receipt

contained a printed notice that the payment was effective to renew the policy only as

of the time and date of the payment. Also following the accident, State Farm

consistently informed Mr. Fowler of its position that the liability policy had been

cancelled prior to the accident. Thus, the Fowler case is clearly distinguishable from

the case presently before us.

DISPOSITION

For the foregoing reasons, we deny the writ and assess costs to Farmers

Insurance Exchange.

WRIT DENIED.

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