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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Blood v. Kenneth A. Murray Insurance, Inc. (12/22/2006) sp-6084

Blood v. Kenneth A. Murray Insurance, Inc. (12/22/2006) sp-6084, 151 P3d 428

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

JAMES D. BLOOD, )
) Supreme Court Nos. S- 11733/11763
Appellant,)
)
v. ) Superior Court No.
) 4FA-99-1306 CI
KENNETH A. MURRAY INSURANCE,)
INC., and PROGRESSIVE INSURANCE)
COMPANIES, )
)
Appellees.)
)
        )   O P I N I O N
KENNETH A. MURRAY INSURANCE,   )
INC.,                          )
                               )
               Cross-Appellant,)
                               )
     v.                        )
                               )
JAMES D. BLOOD,                )
                               )   No.  6084 - December 22, 2006
               Cross-Appellee. )
                               )


          Appeal  from the Superior Court of the  State
          of    Alaska,   Fourth   Judicial   District,
          Fairbanks, Charles R. Pengilly, Judge.

          Appearances:   Robert  John,  Law  Office  of
          Robert  John,  and  Ward  Merdes,  Merdes   &
          Merdes,  P.C.,  Fairbanks, for Appellant  and
          Cross-Appellee  Blood.   Michael  C.  Kramer,
          Cook Schuhmann & Groseclose, Inc., Fairbanks,
          for  Appellee and Cross-Appellant Kenneth  A.
          Murray  Insurance, Inc.  Aisha  Tinker  Bray,
          Guess  &  Rudd, P.C., Fairbanks, for Appellee
          Progressive   Insurance   Companies.    Susan
          Orlansky,   Feldman   Orlansky   &   Sanders,
          Anchorage,  Richard  A. Hodyl,  Jr.,  Meckler
          Bulger  &  Tilson  LLP, Chicago,  for  Amicus
          Curiae Property Casualty Insurers Association
          of America.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh,  and Fabe,  Justices.   [Carpeneti,
          Justice, not participating.]

          MATTHEWS, Justice.

I.   INTRODUCTION
          This  appeal follows a jury trial to determine  whether
James  Bloods automobile insurance coverage remained  in  effect,
despite  his  failure to pay premiums, because the  insurer  sent
notice of termination to the wrong address.  The jury returned  a
verdict  in  favor of the insurer after concluding (1)  that  the
insurer  had not met its obligation to notify Blood but (2)  that
the  failure did not cause Bloods lack of coverage.  The  parties
ask  us  to  review whether the insurers efforts to  notify  were
examined under the proper legal standard and whether it was error
to  include causation as an element of Bloods claim.  We conclude
that  the  jury  was instructed on the wrong legal standard,  but
that the insurer satisfied its notice obligations as a matter  of
law.   We  therefore affirm the judgment without considering  the
causation issue.
II.  FACTS AND PROCEEDINGS
          This  case  is here for the second time.  The following
statement of facts is taken largely from our prior opinion, Blood
v. Kenneth Murray Insurance, Inc. (Blood I).1
          James Blood purchased an automobile liability insurance
policy from Kenneth A. Murray Insurance, Inc. (KMI), on March 28,
1996.   Progressive  Insurance Company issued  the  policy.   The
policy  term  was  six  months.  Blood did not  pay  the  renewal
premium    on   his   policy,   and   Progressive   sent    three
termination-of-coverage  notices  to  him  at  the   address   in
Progressives  files.  Blood no longer lived at that address,  and
the  letters  were  returned undelivered.   Although  Progressive
mailed  the  notices,  they were returned to  KMI.2   The  policy
expired by its terms on September 28, 1996.  On November 4, 1996,
Blood  appeared in person at KMIs office and renewed  the  lapsed
policy for another six-month term.  Blood prepaid the premium for
this   new  term.   On  March  13,  1997,  and  April  20,  1997,
Progressive sent Blood notices that his coverage would expire  on
May  5,  1997, and that in order to renew his coverage  he  would
have  to  submit renewal premiums by that date.  On May 5,  1997,
Progressive sent Blood a notice that his coverage was  terminated
effective May 16, 1997.  These notices were sent to Blood at  the
address  in  Progressives files, which was  Bloods  old  address.
These notices were returned to KMI marked undeliverable.
          On  August  2, 1997, Blood was injured in an automobile
accident  while  riding in a car driven by an uninsured  driver.3
He  filed  a  claim against Progressive and demanded  arbitration
          under the uninsured motorist coverage of his then-lapsed
insurance  policy.  Progressive denied the claim  on  the  ground
that  Bloods coverage under the policy ended before the  accident
because he did not pay the renewal premium.4  Progressive  denied
the  arbitration  request  on the theory  that  arbitration  only
applied to liability and damages issues, not coverage disputes.5
          Blood  then  filed  suit against  Progressive  and  KMI
seeking a declaration of coverage and an award of damages.  Blood
argued that he was covered by the insurance policy at the time of
the  accident  because  KMI  was  negligent  in  failing  to  use
reasonable  efforts  to  obtain his last known  address,and  that
therefore  Progressives attempts to cancel his  policy  for  non-
payment  under  AS  21.36.220[6]  [or  AS  21.36.240,7]  and   AS
21.36.260[8]  were ineffective.9  Although the  complaint  sought
damages,  Bloods  counsel ultimately took the  position  that  he
wanted only a declaration of coverage so that he could proceed to
arbitration  on  his damages claims.10  Blood moved  for  summary
judgment on the coverage issue, arguing (1) that KMI had  a  duty
to  exercise reasonable care and diligence when notifying him, as
the  insured,  of  termination of coverage11  and  (2)  that  KMI
breached its duty as a matter of law because it had three  pieces
of  returned  mail in its files when it mailed Bloods termination
notice  to  the same address.  Without ruling on the validity  of
Bloods  duty  theory,  the  superior  court  denied  his  summary
judgment motion on the ground that factual issues remained as  to
whether such a duty was breached.
          Next, Progressive and KMI argued that Blood waived  his
right  to  arbitration on his damages claims because he  filed  a
lawsuit  seeking damages and indicated an intention  to  litigate
damages  up until the day of trial.12  The superior court  agreed
and  held that Blood had to prove his damages in court.13  Bloods
counsel  responded that he was not prepared to present a  damages
case,   and  so the court dismissed the case, noting  that  Blood
could not prevail if he could not prove damages.14
          Blood  appealed, and in Blood I we concluded that Blood
did  not  waive  his  right to arbitrate,  but  we  affirmed  the
superior courts denial of Bloods summary judgment motion  on  the
coverage  issue  because  material issues  of  fact  remained  in
dispute.15    We   therefore  remanded  the  case   for   further
proceedings, including trial on the coverage issue.16
          In  the  resulting coverage trial, the  superior  court
ruled  on  the duty question as follows.  First, the court  found
that  KMI  satisfied its statutory duty, meaning that notices  of
nonrenewal  and  cancellation were mailed to Blood  to  his  last
known  address  as required by AS 21.36.260.  Second,  the  court
concluded that KMI also owed a separate, non-statutory,  duty  to
exercise  reasonable  care, skill, and diligence  to  inform  the
insured  of termination of coverage.  Whether KMI satisfied  this
second  duty  was a question for the jury, which  was  instructed
that  [u]nder  Alaska law, an insurance agent  may  terminate  an
insurance policy only by mailing notice to the last known address
of  the  insured.   It is also required by Alaska  law  that  the
insurance agent exercise reasonable care, skill and diligence  to
inform  the  insured  of termination of coverage.   In  order  to
          prevail in this lawsuit, Mr. Blood must show not only that [KMI]
breached a duty owed to him, but also that the breach was a legal
cause of harm to him.
          The  jury returned a special verdict, finding that  KMI
failed  to  exercise  reasonable care, skill,  and  diligence  to
inform  [Blood] of termination of coverage, but that the  failure
was  not  a  legal  cause of harm to Blood.  The  superior  court
entered judgment in favor of KMI and Progressive.
          Blood appeals and argues that causation should not have
factored  into whether KMIs breach of its non-statutory  duty  to
provide  notice of terminated coverage resulted in his  continued
coverage under the policy.  Instead, he claims that KMIs  breach,
alone,  establishes continued coverage.  Blood also  argues  that
KMI  did  not  meet its separate obligations under AS  21.36.260.
KMIs  cross-appeal contends that an insurer does not owe  a  non-
statutory  duty  of  due  diligence  to  inform  an  insured   of
terminated coverage, and so the jury was improperly instructed on
that point.
III. DISCUSSION
          We conclude that the superior court erred by imposing a
non-statutory  duty  of  care and due  diligence  to  inform  the
insured of terminated coverage and therefore do not reach  Bloods
argument  that  the  court  erred by including  causation  as  an
element in his claim for breach of such a duty.  Because we  also
conclude  that  the  superior court properly found  KMI  to  have
satisfied  its  statutory  notice  obligations,  we  affirm   the
judgment in favor of KMI and Progressive.17
     A.   KMI Met Its Statutory Notice Obligations.
          Alaska  Statute 21.36.220 requires an insurer to notify
an  insured  before terminating coverage or failing  to  renew  a
policy.18  According to AS 21.36.260, notice under .220 or .240 is
ineffective  unless the insurer (1) mail[s] the notice  by  first
class  mail  to  the last known address of the insured;  and  (2)
obtain[s] a certificate of mailing from the U.S. Postal  Service.
The  superior court found KMI to have substantially complied with
section .260 as a matter of law.  We affirm this decision because
the  evidence  is  such  that  no other  decision  is  reasonably
possible.19
          Blood  does not dispute that Progressive mailed several
notices  to  his former address.  Progressive mailed each  notice
via  first  class  mail.   The first two notices  indicated  that
Bloods policy would lapse if payment was not received before  May
5,  1997.  The third, mailed May 5, stated that his coverage  was
terminated  effective  May 16.  Although Progressive  sent  these
notices  to  an  address at which Blood no longer resided,  Blood
admits  that it was the only address he ever provided to  KMI  or
Progressive.   On  these facts, the requirement  that  notice  of
cancellation or nonrenewal be mailed to Bloods last known address
has plainly been satisfied.
          Alaska Statute 21.36.260(2) also requires an insurer to
obtain  a  certificate of mailing, and KMI appears  not  to  have
complied  with  this subsection.  KMI offered  no  proof  at  the
coverage  trial  of  having obtained a  certificate  of  mailing.
Blood   contends  that  the  missing  certificate  renders   KMIs
          termination of his insurance ineffective.  But, again, Blood does
not  dispute  that Progressive mailed notice to him  at  his  old
address.  The returned letters were introduced as evidence in the
first  trial  and are in the record before us.  A certificate  of
mailing  from  the U.S. Postal Service serves only  as  proof  of
mailing.  When, as here, returned mail directly establishes  that
an  insurer  has  mailed notice, the purpose of  AS  21.36.260(2)
establishing  proof  of  mailing   is  accomplished.    In   this
circumstance   compliance  with  the   certificate   of   mailing
requirement may be excused.20  To hold otherwise would be to  put
form over substance.
          For  these  reasons,  we  affirm  the  superior  courts
conclusion  that  KMI  substantially  complied  with  the  notice
requirements under AS 21.36.260.
     B.   The  Superior Court Erred by Holding KMI to a  Separate
          Duty of Care.
          
          The  superior  courts conclusion that an  insurer  must
satisfy a duty to exercise reasonable care that is separate  from
AS  21.36.260 resulted from an inference the court drew from  our
first  opinion.  Noting Bloods legal theory, we said  that  Blood
relies on Jefferson v. Alaska 100 Insurance., Inc.[21] in arguing
that  an insurance agent has a duty to exercise reasonable  care,
skill,  and  diligence . . . to inform the insured of termination
of  coverage. 22  On remand, the superior court concluded that we
agreed  with Bloods theory.  But because in Blood I the  superior
court  had denied Bloods summary judgment motion due to  disputed
material facts, the validity of his legal theory was not an issue
before  us.   Instead of ruling on it, we said  that   [e]ven  if
Blood  is correct that KMI and Progressive owed him such a  duty,
there  remains the question whether the defendants exercised  due
diligence.23
          According to Blood, the superior courts mistaken belief
that  Blood  I imposes an extra duty of care is harmless  because
the  duty can be found elsewhere in our case law.  He renews  his
argument  from Blood I that Jefferson imposes a duty to  exercise
reasonable care, skill, and diligence . . . to inform the insured
of  termination  of  coverage.24  But this reading  of  Jefferson
conflates  the two duties discussed in that case.   We  noted  in
Jefferson  that an insurers duty to use reasonable  diligence  to
procure  insurance is coupled with an equally important  duty  to
inform  the  insured  of  cancellation.25   The  two  duties  are
distinct.   And  while  the  duty to procure  insurance  requires
reasonable diligence, Jefferson does not state or imply that  the
duty  to  inform the insured of cancellation requires  more  than
compliance with AS 21.36.260.26
          Blood relies on Rosenberg v. Smidt,27 as an alternative
source  for  the extra duty of care.  In that case, we considered
the phrase last known address as it is used in AS 34.20.070(c),28
which   requires  a  deed of trust trustee  to  mail  notices  of
default to the last known addresses of certain interested parties
before  a  nonjudicial  foreclosure  sale  of  real  estate.   In
Rosenberg  the owners of real estate scheduled for a  foreclosure
sale  did  not  receive notice mailed to their former  address.29
          They sued and argued that subsection .070(c) required an
affirmative effort on the part of the trustee to determine  their
correct address.30  We agreed, holding that under AS 34.20.070(c)
the  last  known address is that address most likely to give  the
affected party notice.  The trustee is obligated to exercise  due
diligence  to determine that address.  Failure to impose  such  a
requirement,  we  reasoned,  would  not  balance  adequately  the
competing interests involved.31
          Blood  argues that Rosenbergs definition of last  known
address  applies to that phrase as it is used in AS  21.36.260.32
Under  this  theory,  KMI was bound to both follow  the  specific
terms  of  section  .260,  and  satisfy  an  extra  duty  to  use
reasonable  care  and due diligence to determine  Bloods  correct
address.  But we reject the argument because real estate deed  of
trust  foreclosures  are not comparable  to  the  termination  or
nonrenewal of liability insurance policies.
          As  we  noted  in Rosenberg, the law generally  regards
real  estate  forfeitures to be abhorrent  and  will  seize  upon
slight  circumstances to relieve a party therefrom.33  No similar
doctrine  attends the cancellation or nonrenewal of  policies  of
insurance, especially for nonpayment of premiums.  Relatedly, the
equity of the owner of real property that is subject to a deed of
trust  is  often substantial.  By contrast, the insured  under  a
liability  insurance policy typically has received  what  he  has
paid  for, and stands to lose no equity interest.  Moreover,  the
owner  of  real estate, as in Rosenberg, may not actually  be  in
default  and  thus  may have no notice that  a  foreclosure  will
occur.   But  the insured is typically aware that  his  insurance
will  terminate  when premiums are not paid, even without  notice
from  the  insurer.   In addition, a long period  of  time  often
passes  between  the  execution  of  a  deed  of  trust,  or  the
establishment of subordinate interests to property subject  to  a
deed of trust, and a deed of trust foreclosure.  Thus it is to be
anticipated  that  the addresses of owners and other  parties  in
interest  will  have changed and addresses on  file  may  not  be
accurate.   This is much less likely to be the case with  respect
to  liability insurance where policies are typically issued on an
annual  or  semi-annual basis.  Further, compared to cancellation
or  nonrenewal  of  liability insurance policies,  a  nonjudicial
foreclosure of real estate under a deed of trust is a  relatively
rare  event.  Requiring insurers to track down the new  addresses
of  its  insured would impose a significant burden on  a  routine
transaction,  whereas  real  estate foreclosures  are  much  less
routine.   For these reason we decline to extend the  holding  of
Rosenberg to notices required under AS 21.36.260.
          Our  conclusion on this point renders Bloods  causation
arguments  moot.  Because we hold that KMI owed no separate  duty
of  care, we need not consider whether it was appropriate for the
superior court to instruct the jury that coverage could  only  be
found if a breach of that duty caused Bloods loss of coverage.
IV.  CONCLUSION
          The  coverage  trial  in this case proceeded  under  an
erroneous legal theory because the superior court held KMI  to  a
non-statutory  duty that does not exist.  Yet  because  the  jury
returned a verdict in favor of KMI and we conclude that  KMI  met
its notice obligations under AS 21.36.260, we AFFIRM the judgment
below.
          In the Supreme Court of the State of Alaska

James D. Blood,                )
                               )   Supreme Court No. S-11733
                                   Appellant,  )
                   v.          )             Order
                               )     Petition for Rehearing
Kenneth A. Murray Insurance, Inc.,             )
and Progressive Insurance Companies,           )
                               )
                                   Appellees.  )
                               )
Kenneth A. Murray Insurance, Inc.,             )
                               )   Supreme Court No. S-11763
                                   Cross-Appellant,)
                   v.          )
                               )
James D. Blood,                )
                               )
                                    Cross-Appellee.)     Date  of
Order: 12/22/2006
                               )
Trial Court Case # 4FA-99-01306CI

          Before:   Fabe, Chief Justice, Matthews, Eastaugh,  and
                    Bryner,  Justices.  [Carpeneti, Justice,  not
                    participating.]

     On  consideration  of the Petition for  Rehearing  filed  on
11/13/2006,

     It is Ordered:

     1.   The   Petition  for  Rehearing  is  Denied.    However,
          additional  text  has  been added  to  footnote  17  of
          Opinion No. 6067.

     2.   Opinion No. 6067, issued on 11/3/06, is Withdrawn.

     3.   Opinion  No. 6084 is issued on this date in its  place,
          reflecting the changes.

     Entered by the direction of the court.

                                   Clerk of the Appellate Courts


                                   
                                   Marilyn May

cc:  Supreme Court Justices
     Judge Pengilly
     Trial Court Appeals Clerk
     West Publishing for Opinions

Distribution:

     Ward M Merdes
     Merdes & Merdes  P C
     P O Box 71309
     Fairbanks AK 997071309

     Robert John
     Law Office of Robert John
     PO Box 73570
     Fairbanks AK 99707

     Aisha T Bray
     Guess & Rudd
     100 Cushman Street Suite 500
     Fairbanks AK 99701

     Michael C Kramer
     Borgeson & Burns, PC
     100 Cushman Street, Suite 311
     Fairbanks AK 99701

     Susan Orlansky
     Feldman Orlansky & Sanders
     500  L  Street Suite 400
     Anchorage AK 99501
_______________________________
     1    68 P.3d 1251 (Alaska 2003).

     2    Id. at 1253.

     3    Id.

     4    Id.

     5    Id.

     6     AS  21.36.220  prevents  an  insurer  from  cancelling
insurance  without  first  giving  notice  to  the  insured.   It
provides in relevant part:

               (a)  An  insurer  may not  exercise  its
          right  to cancel a personal insurance  policy
          unless, for a named insured who is
          
               (1) less than 70 years of age, a written
          notice of cancellation is mailed to the named
          insured as required by AS 21.36.260 at  least
          30   days   before  the  effective  date   of
          cancellation; however, if cancellation is for
          nonpayment  of premium, the notice  shall  be
          mailed to the named insured as required by AS
          21.36.260   at  least  20  days  before   the
          effective date of cancellation . . . .
          
     7     AS 21.36.240 requires an insurer to notify the insured
when  insurance  will  not be renewed.  It provides  in  relevant
part:  An insurer may not fail to renew a policy unless a written
notice  of nonrenewal is mailed to the named insured as  required
by  AS 21.36.260 at least 20 days for a personal insurance policy
. . . before the expiration date of the policy . . . .

     8     AS 21.36.260 reads as follows: If a notice is required
from  an  insurer under this chapter, the insurer shall (1)  mail
the  notice by first class mail to the last known address of  the
insured;  and (2) obtain a certificate of mailing from  the  U.S.
Postal Service.

     9    Blood I, 68 P.3d at 1253.

     10    Id.

     11    Id. at 1258.

     12    Id. at 1253.

     13    Id. at 1254.

     14    Id.

     15    Id. at 1257.

     16    Id. at 1258.

     17    In this appeal Blood also attacks some of the superior
courts evidentiary rulings in the coverage trial.  Our conclusion
that the superior court erred by imposing a non-statutory duty in
this  case renders the coverage trial superfluous because it  was
conducted exclusively to determine whether KMI breached the  non-
statutory  duty.   We  therefore reach no  conclusion  on  Bloods
evidentiary claims.

          Blood  also  argues that AS 28.20.440(d) requires  that
Progressive  and  KMI have obtained James Bloods current  address
upon  renewal  of his policy.  But since he did  not  raise  this
point  in the superior court on remand, as by requesting  a  jury
instruction or moving for a directed verdict, it has been waived.
Willoya v. State, Dept of Corrections, 53 P.3d 1115, 1120 (Alaska
2002).   Citing  Sea Lion Corp. v. Air Logistics of  Alaska,  787
P.2d  109,  115 (Alaska 1990), Blood also argues that  the  point
should  be reviewed because it is closely related to .  .  .  the
address  and  notice issues actually litigated  and  presents  an
issue of law not dependent on any new or controverted facts.  But
the  issue  is  not  merely  one of  law;  instead,  it  requires
resolution by a jury.  As we observed in Blood I, assuming a jury
could  find that KMI was negligent for failing to ask for  Bloods
new  address,  we cannot hold that a jury could only  reach  this
result.   68  P.3d at 1258.  Thus Bloods Sea Lion Corp.  argument
lacks merit.

     18     AS  21.36.220(a).  There is some dispute between  the
parties  as to whether KMI terminated Bloods insurance policy  or
simply failed to renew the policy.  Yet the distinction makes  no
difference here because AS 21.36.260 applies whenever  notice  is
required from an insurer under [AS 21.36] and therefore sets  the
same  requirements regardless of whether notice is due  under  AS
21.36.220  for  terminated insurance or  AS  21.36.240  for  non-
renewed insurance.

     19    See Bennett v. Hedglin, 995 P.2d 668, 672 (Alaska 2000)
(noting that courts may decide facts as a matter of law when  the
evidence  is  such that there can be no reasonable difference  of
opinion.   (quoting Ruhlig v. American Cmty. Mut. Ins.  Co.,  696
N.E.2d 877, 880 (Ind. App. 1998)).

     20     See Travelers Indem. Co. v. Guess, 255 S.E.2d 55,  56
(Ga. 1979) (concluding that written notice of cancelled insurance
mailed to and actually received by the insured is effective  even
if the insurance company fails to obtain a post office receipt as
the  governing statute requires because where it is admitted such
notice  was  received,  the  purpose  of  the  statute  has  been
accomplished).

     21    717 P.2d 360, 364 (Alaska 1986).

     22    Blood I, 68 P.3d at 1258 (alteration in original).

     23    Id. (emphasis added).

     24     Blood I, 68 P.3d at 1258 (quoting Jefferson, 717 P.2d
at 364).

     25    Jefferson, 717 P.2d at 364 (emphasis added).

     26    Id.

     27    727 P.2d 778 (Alaska 1986).

     28    Id. at 780.

     29    Id. at 779.

     30    Id. at 780.

     31    Id. at 783.

     32     See  AS 21.36.260 (The insurer shall . . .  mail  the
notice . . . to the last known address of the insured.).

     33    727 P.2d at 783.

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