|
Fire And Allied Lines |
Change Of Address |
|
Floating Home |
Reasonable Expectations |
Robert and Ann Morrow
purchased a fire insurance policy from Red Shield Insurance Company covering
their floating home anchored at a marina on Hayden Island in Portland, Oregon.
The policy had a term of one year and would lapse in 12 months if not renewed.
When the Morrows received their 2000-2001 renewal papers from Red Shield, they
wanted to keep the same coverage. However, they wanted to change the name of
the insureds from their name to MOCON Corporation. Accordingly, Ann Morrow
added a note to the form reading "Please change Insured to MOCON
Corporation." She provided a new address, and checked boxes labeled
"Renew with changes" and "Renew as quoted."
When the Morrows received
their 2001-2002 renewal papers, the document was addressed to Robert Morrow and
Ann Morrow, DBA MOCON Corporation, at the updated address. Ann Morrow checked
the box on the form "Renew as quoted" and returned the form with the
premium to Red Shield. Upon receipt, a Red Shield agent removed MOCON as a
named insured and issued a policy in the Morrows' names. The 2001-2002 policy
issued to the Morrows provided in relevant part: "We may elect not to
renew this policy. We may do so by delivering to you, or mailing to you at your
mailing address shown in the Declarations, written notice at least 30 days
before the expiration date of this policy. Proof of mailing will be sufficient
proof of notice."
In July 2003, the Morrows
received their 2002-2003 renewal notice. That notice listed the Morrows but not
MOCON as named insureds. Ann Morrow testified that she returned the renewal
with a change of address notification for MOCON Corporation on a separate
81/2" x 11" sheet of paper. She also answered a questionnaire that
had been sent with the renewal notice. One of the questions was whether the
Morrows maintained another residence. Ann answered in the affirmative, stating:
"We reside in rental property in Vancouver, WA." Before mailing the
renewal form with the address change notification, completed questionnaire and
premium payment, Ann Morrow checked the "Renew as quoted" box on the
form.
Red Shield did not process
the mailing address change in its system, so it sent the 2002-2003 policy to
MOCON's former address. The policy was returned to Red Shield, so the Morrows
never received it. The 2003-2004 quote was also sent to the old MOCON address
and returned. As a result, the Morrows never received a notice of cancellation
or nonrenewal at the correct address, and the policy expired on August 31,
2003. On November 3, 2003, fire destroyed the Morrows' floating home.
The Morrows sued Red Shield,
claiming that Red Shield breached the insurance policy by failing to record the
change of address and failing to make an effort to contact the Morrows. The
trial court found in favor of Red Shield; the Morrows appealed.
On appeal the Morrows argued
that, although the insurance contract did not specify such a requirement,
processing a change of address "is necessarily implied or encompassed within
the duty of good faith and fair dealing that exists in every contract."
The Court of Appeals of Oregon found that Red Shield complied literally with
the terms of the policy because it sent notice to the Morrows' address as shown
on the declarations page of the policy. The court noted that "the law will
imply a provision in a contract that is necessary to carry out the purpose for
which the contract was made," but the court did not consider a duty to
change an address to be a term that must be implied in order for the purpose of
the policy to be fulfilled.
Nevertheless, the court did
find that the contract encompassed a good faith duty to process an address
change request, assuming that the request "was properly made" and
"[did] not contradict the express terms of the policy." The court
agreed with the Morrows that "it is within the parties' reasonable
expectations that, if the insured provides a change of address, the insurer
will take action on that request either by making the necessary change to the
Declarations page or following up on the request."
The court concluded that
whether Red Shield did nothing with the Morrows' notice of address change was a
question of fact to be decided at the trial court level. Thus the court
reversed the decision of the lower court and remanded the case for further
proceedings.
Morrow vs. Red Shield
Insurance Company-Nos. 041112024; A130859-Court of Appeals of Oregon-May 16,
2007-159 Pacific Reporter 3d 384