Minnesota Joint Underwriting Association v. Jacy, LLC

• Court: Court of Appeals of Minnesota
• Decided: June 13, 2016
• Docket: A15-1627
• Status: Unpublished

Opinion

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA IN COURT OF APPEALS A15-1627

Minnesota Joint Underwriting Association, Respondent,

vs.

Jacy, LLC, et al., Appellants.

Filed June 13, 2016 Affirmed Ross, Judge

Ramsey County District Court File No. 62-CV-14-5881

Suzanne L. Jones, Hinshaw & Culbertson LLP, Minneapolis, Minnesota (for respondent)

Britton D. Weimer, Jones Satre & Weimer, PLLC, Bloomington, Minnesota; and

Matthew W. Moehrle, Britton D. Weimer, Rajkowski Hansmeier, Ltd, St. Cloud. Minnesota (for appellants)

Considered and decided by Reyes, Presiding Judge; Ross, Judge; and Smith, Tracy,

Judge.

UNPUBLISHED OPINION

ROSS, Judge

A company that operates an adult residential care facility carried liability insurance

under a claims-made policy issued by the Minnesota Joint Underwriting Association, but the association notified the company in early April 2011 that the policy would expire in

July 2011 and that the company had until the end of April to apply for continued coverage.

A communication exchange ensued, resulting in the association’s decision that the

company failed to renew the policy followed by the company’s challenge to that decision.

In the meantime, family members of a client who had died at the company’s residential

facility notified the company that they intended to bring a wrongful-death action against it,

and the company in turn notified the association of the claim. The association denied

coverage for the claim, and, after the association sued for a declaratory judgment, the

district court held that the association was not required to cover the claim because the

company failed to make the claim during the policy period. We affirm because the

association gave the company sufficient notice of nonrenewal, triggering a 60-day period

during which the company could have, but did not, adequately apply for renewed coverage.

FACTS

Carmen Wilson created Jacy LLC in 2006 to operate South Rock, a Litchfield adult

residential care facility. The Minnesota Joint Underwriting Association (MJUA) is a

creature of the legislature established to provide insurance coverage for people and entities

who are required by law to carry insurance but who are unable to obtain it. See Minn. Stat.

§ 62I.02, subd. 1 (2014). The MJUA first issued a claims-made liability annual insurance

policy to Jacy in 2007, and Jacy renewed the policy several times. The MJUA issued the

last of these policies to Jacy in 2010.

2 The 2010 policy identifies the named insured as “Jacy, LLC” and the policy period

as July 1, 2010, to July 1, 2011. It states that the policy covers only those claims made

either during the policy period or during an extended reporting period.

Wilson formed Tomorrow LLC in February 2011 during Jacy’s July 2010 to 2011

policy period. She intended to combine Jacy and another limited liability company into the

single entity—Tomorrow—to operate the South Rock care facility. But Tomorrow did not

immediately obtain a license to operate the facility. Two months before Tomorrow

obtained its operational license on May 1, 2011, a resident client at South Rock (which was

still being operated by Jacy) died in the home. Wilson learned of the death immediately,

but she did not report it to the MJUA because the resident’s family had made no claim.

The MJUA sent Jacy a letter on April 7, 2011, notifying it that its insurance policy

would expire on July 1, 2011. The expiration letter explained that Jacy must complete and

return its policy-renewal application form, with specified attachments (including Jacy’s

license to operate the facility) by April 30, 2011, to continue coverage. Wilson sent an

email to an MJUA employee on April 18, attaching a renewal application referencing the

policy number held by Jacy but identifying the name of the insured as “Tomorrow, LLC

dba South Rock (Formerly Jacy, LLC).” Wilson’s email stated that she had merged Jacy

and another company into a new company, and she asked if she could merge into a single

policy the policies that separately insured Jacy and the other company. Wilson did not

attach a copy of any operational license for the South Rock facility.

Wilson wrote to the MJUA again on May 9, 2011. Her letter again referenced the

merger between Jacy and the other company she managed, asking the MJUA to cancel the

3 policy covering the other company and to add its information to the policy that covered

Jacy. Wilson’s letter stated that the two companies were merging into the single company,

named Tomorrow. And she explained that an operational license for South Rock had been

applied for in Tomorrow’s name but not yet received. Wilson attached a copy of the South

Rock license under Jacy, not under Tomorrow.

The MJUA sent Jacy a letter on July 11, 2011, informing Jacy that its policy was

not renewed, effective July 1, 2011. The letter offered Jacy the extended reporting period

endorsement, which would facilitate coverage for claims that Jacy might make to the

MJUA after the policy expired on July 11. Wilson checked the box indicating that Jacy

was declining the extended reporting period endorsement, and she returned the letter on

July 14. Jacy paid no premiums to the MJUA for coverage after July 1, 2011. A

communication exchange between the MJUA and Jacy’s insurance agent ensued in

February 2012, and during this exchange the MJUA detailed the Jacy-policy nonrenewal,

Jacy’s failure to complete the renewal application, and Jacy’s rejection of extended

reporting coverage. The MJUA then issued a claims-made policy to Tomorrow with a new

policy number.

Wilson received notice that the decedent’s estate was bringing a wrongful-death

action against Jacy and Tomorrow, and on June 6, 2012, she contacted the MJUA and

informed it of the claim. The MJUA replied, denying coverage because Jacy’s policy

terminated in July 2011 and Jacy declined extended reporting coverage.

The wrongful-death lawsuit commenced in March 2014 against Jacy and against

Tomorrow as Jacy’s successor in interest. The MJUA asked the district court for a

4 judgment declaring that it is not obliged to indemnify Jacy or Tomorrow in the action. The

parties stipulated to certain facts, and, based on that stipulation and other undisputed facts,

the district court granted the MJUA’s motion for summary judgment. It held that the MJUA

had no duty to indemnify Jacy for liability arising out of the resident’s death.

Jacy and Tomorrow appeal.

DECISION

Jacy and Tomorrow challenge the district court’s grant of summary judgment. We

review a district court’s grant of summary judgment de novo, determining whether the

court properly applied the law and whether material fact disputes exist. Riverview Muir

Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn. 2010). Our decision

turns in part on the 2010 insurance contract between Jacy and the MJUA. Contract

interpretation is a question of law reviewed de novo. Caldas v. Affordable Granite & Stone,

Inc., 820 N.W.2d 826, 832 (Minn. 2012).

Although the resident died during the policy period, coverage under a claims-made

policy is triggered when the claim is made, not when the event creating the potential

liability occurred. In re Silicone Implant Ins. Coverage Litig., 667 N.W.2d 405, 409 (Minn.

2003). So the MJUA can be obligated to cover the wrongful-death claim only if the claim

was made during the policy period or during an extended reporting period. Jacy

acknowledges that the wrongful-death claim was not made until June 2012 and that Jacy

purchased no extended reporting coverage. So unless Jacy’s policy renewed, its claim fell

outside the policy period and the MJUA is not obligated to cover Jacy for any liability it

5 incurred because of the alleged wrongful death. We turn to the policy and the operative

statute.

The parties interpret differently the renewal provision of the insurance policy and

the requirements of Minnesota Statutes section 60A.37 (2014). The statute provides for a

60-day nonrenewal notice period:

At least 60 days before the date of expiration provided in the policy, a notice of intention not to renew the policy beyond the agreed expiration date must be made to the policyholder by the insurer. If the notice is not given at least 60 days before the date of expiration provided in the policy, the policy shall continue in force until 60 days after a notice of intent not to renew is received by the policyholder.

Minn. Stat. § 60A.37, subd. 1. We need not consider which statute controls as between this

provision governing insurance contracts generally and section 62I.13, subdivision 5

(2014), which governs MJUA insurance contracts specifically and calls for a 30-day notice

of intent not to renew. This is because the Jacy-MJUA insurance policy itself includes the

longer, 60-day nonrenewal notice period.

Jacy argues that because MJUA failed to provide the 60-day nonrenewal notice

required by statute and the policy, the policy automatically renewed for an additional year

and was therefore in effect when Jacy made its claim for the wrongful-death lawsuit in

June 2012. The MJUA counters, arguing that it was not required to give a nonrenewal

notice. It urges that section 60A.37 specifically indicates that the 60-day notice is required

only when the insurer (rather than the insured) has an “intention not to renew the policy

beyond the agreed expiration date.” Minn. Stat. § 60A.37, subd. 1. The MJUA points to

the exception listed in section 60A.37, subdivision 2, which provides that the section “does

6 not apply if the policyholder has insured elsewhere, has accepted replacement coverage, or

has requested or agreed to nonrenewal.” The Jacy-MJUA policy includes a materially

identical list of exceptions. The MJUA asserts that Jacy essentially requested or agreed not

to renew its policy in responding to the renewal application by applying for coverage for

an entity other than Jacy (Tomorrow). Jacy parlays the argument with its own.

But we need not decide whether Jacy or the MJUA has the better position here over

whether or not Jacy requested or agreed to nonrenewal. This is because we are satisfied

that, either way, the MJUA eventually sufficiently notified Jacy that the policy was not

renewing, and after this notice Jacy failed to act to renew or extend within 60 days. The

statute establishes the length of a policy extension that follows an insurer’s tardy

nonrenewal notice: “If the notice is not given at least 60 days before the date of expiration

provided in the policy, the policy shall continue in force until 60 days after a notice of

intent not to renew is received by the policyholder.” Id. (emphasis added). For the following

reasons, we believe that the MJUA’s letter of July 11, 2011, indicating that coverage had

ceased, is sufficient notice that the Jacy policy was not being renewed.

We consider whether the July 11, 2011 letter constitutes adequate notice de novo,

as a question of law. See Benton v. Mut. of Omaha Ins. Co., 500 N.W.2d 158, 160 (Minn.

App. 1993) (analyzing the adequacy of written notice of reduction in coverage), review

denied (Minn. July 19, 1993). The parties’ policy establishes two technical requirements

for a valid nonrenewal notice: The 60-day notice of nonrenewal must be in writing, and the

notice must be delivered or mailed first class to the named insured’s last known mailing

address. The record satisfies us that the July 2011 letter met both these requirements.

7 We know of no authority defining the substantive adequacy of a 60-day nonrenewal

notice under section 60A.37, but for guidance we look to caselaw governing the analogous

notice of cancellation. Cancellation notice is sufficient if it “positively and unequivocally”

informs the insured that coverage is ceasing. Lievers v. Nat’l Ins. Underwriters, 257 Minn.

268, 270, 101 N.W.2d 817, 819 (1960). The notice’s sufficiency is tested by the meaning

it reasonably conveys. Id. at 271, 101 N.W.2d at 819. The MJUA’s July 11 letter identified

the Jacy policy number and declared that the “insurance policy was non-renewed by you

effective 7/1/2011.” The letter informed Jacy that because Jacy’s policy was a claims-made

policy, incidents occurring during the policy period must be reported while the policy was

in force, or during the policy’s automatically extended 60-day reporting period after the

end of the policy period, or during any extended reporting period if Jacy purchases

extended reporting coverage. The letter positively and unequivocally informed Jacy that

its policy was not renewed. Jacy necessarily was informed of two things: (1) coverage

under the policy has ended; (2) and no unreported claims will be covered unless Jacy

purchases an extended reporting period or the claim is made within 60 days after the end

of the policy period on July 1, 2011. The letter therefore is sufficient notice of nonrenewal.

The record shows that Jacy received the letter on or before July 14, 2011, which is

the date Wilson signed and indicated that Jacy did not wish to purchase extended reporting

coverage. This began the 60-day extension for making claims, required under section

60A.37. Jacy did not make its claim regarding the wrongful-death action until almost a

year later, well beyond the statutory 60-day extension. We therefore hold that the district

court did not erroneously conclude that the MJUA is not bound to cover the claim.

8 The parties have forwarded other arguments, but our holding makes their

consideration unnecessary.

Affirmed.