Joel Johnson, Appellant, v. Safeco Insurance Company of America et al., Respondents.

No. 68029-3-I COURT OF APPEALS OF WASHINGTON, DIVISION ONE

2013 Wash. App. LEXIS 2182


 September 16, 2013, Filed

NOTICE:

   As amended by order of the Court of Appeals December 20, 2013.    Order Granting Motion to Publish January 15, 2014.

SUBSEQUENT HISTORY: Reported at Johnson v. Safeco Ins. Co. of Am., 176 Wn. pp. 1022, 2013 Wash. App. LEXIS 2216 (2013) Amended by, Reconsideration denied by Johnson v. Safeco Ins. Co. of Am., 2013 Wash. App. LEXIS 2908 (Wash. Ct. App., Dec. 20, 2013) Ordered published by Johnson v. Safeco Ins. Co. of Am., 2014 Wash. App. LEXIS 58 (Wash. Ct. App., Jan. 15, 2014)

PRIOR HISTORY:  [*1]
   Appeal from Superior Court King County. Docket No(s): 10-2-03695-4 SEA. Judge
signing: Carol Schapira & Douglass North. Date entered: November 18, 2011 &
January 7, 2011. Johnson v. Fed. Home Loan Mortg. Corp., 2013 U.S. Dist. LEXIS 10485 (W.D. Wash., Jan. 25, 2013)

DISPOSITION:    Affirmed.

SUMMARY:

WASHINGTON OFFICIAL REPORTS SUMMARY

   Nature of Action: A homeowner whose home and personal property were destroyed
in a fire sought damages from two insurers for breach of contract, breach of the duty of good faith and fair dealing, violation of insurance regulatory provisions, violation of the Consumer Protection Act, and violation of the
Insurance Fair Conduct Act.

   Superior Court: After entering a summary judgment in favor of one of the insurers, the Superior Court for King County, No. 10-2-03695-4, Carol A. Schapira, J., on November 18, 2011, granted the other insurer's CR 50 motion for judgment as a matter of law and dismissed the plaintiff's complaint with prejudice, ruling that the plaintiff intentionally misrepresented material facts concerning his insurance claim.

   Court of Appeals: Holding that the homeowner was provided sufficient notice of cancellation for failure to pay a renewal premium for the first insurer to cancel its policy and that the homeowner's intentional misrepresentations of material facts in the course of the claim proceedings precluded his claims for bad faith and statutory violations against the second insurer, the court affirms the both summary judgment and the judgment as a matter of law.

HEADNOTES
WASHINGTON OFFICIAL REPORTS HEADNOTES
[1] Insurance -- Construction of Policy -- Question of Law or Fact -- Standard of Review. The interpretation of an insurance contract is a question of law that is reviewed de novo.

[2] Insurance -- Construction of Policy -- As a Contract -- In General. Insurance policies are construed in the same manner as contracts.

[3] Insurance -- Construction of Policy -- Policy as a Whole -- Meaning to All Provisions -- In General. In determining the legal effect of an insurance contract, a court must construe the contract as a whole so as to give force and effect to each clause.

[4] Insurance -- Construction of Policy -- Unambiguous Language -- Effect. When the language of an insurance contract is unambiguous, a court must enforce the language as written and may not modify the contract or create an ambiguity where none exists.

[5] Insurance -- Renewal of Policy -- Mailing Copy of Renewed Policy -- Payment of Premium -- Necessity. An insurer's mailing to an insured a copy of a renewal policy does not effect an automatic renewal for the next policy period if theenewal notice and the express terms of the policy require payment of a premium before the policy can renew.

[6] Contracts -- Formation -- Acceptance -- Identical Terms as Offer -- Necessity. An acceptance of an offer to contract must be identical to the offer made or no contract is formed.

[7] Insurance -- Renewal of Policy -- Contractual Terms -- Applicability -- In General. In the absence of a restrictive statutory provision, an insurer and an insured have the right to specify in their insurance contract the method by which the policy can be renewed.

[8] Insurance -- Cancellation -- Notice -- Mailing -- Sufficiency. Under RCW 48.18.293(2), proof of mailing of notice of cancellation of an insurance policy is proof of notice of the policy's cancellation.

[9] Insurance -- Cancellation -- Notice -- Lienholder -- Effect. When a policy of property insurance addresses the insured property owner and a lienholder separately and specifically provides additional protection to the lienholder by requiring special notice to the lienholder before the policy is cancelled, the insurer's failure to comply with the policy provisions for notifying the lienholder of possible cancellation does not necessarily mean that the insured property owner was not given sufficient notice to cancel the policy, in which case the policy may be cancelled in relation to the insured property owner but
not the lienholder.

[10] Appeal -- Review -- Issues First Raised in Reply Brief -- In General. An issue raised for the first time in a reply brief is too late to warrant the court's consideration.

[11] Trial -- Taking Case From Jury -- Sufficiency of Evidence -- Judgment as a Matter of Law -- Review -- Standard of Review. A trial court's ruling on a CR 50 motion for judgment as a matter of law is reviewed de novo.

[12] Trial -- Taking Case From Jury -- Sufficiency of Evidence -- Judgment as a Matter of Law -- Test. A defendant's CR 50 motion for judgment as a matter of law is properly granted if the court, after viewing the evidence most favorable
to the plaintiff, can say, as a matter of law, that the record lacks competent and substantial evidence or does not support a reasonable inference on which a verdict in favor of the plaintiff could be sustained.

[13] Insurance -- Good Faith -- Insurer's Bad Faith -- Insured's Right of Action -- Fraud by Insured -- Effect. An insured who intentionally misrepresents material facts in making a claim for coverage may not pursue a claim against the insurer for bad faith.

[14] Insurance -- Consumer Protection -- Action for Damages -- Insurer's Acts -- Fraud by Insured -- Effect. An insured who intentionally misrepresents material facts in making a claim for coverage may not pursue a claim against the insurer
for a violation of the Consumer Protection Act (ch. 19.86 RCW).Schindler, J., delivered the opinion for a unanimous court.

COUNSEL: Joel Hanson, for appellant.

John M. Silk, Sarah Eversole, David M. Jacobi, and Shawnmarie Stanton (of Wilson Smith Cochran Dickerson) and Joseph D. Hampton and Jeffrey S. Tindal (of Betts, Patterson & Mines PS), for respondents.

JUDGES: AUTHOR: Schindler, J. WE CONCUR: Lau, J., Dwyer, J.

OPINION BY: Schindler

OPINION
   ¶1 Schindler, J. -- Joel Johnson appeals summary judgment dismissal of his claims against Safeco Insurance Co. and the order granting the CR 50 motion to dismiss his bad faith claim and claims against Mount Vernon Fire Insurance Co. under the Consumer Protection Act (CPA), chapter 19.86 RCW. We affirm.


                                     FACTS

   ¶2 The material facts are not in dispute. Joel Johnson owned a house in Edmonds located at 5703 145th Street Southwest and had a "Quality-Plus Homeowners Policy" with Safeco Insurance Co. On July 22, 2008, Johnson refinanced the Edmonds house with Taylor Bean & Whitaker Mortgage Corp. (TBW).
TBW assumed responsibility for paying the insurance premium from the escrow account.

   ¶3 Johnson also owns rental property located at 9036-38 4th Avenue Southwest in Seattle. The rental property is a duplex with an upstairs unit of approximately 2,500 square feet and a small basement apartment of approximately 1,000 square feet. The mortgage payments for the rental property  [*2] were
$1,800 a month.

   ¶4 On September 28, 2008, Safeco sent TBW and Johnson a renewal notice for the upcoming 12-month policy period of November 17, 2008 to November 17, 2009. In October, TBW sent Safeco a check for the premium amount due to renew the policy. But TBW stopped payment on the check and did not reissue another check to pay for the premium.

   ¶5 On December 2, Safeco sent Johnson an expiration notice. The notice states that Safeco had not received the renewal premium from the mortgage company. The notice gave Johnson until January 5, 2009 to send Safeco the premium to "keep your policy in effect." Neither Johnson nor TBW paid the premium to renew the homeowners' insurance policy.

   ¶6 On January 11, 2009, Safeco sent a notice of cancellation to TBW stating that the mortgage company's interest in the policy would be cancelled on February 5. At some point after receipt of the notice of cancellation from Safeco, TBW obtained a "lender placed" homeowners' insurance policy for Johnson's house with Mount Vernon Fire Insurance Co. The policy was effective from November 17, 2008 to November 17, 2009.

   ¶7 On January 25, 2009, the chimney in Johnson's house caught fire. The fire destroyed the house and  [*3] personal property. Johnson moved into his rental property in Seattle.

   ¶8 When Johnson contacted Safeco, Safeco told him the policy expired because the premium was not paid. TBW informed Johnson that the Mount Vernon policy would cover the fire-related structure repairs, damaged personal property, and additional living expenses (ALE).

   ¶9 Johnson submitted a claim to Mount Vernon. Mount Vernon assigned Maureen Connor to process the claim. Mount Vernon also retained an independent local adjuster, Tony Brown. Brown inspected the property on February 6. On February 23, Brown submitted an estimate for the structural repairs of $133,041.30, plus an allowance for personal property. On February 25, Mount Vernon authorized payment for the full cost of repair. But after discovering the Safeco policy was in effect as to TBW, Mount Vernon cancelled payment. On April 27, Mount Vernon filed a claim with Safeco.

   ¶10 In early May, Johnson told Brown that he was living in his rental property and the rent was $1,800 a month. Johnson said that he moved into his unoccupied rental "to mitigate his exposure (ALE)."

   ¶11 On May 27, Connor informed Johnson that Mount Vernon needed documentation to support his ALE claim for $1,800  [*4] a month in rent. Johnson then sent a letter to Connor stating that "[t]he cost of the house I'm living in is $1,800 per month." In response, Connor told Johnson that "Mt. Vernon needed actual
substantive documentation to support his claim."

   ¶12 Connor's supervisor James Ziff concluded that there was no coverage to reimburse Johnson for lost rent. But when Ziff spoke to Johnson on May 29, Ziff agreed to pay five months of ALE at $1,250 per month. Ziff also agreed to a $5,000 advance for reimbursement of the personal property loss. In August,
Johnson contacted Brown to request additional ALE. On September 21, Ziff told Johnson that he had 30 days to provide documentation to support his ALE claim or Mount Vernon would close the claim.

   ¶13 Safeco concluded that TBW was entitled to coverage for the structural damage to Johnson's house. In June, Safeco entered into an agreement with Mount Vernon to pay 51 percent of the structural repair costs. On June 20, Safeco paid its share of its estimate of the actual cash value of the structure.

   ¶14 Mount Vernon asked an independent adjuster to review Safeco's estimate of the structural repair costs. In October, Mount Vernon paid its share of the structure repair  [*5] cost based on its own estimate. 1 Mount Vernon then closed the claim because Johnson did not submit an inventory of personal
property or any documentation to support his ALE claim.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -1   On February 9, 2011, Mount Vernon issued its final payment for the cost of the repairs in the amount of $33,949.40.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   ¶15 On November 25, an attorney representing Johnson sent a letter to Mount Vernon demanding payment of $18,000 for ALE. The attorney provided Mount Vernon with a lease agreement between Johnson and his previous renters Pete and Evon Little. According to the terms of the lease, the Littles rented the upstairs of the duplex from May 15, 2008 to November 15, 2008 for $1,800 a month. Mount
Vernon denied ALE coverage on the grounds that the policy did not cover lost rent.

   ¶16 On December 18, Johnson notified Mount Vernon that he planned to file a claim under the Insurance Fair Conduct Act, chapter 48.30 RCW, for unreasonable denial or delay for ALE payments. Mount Vernon agreed to pay Johnson an additional $1,250 a month for the previous six months.

   ¶17 On May 24, 2010, Johnson filed a lawsuit against Safeco, Mount Vernon, and TBW. Johnson alleged Safeco breached the terms of the insurance policy by failing to  [*6] provide proper notice to Johnson before cancellation, and refusing to pay him for the structural costs of repair, personal property
damage, and ALE. Johnson alleged TBW had a contractual duty "to properly and timely make his insurance payments to avoid any cancellation of his insurance policy" with Safeco. Johnson alleged Mount Vernon breached its contractual duty to pay for the cost of structural repairs, personal property damage, and living expenses. Johnson alleged Mount Vernon also failed "to conduct a reasonable investigation of the fire loss, and fail[ed] to provide for the timely repair and/or rebuilt of his dwelling to its original pre-loss condition with like, kind, and quality materials and professional workmanship."

   ¶18 Johnson also alleged that Safeco and Mount Vernon violated the insurance regulatory provisions of the Washington Administrative Code (WAC); violated the Consumer Protection Act (CPA), chapter 19.86 RCW, and the Insurance Fair Conduct Act, chapter 48.30 RCW; and breached the duty of good faith and fair dealing. After TBW filed for bankruptcy, Johnson voluntarily dismissed TBW without prejudice.

   ¶19 Safeco filed a motion for summary judgment arguing that because Johnson [*7] did not pay the premium, the homeowners' policy expired before the fire on January 25, 2009. The court granted the motion for summary judgment. The court ruled, in pertinent part:
        The relevant law here that has to do with renewal of a policy or a  cancellation. Either way, Safeco's properly met its obligations here.      The notices were sent. Mr. Johnson didn't renew the policy.
        I recognize that it may have been the responsibility of [TBW] to do  that, but nevertheless, it's not Safeco's fault that the policy wasn't  renewed and therefore, Safeco doesn't have any liability here.


   ¶20 The trial on the claims against Mount Vernon was scheduled to begin on October 3, 2011. On August 18, Johnson filed a motion for summary judgment on the breach of contract claim for ALE. Johnson argued that he was entitled to lost rental income of $1,800 a month.

   ¶21 On August 31, Mount Vernon took Johnson's deposition. Johnson testified that Dean Little signed the lease on May 15, 2008 and the Littles rented the upstairs portion of the duplex for $1,800 a month from May 2008 to December 2008. But Johnson later admitted that he had forged the lease and asserted the lease reflected the oral agreement he had with the Littles.  [*8] Mount Vernon filed an amended answer asserting misrepresentation and fraud as an affirmative defense.

   ¶22 Mount Vernon filed a motion for entry of a judgment as a matter of law to dismiss. In support, Mount Vernon filed the affidavit of Dean Little. Little states that he and his spouse rented the basement apartment of Johnson's duplex from May 2008 to March 2009 for $750 a month, and they did not sign a lease.


   ¶23 On the first day of the scheduled trial, the court granted the CR 50 motion for judgment as a matter of law. The court ruled that "following plaintiff's factual admissions, no legally sufficient basis exists for a jury to find for the plaintiff on his contractual, extra-contractual or CPA claim." The order sets forth in detail the undisputed facts establishing Johnson intentionally misrepresented the terms of the rental agreement that was submitted to obtain ALE. The undisputed findings state, in pertinent part:

       2. Mt. Vernon's insurance policy issued to plaintiff contains a  clause stating that it provides coverage to no "insureds" if the  insured has committed fraud, concealment or misrepresentation of any
     material fact related to the insurance. (Homeowners 3, condition Q) .
     . . .
        3.  [*9] In May 2009, plaintiff submitted a letter to Mt. Vernon requesting that he be paid $1,800 per month in additional living  expenses ("ALE").

        4. In November 2009, plaintiff submitted a document entitled  "Rental Agreement" to Mount Vernon as evidence in support of his claim  for $1,800 per month in ALE under Mount Vernon's policy.

        5. The Rental Agreement states that plaintiff rented a residence to Pete and Evon Little, for a period of six months, beginning May 15, 2008, at a rate of $1,800 per month; the Rental Agreement purports to
     contain the signatures of plaintiff and Pete Little.

        6. In January 2010, Mt Vernon paid plaintiff additional ALE after this Rental Agreement was submitted to it. Plaintiff subsequently filed suit against Mt. Vernon for further ALE and under various
     theories of extra-contractual liability.

        7. Plaintiff testified under oath at his deposition that (a) the Rental Agreement was a genuine written agreement between him and Pete and Evon Little, (b) it related to the upper, larger portion of a duplex, specifically, 9036 4th Avenue Southwest, in Seattle, (c) it was signed by Pete Little on May 15, 2008, and (d) that the terms and conditions recited therein were the actual  [*10] terms and conditions
     of the agreement he had with Pete and Evon Little.

        8. Whether plaintiff is entitled to ALE in addition to that which was paid prior to litigation has been at issue in this case since the beginning.

        9. The Rental Agreement is a blank legal form which was filled in by plaintiff. The legal form in question did not exist on its  purported May 15, 2008 date of execution as one of the pages of the     Rental Agreement was not available for sale to the public until 2009. The Rental Agreement cannot be a genuine agreement between plaintiff and Pete and Evon Little.

        10. After being confronted with this evidence, plaintiff conceded that he had fabricated the document. However, he asserted that  irrespective of the fabrication, he actually had an oral lease with
     Pete and Evon Little for the terms and conditions set forth in the Rental Agreement. Specifically, he contended that he had rented the  upper part of the duplex, 9036 4th Avenue Southwest, Seattle, to Pete
     arid Evon Little from May 15, 2008 to some time in December, 2008 for the amount of $1,800 per month.

        11. On September 30, 2011, plaintiff's counsel notified Mt.Vernon's counsel that plaintiff had discovered a box containing  [*11]   the true names of his renters, which was evidence that they rented
     from plaintiff. Plaintiff's counsel revealed to Mt. Vernon's counsel,    however, that the true names of the renters were Dean Little and Yvonne Mokihana Calizar. On October 2, 2011, Mt. Vernon's counsel was
     able to locate Mr. Little and Ms. Calizar.

        12. Dean Little is also known as Pete Little. Mr. Little testified  in an affidavit that he and his wife did rent property from plaintiff,  but (a) they rented the downstairs apartment at 9038 4th Avenue   Southwest, Seattle, and not the upstairs with the address 9036 4th Avenue Southwest, Seattle; (b) they paid plaintiff $750 per month, not  $1,800 per month; (c) they never signed a rental agreement; (d) they     lived in the basement apartment from May of 2008 to March of 2009.

        13. Plaintiff has not disputed any of the foregoing evidence, and in pleadings filed with the Court, plaintiff's counsel concedes the foregoing evidence.



   ¶24 The court concluded there was no genuine issue of fact for trial, and under the "controlling case law authority, Mutual of Enumclaw Ins. Co. v. Cox, 110 Wn.2d 643[, 757 P.2d 499] (1988) and Onyon v. Truck lns. Exch., 859 F.Supp. 1338 (W.D. Wash. 1994); [and]  [*12] Kim v. Allstate[ Ins. Co., 153 Wn. App.
339, 223 P.3d 1180 (2009)],"


        (1) an insured who makes a material misrepresentation of fact
     relating to his claim under a policy of insurance that contains a
     clause voiding specific coverage entirely for the insured's fraud or
     misrepresentation, is precluded from recovery on that coverage
     insurance policy;

        (2) an insured who makes a material misrepresentation of fact
     relating to his insurance claim is precluded from maintaining tort
     causes of action such as bad faith and violation of the Consumer
     Protection Act.



   ¶25 The court dismissed Johnson's complaint against Mount Vernon with
prejudice because he "intentionally misrepresented material facts concerning his
insurance claim with Mt. Vernon. [Johnson] is precluded from making any recovery
from Mount Vernon by established law." 2

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -2   The court
granted Mount Vernon's motion for sanctions under CR 11 and ordered Johnson to
pay $22,500 in attorney fees and costs.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -


                                    ANALYSIS


Summary Judgment Dismissal of Claims Against Safeco

   ¶26 Johnson contends the court erred in dismissing his claims against Safeco for breach of the insurance contract, bad faith, and violation of the CPA.

   ¶27 When review summary judgment de novo. Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982).  [*13] Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and  admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.


CR 56(c); White v. State, 131 Wn.2d 1, 9, 929 P.2d 396 (1997).

   [1-4] ¶28 The interpretation of an insurance contract is a question of law
that we also review de novo. Bushnell v. Medico Ins. Co., 159 Wn. App. 874, 881,
246 P.3d 856 (2011). We construe insurance policies in the same manner as
contracts. Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 665-66,
15 P.3d 115 (2000). In determining the legal effect of a contract, "a court must
construe the entire contract together so as to give force and effect to each
clause." Pub. Util. Dist. No. 1 of Klickitat County v. Int'l Ins. Co., 124 Wn.2d
789, 797, 881 P.2d 1020 (1994); Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d
165, 171, 110 P.3d 733 (2005) (principles of contract interpretation apply to
insurance policies). If the language in an insurance contract is unambiguous,
the court must enforce it as written and may not modify the contract or create
[*14] an ambiguity where none exists. State Farm Mut. Auto. Ins. Co. v. Ruiz,
134 Wn.2d 713, 721, 952 P.2d 157 (1998).

   [5] ¶29 Johnson contends the insurance policy for the 12-month period beginning November 17, 2008 became effective when Safeco sent him a copy of the renewal policy on September 28, 2008. But the renewal notice and express terms of the policy require payment of the premium in order to renew the policy. The September 28 renewal notice states:


        [I]t is now time to renew your Quality-Plus Homeowners policy. . .
     . Your new policy period begins November 17, 2008. The 12-month
     premium for this policy is $630.00 for the November 17, 2008 to
     November 17, 2009 policy term. . . . We have sent a bill for this
     amount to your mortgage servicing company.



   ¶30 The Safeco homeowners' insurance policy only applies to a loss that
occurs during the policy period, and the policy may be renewed "for successive
policy periods if the required premium is paid." The policy provides, in
pertinent part:




     SECTION I AND II -- PROPERTY AND LIABILITY CONDITIONS    1. Policy
     Period and Changes.

             a. The effective time of this policy is 12:01 A.M. at the
          residence premises. This policy applies only to loss under
          Section I, or bodily  [*15] injury or property damage under
          Section II, which occurs during the policy period. This
          policy may be renewed for successive policy periods if the
          required premium is paid and accepted by us on or before the
          expiration of the current policy period. The premium will be
          computed at our then current rate for coverage then offered.

             b. Changes:

                  (1) Before the end of any policy period, we may
               offer to change the coverage provided in this
               policy. Payment of the premium billed by us for
               the next policy period will be your acceptance of
               our offer.

                  (2) This policy contains all agreements between
               you and us. Its terms may not be changed or waived
               except by endorsement issued by us.


   ¶31 The policy also provided that Safeco would pay claims and provide coverage only if the premiums were paid when due:

     INSURING AGREEMENT: In reliance on the information you have given us, we will pay claims and provide coverage as described in this  policy if you pay the premiums when due and comply with all the   applicable provisions outlined in this policy.

The plain and unambiguous language of the policy requires payment of the premium in order to renew the policy.

   ¶32 Further, the cases Johnson cites do not support the argument  [*16] that
the Safeco policy automatically renewed when Safeco sent him a copy of the
policy. In Frye v. Prudential Insurance Co. of America, 157 Wash. 88, 95, 288 P.
262 (1930), the court addressed whether an insurance company was estopped from
claiming the policy had expired for late payment when the insurer has a pattern
of allowing the insured to make late payments. See also McGreevy v. Or. Mut.
Ins. Co., 74 Wn. App. 858, 867, 876 P.2d 463 (1994) (amendments to insurance
policy not effective where insured had no notice of the changes); Webster v.
State Farm Mut. Auto. Ins. Co., 54 Wn. App. 492, 496, 774 P.2d 50 (1989) (no
dispute that policy had been issued).

   [6, 7] ¶33 In the alternative, Johnson claims that mailing the renewal policy
to him was an offer followed by acceptance when TBW sent payment of the premium
to Safeco. Acceptance of an offer must be identical to the offer or no contract
is formed. Sea-Van Invs. Assocs. v. Hamilton, 125 Wn.2d 120, 126, 881 P.2d 1035
(1994). The plain language of the policy required payment of the premium.
Because there is no dispute TBW stopped payment and Johnson never paid the
premium, the homeowners' policy was not renewed or in effect at the time of the
[*17] fire. 3

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -3   "[I]n the
absence of a restrictive statutory provision, the insurer and insured have the
right to specify in their insurance contract the method by which it can be
terminated." Taxter v. Safeco Ins. Co. of Am., 44 Wn. App. 121, 127, 721 P.2d
972 (1986).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   ¶34 Johnson also contends Safeco did not comply with either the policy or the
statutory notice requirements. Safeco asserts that because Johnson did not pay
the premium to renew the policy, it did not have an obligation to send a
cancellation notice. But Safeco also asserts the December 2, 2008 notice of
expiration complied with the requirement to provide notice of cancellation. We
agree with Safeco.

   ¶35 In Safeco Insurance Co. v. Irish, 37 Wn. App. 554, 681 P.2d 1294 (1984),
we held that the cancellation provisions of an insurance policy did not apply to
the failure to pay a renewal premium.


        Unfortunately, the issue before us was brought about in great
     measure because of the form chosen by Safeco to notify Irish that he
     had an extended period of time in which to reinstate coverage under
     his lapsed policy. Although denominated a "cancellation" notice, it
     was, in fact, merely a reminder that (1) Irish had not accepted
     Safeco's offer to  [*18] renew, (2) his policy had lapsed, and (3) he
     was being given an opportunity to reinstate.

        The term "cancellation" refers to a unilateral act of the insurer
     terminating coverage during the policy term. . . . Neither RCW
     48.18.291, relied upon by Irish, nor his policy provisions governing
     cancellation apply to a situation where the insured fails to pay a
     premium as a condition to renewal. . . . Thus, the general rule is
     that failure of an insured to pay a renewal premium by the due date
     results in a lapse of coverage as of the last day of the policy
     period.


Irish, 37 Wn. App. at 557-58.

   ¶36 Here, as in Irish, Safeco did not cancel the policy during the policy
period. Safeco sent a notice offering to renew the policy upon payment of the
premium. 4 Johnson's policy coverage expired because he did not pay the renewal
premium. Safeco notified Johnson on September 28, 2008 that his policy would be
renewed only if he paid the premium by November 17, 2008. The unambiguous
language in the policy states that the policy would renew for a successive
period if payment was made on time: "This policy may be renewed for successive
policy periods if the required premium is paid and accepted by us on or before
[*19] the expiration of the current policy period."

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -4
Accordingly, the policy provision that requires Safeco to give 31 days notice if
Safeco elects not to renew the policy does not apply.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   ¶37 On December 2, 2008, Safeco notified Johnson again stating that the
premium was past due and the policy had expired, but gave him until January 5,
2009 to pay the premium and "keep your policy in effect." The "HOMEOWNERS
EXPIRATION NOTICE (for non-payment of premium)" sent to Johnson on December 2
states:


        [A]s of December 1, 2008, we have not yet received your renewal
     premium of $630.00 from your mortgage company. This payment was due on
     November 17, 2008. Your Homeowners policy expired at 12:01 a.m.
     standard time on November 17, 2008.

        Fortunately, we can continue your policy, with no lapse in
     coverage, if you send your payment to us postmarked no later than
     January 5, 2009. We urge you to contact your mortgage company to
     ensure that payment is sent in time to keep your policy in effect.


The December 2, 2008 notice complied with the requirements under the policy to
provide notice "at least 20 days before the date cancellation takes effect" 5
and the 10-day notice required by RCW 48.18.290(1)(c).6

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -5   The
policy states,  [*20] in pertinent part:


        Cancellation.

        . . . .


             (1) When you have not paid the premium we may cancel at
          any time by notifying you at least 20 days before the date
          cancellation takes effect.



        . . . .

        Non-Renewal. 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 31 days before the
     expiration date of this policy. Proof of mailing shall be sufficient
     proof of notice.



6   In his reply brief, Johnson cites Whistman v. West American, 38 Wn. App.
580, 583, 686 P.2d 1086 (1984). In Whistman, the court held that because the
policy language was ambiguous, the notice of cancellation was not effective.
Whistman, 38 Wn. App. at 584. However, the court noted that by contrast, the
policy language in Safeco Insurance Co. v. Irish, 37 Wn. App. 554, 681 P.2d 1294
(1984), was not ambiguous. Whistman, 38 Wn. App. at 584 n.1. Here, unlike in
Whistman, the policy language is not ambiguous, and the notice complied with the
plain language of the policy and RCW 48.18.290(1)(c).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   ¶38 The policy states, "When you have not paid the premium we may cancel at
any time by notifying you at least 20 days before the date cancellation takes
effect." RCW 48.18.290(1)(c) requires an insurer cancelling a policy for
nonpayment of premium to send notice at least 10 days before the effective
cancellation date. 7

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -7   RCW
48.18.290 states, in pertinent part:


        (1) Cancellation by the insurer of any policy which by its terms is
     cancellable at the option of the insurer, or of any binder based on
     such policy which does not contain a clearly stated expiration date,
     may be effected as to any interest only upon compliance with the
     following:

        (a) For all insurance policies other than medical malpractice
     insurance policies or fire insurance  [*21] policies canceled under
     RCW 48.53.040:

        (i) The insurer must deliver or mail written notice of cancellation
     to the named insured at least forty-five days before the effective
     date of the cancellation; and

        (ii) The cancellation notice must include the insurer's actual
     reason for canceling the policy.

        . . . .

        (c) If an insurer cancels a policy described under (a) or (b) of
     this subsection for nonpayment of premium, the insurer must deliver or
     mail the cancellation notice to the named insured at least ten days
     before the effective date of the cancellation.

        (d) If an insurer cancels a fire insurance policy under RCW
     48.53.040, the insurer must deliver or mail the cancellation notice to
     the named insured at least five days before the effective date of the
     cancellation.

        (e) Like notice must also be so delivered or mailed to each
     mortgagee, pledgee, or other person shown by the policy to have an
     interest in any loss which may occur thereunder. For purposes of this
     subsection (1)(e), "delivered" includes electronic transmittal,
     facsimile, or personal delivery.

        (2) The mailing of any such notice shall be effected by depositing
     it in a sealed envelope, directed to the addressee at his or her last
     address  [*22] as known to the insurer or as shown by the insurer's
     records, with proper prepaid postage affixed, in a letter depository
     of the United States post office. The insurer shall retain in its
     records any such item so mailed, together with its envelope, which was
     returned by the post office upon failure to find, or deliver the
     mailing to, the addressee.

        (3) The affidavit of the individual making or supervising such a
     mailing, shall constitute prima facie evidence of such facts of the
     mailing as are therein affirmed.


- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   [8] ¶39 Johnson claims he did not receive the December 2 notice. The
unrebutted evidence establishes Safeco mailed the December 2 notice to Johnson.
Under the policy and RCW 48.18.293(2), proof of mailing is proof of notice. See
also Trinity Universal Ins. Co. v. Willrich, 13 Wn.2d 263, 273, 124 P.2d 950
(1942) (holding policy provision providing that mailing of notices was proof of
notice is enforceable); Sowa v. Nat'l Indem. Co., 102 Wn.2d 571, 580, 688 P.2d
865 (1984) (insurer had to prove policy endorsements were sent, not that they
were received); Kaiser Aluminum & Chem. Corp. v. Dep't of Labor & Indus., 57 Wn.
App. 886, 889-90, 790 P.2d 1254 (1990).

   [9, 10] ¶40 Next, Johnson claims that because  [*23] Safeco did not properly
notify TBW, the policy was in effect as to both TBW and himself on January 25,
2009. We disagree.

   ¶41 Under the terms of the policy, TBW had a separate interest. 8 The policy
declaration identified Johnson as the insured and TBW as the "mortgagee." The
policy specifically provides additional protection to the mortgagee that
requires notification before cancellation or renewal. The policy states, in
pertinent part:




     Mortgage Clause.    . . . If mortgagee is named in this policy, any
     loss payable under Coverage A or B shall be paid to the mortgagee and
     you, as interests appear. . . .

        If we deny your claim, that denial shall not apply to a valid claim
     of the mortgagee, if the mortgagee:

        a. notifies us of any change in ownership, occupancy or substantial
     change in risk of which the mortgagee is aware;

        b. pays any premium due under this policy on demand if you have
     neglected to pay the premium;

        . . . .

        . . . If the policy is canceled or not renewed by us, the mortgagee
     shall be notified at least 20 days before the date cancellation or
     nonrenewal takes effect.




- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -8   In a
statement of additional authority, Safeco also cites Wisniewski v. State Farm
General Insurance Co., 25 Wn. App. 766, 609 P.2d 456 (1980).  [*24] In
Wisniewski, the insurance company provided notice of cancellation to the
homeowners but not to the lien holder. Wisniewski, 25 Wn. App. at 769. The court
held that the cancellation was effective as to only the homeowners. Wisniewski,
25 Wn. App. at 769.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   ¶42 Consistent with the terms of the policy, on January 11, 2009, Safeco sent
TBW a notice of cancellation. The notice states:


        We are cancelling this policy for nonpayment of premium. Your
     interest in this policy is cancelled. Coverage will end at 12:01 a.m.
     standard time on February 5, 2009. [9]




- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -9   (Emphasis
added.)
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   ¶43 The court did not err in granting the summary judgment dismissal of the
claims against Safeco. 10

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -10   For the
first time in his reply brief, Johnson attempts to argue the renewal and
cancellation provisions are ambiguous. Cowiche Canyon Conservancy v. Bosley, 118
Wn.2d 801, 809, 828 P.2d 549, 553 (1992) (issue raised for the first time in a
reply brief is too late to warrant consideration).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

CR 50 Judgment as a Matter of Law

   ¶44 Johnson contends the trial court erred in granting the CR 50 motion for
judgment as a matter law. Johnson alleged Mount Vernon breached the duty "to pay
for fire related repairs, personal property damage, and additional  [*25] living
expenses" in violation of the WAC and the CPA.

   ¶45 Johnson does not challenge dismissal of his contract claims. Nor can he.
It is well established that if the insured commits fraud with the intent of
deceiving the insurance company, the insured forfeits any claim under the
policy. Cox, 110 Wn.2d at 652-53; see also William E. Shipley, Annotation,
Overvaluation In Proof of Loss of Property Insured As Fraud Avoiding Fire
Insurance Policy, 16 A.L.R.3d 774, § 2 (1967). Accordingly, the Mount Vernon
policy expressly states, in pertinent part:




     Q. Concealment Or Fraud


             We provide coverage to no "insureds" under this policy
          if, whether before or after a loss, an "insured" has:

             1. Intentionally concealed or misrepresented any material
          fact or circumstance;

             2. Engaged in fraudulent conduct; or

             3. Made false statements; relating to this claim.






   ¶46 Nonetheless, Johnson asserts the court erred in dismissing his bad faith
and CPA claims because his fraud occurred after Mount Vernon committed the
alleged bad faith and violated the CPA. Mount Vernon asserts the Washington
Supreme Court's decision in Cox is dispositive. We agree with Mount Vernon.

   [11, 12] ¶47 We review a CR 50 motion for judgment as a matter of law de
novo.  [*26] Goodman v. Goodman, 128 Wn.2d 366, 371, 907 P.2d 290 (1995). The
decision to grant a motion for judgment as a matter of law is appropriate when,
viewing the evidence most favorable to the nonmoving party, the court can say as
a matter of law that there is no substantial evidence or reasonable inference to
sustain a verdict for the nonmoving party. Guijosa v. Wal-Mart Stores, Inc., 144
Wn.2d 907, 915, 32 P.3d 250 (2001).

   ¶48 Johnson does not challenge any of the undisputed and extensive findings
of fact set forth in the "Order Granting Defendant Mount Vernon's Motion for
Judgment as a Matter of Law." The undisputed findings establish he intentionally
misrepresented material facts during the course of his claim with Mount Vernon
by submitting a fraudulent lease "in order to obtain ALE benefits under the Mt.
Vernon policy."

   ¶49 In Cox, the insured purchased a homeowners' policy from Mutual of
Enumclaw (MOE) that provided coverage for his home and $137,000 in unscheduled
personal property. Cox, 110 Wn.2d at 645. The policy contained a provision
stating that the entire policy was void if an insured willfully concealed or
misrepresented any material fact or circumstance. Cox, 110 Wn.2d at 646.

   ¶50 A fire  [*27] destroyed the house and its contents. Cox, 110 Wn.2d at 645
. The insured Cox submitted an itemized inventory in the amount of $324,420 for
personal property destroyed by the fire. Cox, 110 Wn.2d at 645. MOE "found no
trace of certain items claimed lost," including jewelry and bronze statutes
valued at $35,000 to $40,000. Cox, 110 Wn.2d at 646.

   ¶51 MOE filed a declaratory judgment action asserting that under the terms of
the policy, the fraudulent claim voided coverage. Cox, 110 Wn.2d at 646. Cox
filed a counterclaim alleging MOE committed bad faith and unfair and deceptive
practices while processing his claim in violation of the WAC and the CPA. Cox,
110 Wn.2d at 646-47.

   ¶52 The jury found in favor of Cox. In the special interrogatories, the jury
found that Cox committed fraud but that MOE was "estopped by its acts and
conduct from voiding the insurance policies," and that MOE "act[ed] in bad faith
in the handling of defendant's claim under the provisions of the Consumer
Protection Act" and the WAC. Cox, 110 Wn.2d at 647-48. The trial court granted
MOE's motion for judgment notwithstanding the verdict. Cox, 110 Wn.2d at 648.
The trial court ruled that Cox's fraud precluded the use of estoppel.  [*28] Cox
, 110 Wn.2d at 648.

   ¶53 The Washington Supreme Court affirmed. Cox, 110 Wn.2d at 654. The Court
held that the insured was not entitled to assert estoppel and that after finding
that the insured committed fraud, the jury should not have considered the claims
that MOE committed bad faith, violated the WAC, and violated the CPA. Cox, 110
Wn.2d at 652.

   [13, 14] ¶54 The Court held that where the insured intentionally
misrepresents material facts during the claims process, the insured is not
entitled to pursue bad faith or CPA claims. Cox, 110 Wn.2d at 652-53. In
rejecting the insured's argument that the finding of fraud should not preclude
his bad faith and CPA claims, the court states that the insured's fraud
precludes any actions for bad faith or violation of the CPA. Cox, 110 Wn.2d at
652-53.


        [T]he purpose of the CPA will not be served by awarding damages,
     attorney fees, and costs to Cox after he tried to perpetrate a fraud
     on MOE. Furthermore, legal mechanisms exist to punish insurers guilty
     of CPA violations since insurers are subject to the enforcement powers
     of the State Insurance Commissioner. We consider this regulation by
     the Insurance Commissioner to be an adequate deterrence against bad
     faith  [*29] by insurance companies. We need not further punish MOE
     when to do so would provide a windfall to one guilty of fraud.

        . . . .

        The CPA exists to protect consumers, not to aid and abet fraud. We
     hold that Cox is not entitled to recovery under the CPA.


Cox, 110 Wn.2d at 652-53.

   ¶55 Here, because there is no dispute that Johnson committed fraud during the
claim process, he is not entitled to pursue the bad faith and CPA claims against
Mount Vernon. See also Tornetta v. Allstate Ins. Co., 94 Wn. App. 803, 806-07,
810, 973 P.2d 8 (1999) (where the insured misrepresented the value of the
jewelry and falsified a receipt from the jewelry store but alleged the insurance
company committed bad faith and violated the CPA during the investigation of his
claim for the allegedly stolen items, the court held that a plaintiff who
commits fraud may not "pursue a bad faith or CPA claim"); Kim, 153 Wn. App. at
361 (insured's material misrepresentations "negate a finding that Allstate acted
in bad faith or in violation of the CPA"); and Wickswat v. Safeco Ins. Co., 78
Wn. App. 958, 971, 904 P.2d 767 (1995) (where the insured intentionally
misrepresented material facts during the claims process, under Cox, the insured
[*30] is not entitled to sue the insurer for bad faith or violation of the CPA).

   ¶56 Strother v. Capitol Bankers Life Insurance Co., 68 Wn. App. 224, 842 P.2d
504 (1992), and Ellis v. William Penn Life Assurance Co. of America, 124 Wn.2d
1, 873 P.2d 1185 (1994), do not support Johnson's argument that despite his
fraud, he is entitled to pursue the bad faith and CPA claims.

   ¶57 In Ellis, the Supreme Court consolidated and considered two cases, Ellis
and Strother. Ellis, 124 Wn.2d at 3. The Court distinguished Cox and held that
in the context of a replacement life insurance policy, the insured's fraud does
not prevent an innocent beneficiary from asserting equitable estoppel against an
insurer who has acted in bad faith. Ellis, 124 Wn.2d at 14. Ellis stands for the
proposition that in the context of replacement life insurance, it would be
unfair to bar an innocent beneficiary from relying on equitable estoppel where
both the insurer and insured engaged in wrongful acts. See Wickswat, 78 Wn. App.
at 975. But the same fairness and policy considerations do not apply in either
Cox or here where no third party beneficiary is involved. See Wickswat, 78 Wn.
App. at 975.

   ¶58 Johnson's reliance on Oregon Mutual Insurance Co. v. Barton, 109 Wn. App.
405, 36 P.3d 1065 (2001),  [*31] is also misplaced. In Barton, the court
addressed whether a settlement between an insurer and the insured was
enforceable. The insurance company attempted to void the policy after the
settlement, claiming the insured had made material misrepresentations. Barton,
109 Wn. App. at 411. The court concluded the alleged misrepresentations could
not have induced the settlement because the misrepresentations occurred after
the settlement. Barton, 109 Wn. App. at 416.

   ¶59 We conclude the trial court did not err in granting Mount Vernon's motion
for judgment as a matter of law.

   ¶60 We affirm dismissal of Johnson's lawsuit against Safeco and Mount Vernon.

   Dwyer and Lau, JJ., concur.

Thomas V. Harris, Washington Insurance Law (3d ed)

Washington Rules of Court Annotated (LexisNexis ed.)

Annotated Revised Code of Washington by LexisNexis