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Armstrong v. Safeco Insurance Co.12/15/1988
When an insurance company issues a notice of nonrenewal pursuant to RCW 48.18.292, does the insurer's duty of good faith mandate that the statutorily required reason for nonrenewal be based upon some increased actuarial risk to the insurer?
Safeco Insurance Company (Safeco) first insured Jack and Linda Armstrong under a contract of automobile insurance issued in 1977. The policy provided coverage for 6-month periods and remained in effect following successive renewals until November 14, 1984. The policy made the following provisions for nonrenewal:
If we decide not to renew this policy we will mail notice to you at the address stated in this policy at least 20 days before the end of the policy period. We may not refuse to renew the Liability or Collision coverage of this policy on the basis that you have made one or more claims under the:
(1) Comprehensive coverage; or
(2) Towing and Labor Costs coverages; of this policy.
On October 3, 1984, Safeco mailed a notice of nonrenewal to the Armstrongs. The notice stated that coverage would terminate on November 14, 1984, well within the time frame contemplated by both the contract of insurance and statute. The only explanation cited for nonrenewal was "Claims Frequency and the Unrevealed Speeding Cite for 65 in a 55 on 10-3-82." After receiving the notice of nonrenewal, the Armstrongs wrote a letter of complaint to the Washington State Insurance Commissioner (Commissioner).
In their letter to the Commissioner, the Armstrongs provided the following comment with respect to the speeding citation referenced in the notice of nonrenewal:
As for the speeding ticket, this is the only one my husband has had in his 30 plus years of driving; and no one ever asked us if we had any tickets, they just sent the renewal policy each year and asked us to pay the premium.
The Armstrongs went on to suggest an alternative explanation for Safeco's decision not to renew their automobile insurance policy:
Even though the above are the causes being cited for non-renewal, we feel the real reason is the following: -- . . . Jack [Armstrong] was involved in an accident in December 1982 which has left him partially disabled even after extensive treatment and back surgery. The lady that ran her car into Jack's truck was underinsured. Therefore, a claim was filed against our Underinsured Motorist portion of the Safeco Policy, which has not yet been settled.
(Italics ours.)
Following inquiry by the Commissioner, Safeco subsequently elaborated on its reasons for nonrenewal in a letter to the Commissioner dated March 20, 1985, in which Safeco listed the following claims as support for nonrenewal in addition to the October 3, 1982, speeding citation:
June 1, 1980 -- Comprehensive -- rock thrown up by passing vehicle, broke windshield.
January 1, 1982 -- Collision -- car stolen and damaged in an accident.
December 4, 1982 -- Collision and PIP -- claimant ran stop sign and struck insured's car.
January 28, 1984 -- Comprehensive -- tires slashed.
February 25, 1985 [ sic ] [Most probably, the date should read 1984.] -- Comprehensive -- tires slashed.
April 18, 1984 -- Collision -- insured struck by claimant.
In their amended complaint, the Armstrongs alleged a cause of action for "bad faith cancellation". Contrary to the title of the Armstrongs' cause of action, however, this is a case involving nonrenewal, not cancellation. In opposition
to Safeco's motion for summary judgment, the Armstrongs averred that no
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