How many automobile insureds receive renewal questionnaires that they do not return to their insurers?
In a recent decision from the First Circuit Court of Appeals, however, the failure to return these renewal questionnaires with updated information resulted in two Massachusetts insureds losing their optional collision and liability coverage and umbrella coverage for an accident involving personal injury and property damage.
In a 2018 Florida accident, the Massachusetts insureds, Philip and Claudia Feldberg, suffered a total loss of their Toyota Highlander insured by IDS Property Casualty Insurance Co. d/b/a Ameriprise Auto & Home Insurance (“Ameriprise”) in a Florida collision with a Lamborghini insured by Government Employees Insurance Company (“GEICO”). The Feldbergs’ daughter-in-law was driving the Highlander with her child when the Lamborghini collided with her vehicle, sending the Lamborghini crashing into and damaging two utility poles owned by a local utility.
After investigating the facts and circumstances of the Florida accident, Ameriprise denied coverage, alleging that Mr. Feldberg and his wife had made material misrepresentations when they renewed their policy coverage in 2017, without having returned Ameriprise’s renewal questionnaire. To Ameriprise, the misrepresentations, besides principal garaging and customary operators, violated what an Ameriprise underwriter testified to as the “snowbird clause” in the company’s underwriting guidelines. This guideline required for coverage that insured vehicles be garaged in Massachusetts for at least six months. The Feldbergs had kept their Highlander in Florida for almost two years and had allowed their daughter-in-law to use the Highlander while it was parked at her home.
After denying coverage, Ameriprise filed a declaratory judgment naming all the parties involved, including the Feldbergs, the drivers of both cars, the passengers, and the Florida power company that had its electricity poles damaged. The District Court decision affirmed Ameriprise’s denial of all coverage to the Feldbergs for the total loss of their vehicle and third-party property damage coverage for their daughter-in-law against GEICO’s $100,000 subrogation claim for the total loss of its insured’s Lamborghini.
After the district court granted summary judgment to Ameriprise, GEICO, but not any of the other defendants, appealed, seeking to reinstate the Feldberg’s coverage for the $100,000 total loss of its insured’s Lamborghini.
In a forty-page decision, the First Circuit Court of Appeals affirmed a Federal District Court’s decision and provided a comprehensive legal analysis of the Massachusetts law that an insured has a duty to inform their insurer when asked in a renewal questionnaire about any material changes. The insured’s failure to return a questionnaire with such material information constituted a material misrepresentation that would allow the insurer to rescind the policy.
The Feldbergs’ policy history and the “snowbird clause” requiring garaging the vehicle in Massachusetts at least six months
The Feldbergs first insured their automobiles with Ameriprise in 2011. Besides automobile insurance, the Feldbergs also carried a $1 million umbrella policy with Ameriprise.
In 2016, the policy only identified Mr. and Mrs. Feldberg as the customary drivers of the insured vehicles, a Toyota RAV4 and a Honda Accord. The policy described the principal place of garaging for the vehicles as Peabody, Massachusetts.
In September 2016, Mr. Feldberg added a third vehicle, a Toyota Highlander, with Peabody as the Highlander’s principal place of garaging and Mr. Feldberg and his wife as its customary drivers.
A year later, on September 23, 2017, the Feldbergs received an annual renewal notice from Ameriprise, which included a cover letter and a “Massachusetts Renewal Form.” The renewal letter advised the Feldbergs they only needed to return the renewal form if the information” contained within the form “has changed.” The notices also instructed the Feldbergs to “review the Coverage Selections Page.”
The Coverage Selections Page sent to the Feldbergs identified the Highlander, the RAV4, and the Accord as the insured vehicles with their principal place of garaging as Peabody. The customary drivers for the vehicles only listed Mr. Feldberg and his wife.
Ameriprise sent renewal forms for each of the vehicles. Each form restated the instruction of the cover letter and stated to the effect:
It will not be necessary to return this form to your agent or company representative unless you wish to make any changes or unless the information contained on the Coverage Selections Page and in this form…including the principal place of garaging and the customary drivers…is inaccurate or obsolete.
The renewal forms advised the Feldbergs to check the information for accuracy and to return the form with any corrections or additions. Ameriprise’s forms all advised the Feldbergs that if the forms were incorrect the failure to advise Ameriprise of the necessary changes “may have very serious consequences.”
The Feldbergs did not send Ameriprise any corrections or changes to their renewal forms for the 2017-2018 policy year, and the policy was renewed without any corrections to any vehicle’s place of principal garaging or customary operators.
Besides their home in Peabody, the Feldbergs had a condo in Naples, Florida. For several years, they wintered in Naples from December until late May or early June before returning to Peabody for the summer and fall.
The Ameriprise-insured Highlander and a GEICO-insured Lamborghini total each other in a Florida accident
After the Feldbergs had returned to Peabody from Naples, their daughter-in-law had a road accident driving the Highlander in Florida. The accident occurred on July 24, 2018, and involved a Lamborghini worth $100,000.
Both vehicles were total losses, and the drivers and the passenger in each vehicle suffered personal injuries. The police cited each driver for traffic violations. The daughter-in-law received a citation for failing to cede the right of way and the Lamborghini driver for speeding (after colliding with the Highlander, his vehicle careened off the Highlander and damaged two utility poles).
The Feldbergs filed a claim with Ameriprise in Massachusetts for the collision damage to the Highlander.
The Florida accident spurred Ameriprise to investigate the Highlander’s garaging and who customarily drove it
After receiving the Feldbergs’ claim, Ameriprise initially made some required payments under the policy. However, it quickly began an investigation into how the Highlander had an accident in Florida while the vehicle’s customary drivers were in Massachusetts.
The investigation included recorded calls with Mr. Feldberg and his daughter-in-law, as well as an examination under oath of Mr. Feldberg, as allowed by the standard automobile policy’s terms.
Mr. Feldberg told Ameriprise that after leasing the Highlander, he brought it to Florida “almost immediately” after insuring it in September 2016. With the encouragement of his children, he had leased the Highlander to have a car in Florida. He had poor health and having the Highlander there would allow him to fly to Florida the next winter and have the Highlander waiting for him at his daughter-in-law’s house.
Mr. Feldberg also stated that he had intended to drive the Highlander back to Peabody, but he never ended up feeling well enough to do so.
When Ameriprise questioned Mr. Feldberg about the Highlander’s customary drivers, he stated his daughter-in-law had “standing permission . . . to use the vehicle” whenever “she needs to” for the six or “seven months of the year” when he and his wife were staying in Massachusetts. Consistent with her permission to use the Highlander, Mr. Feldberg provided his daughter-in-law her an individual car key set. The daughter-in-law, when questioned by Ameriprise, estimated she drove the vehicle about “three times a week” while her in-laws were staying in Peabody.
Ameriprise concludes the Feldbergs misstated the Highlander’s garaging, customary operators and violated the company’s “snowbird clause”
Ameriprise’s Massachusetts Auto Eligibility Guidelines had what an Ameriprise underwriter testified to as a “snowbird clause.” This underwriting requirement only permitted Massachusetts insurance for vehicles that insureds might use at an out-of-state second home if the vehicle was garaged in Massachusetts for at least half the policy year.
After concluding its investigation, Ameriprise notified the Feldbergs on November 2, 2018, that they had violated the terms and conditions of their auto insurance policy by failing to inform Ameriprise about the Highlander’s principal place of garaging in Florida and about their daughter-in-law being a customary driver.
Ameriprise’s notice also advised the Feldbergs that the company was exercising their legal right to rescind all optional coverages under the auto policy and the Feldbergs’ umbrella policy for the Highlander. Ameriprise elected not to contest paying the Highlander’s compulsory coverages.
Declaratory judgment by Ameriprise to confirm rescission of the Highlander’s coverage
Ameriprise thereafter sought declaratory relief in federal district court in Massachusetts against everyone involved in the Florida accident who might have a property damage or bodily injury claim against the Highlander’s rescinded insurance coverage.
The defendants sued included Mr. and Mrs. Feldberg, the Feldbergs’ daughter-in-law, personally and as the mother and next friend of her child who had been a passenger in the Highlander, the driver of the Lamborghini, his passenger, and the Withlacoochee River Electric Cooperative, Inc., the utility whose poles had been damaged in the accident.
After some discovery, Ameriprise filed summary judgment, attaching an affidavit from a senior underwriter, which summarized Ameriprise’s underwriting policy that:
- vehicles must be garaged at named insured’s permanent residence.”
- vehicles are not eligible for coverage if they are kept outside of the state where the policy is written.
The underwriter’s affidavit also calculated that the Feldbergs’ auto premium would have increased anywhere from $85 to $338 if the company had known that the Feldbergs daughter-in-law was a customary driver.
For his part, Mr. Feldberg submitted an affidavit in opposition to Ameriprise’s affidavit and submissions for summary judgment averring:
- He never intended to deceive or to knowingly make false statements.
- He simply did not know that the Highlander’s principal place of garaging or how frequently his daughter-in-law drove the Highlander mattered for his coverage or calculating the policy premium.
- When the policy was renewed in 2017, he would have considered the Highlander to be garaged principally at his residence in Peabody.
- He did not know and still was not sure about what constituted a “usual and customary driver” of an insured vehicle under the policy; and,
- He would have taken corrective action if someone alerted him to this erroneous belief.
GEICO opposed Ameriprise’s summary judgment tracking Mr. Feldberg’s affidavit and argued that Ameriprise had not put forward sufficient evidence to prove the Feldbergs had materially misrepresented the Highlander’s principal place of garaging or its customary drivers.
GEICO also contended that that Ameriprise had not sufficiently or clearly demanded such information in the renewal form and that such a lack of precision could not support its claim that the Feldbergs has misrepresented anything.
The Federal district court judge at first denied Ameriprise’s motion for summary judgment. However, the judge allowed a motion for reconsideration and granted summary judgment finding that:
Here, the record establishes that when Philip Feldberg added the Highlander to the Auto Policy, he represented to Ameriprise that the Highlander would be garaged in Massachusetts and that he and Mrs. Feldberg would be its sole customary operators. Although the terms of the Feldbergs’ Auto Policy required them to notify Ameriprise of any material changes, including the “type of usage and place of garaging” of covered vehicles, the Feldbergs failed to inform Ameriprise that the Highlander was principally garaged in Florida and that [their daughter-in-law] had become a customary operator of the vehicle.
The court further concludes that no reasonable jury could find the Feldbergs’ misrepresentations were not material.
After final judgment entered for Ameriprise, only GEICO filed an appeal to reinstate coverage for the Highlander and, thereby, collect some or all its collision payment on the Lamborghini it insured.
The Appeals Court must decide whether Ameriprise’s renewal form created a duty for the Feldbergs to update their policy information
The Court stated, after giving the background of the appeal, that:
“The dispute compresses to a simple premise. If the renewal form sent by Ameriprise created a duty on the Feldbergs to inform Ameriprise about updates to the Highlander’s principal place of garaging and customary drivers, and if the Feldbergs failed to do so, then they would have committed a material misrepresentation sufficient for Ameriprise to rescind coverage according to Massachusetts law.”
The Court then stated that it would “follow:
- A roadmap that takes us first through the applicable Massachusetts law.
- Then to the language of the renewal form (which incorporated the original auto policy).
- Then see if the form imposed a duty to inform upon the Feldbergs, and
- Finally, to see if any dispute of material fact exists…whether the Feldbergs breached their duty.”
The law on renewal letters and applications causing insureds having a duty to inform
The Court started its analysis with M.G.L. c. 175 § 186(a), which codifies the common law rule on misrepresentations that allow an insurer to rescind coverage. This statute states, in part:
“No oral or written misrepresentation or warranty made in the negotiation of a policy of insurance by the insured or in his behalf shall be deemed material or defeat or avoid the policy or prevent its attaching unless such misrepresentation or warranty is made with actual intent to deceive, or unless the matter misrepresented or made a warranty increased the risk of loss.”
The Court noted that for the alleged misrepresentation to become material under the statute it must occur during “the negotiation of a policy of insurance.” Therefore, the Court’s first task was to determine whether the renewal forms sent by Ameriprise to the Feldbergs constituted a negotiation under § 186.
The Court started with the premises that renewal notices merely notifying an insured that a policy renewal will occur without the insureds having to do anything do not fall under the statute as a “negotiation” since the insured is not called upon to inform the insurer of anything. However, if the insurer “requires the insured to provide updated information to the insurer” and specifically identifies “the information that it considers material and request[s] from the insured updated information concerning any changes,” then such a policy renewal letter is a policy renewal application that qualifies as a negotiation under § 186. Such specific requests create a duty to inform. Any nondisclosures by the insured of relevant answers to such a specific request which increases the insurer’s risk of loss, allows the insurer to rescind the renewed policy when it discovers the insured’s nondisclosure amounting to a misrepresentation.
The Court finds the policy renewal questions required the Feldbergs to report the Highlander’s changed garaging and additional customary driver
After stating the legal standard, the Court applied the standard and found that Ameriprise used precise language to advise the Feldbergs to report any changes to the Highlander’s principal place of garaging and its customary drivers. The Court found:
- The renewal forms sent by Ameriprise mirrored and incorporated the initial auto policy in specifying the importance of accurate information concerning the Highlander’s principal place of garaging and customary drivers.
- The renewal form’s cover letter instructed the Feldbergs to “review the Coverage Selections Page,” which listed Peabody, Massachusetts, as the Highlander’s principal place of garaging and the Feldbergs as the vehicle’s only customary drivers for “any application.”
- The renewal form, in turn, required the Feldbergs to return it only if “the information contained on the Coverage Selections Page and in this form . . . is inaccurate or obsolete.”
- The form also stated that the Feldbergs “must inform [Ameriprise] of any changes which may have a material effect on [the Feldbergs’] insurance coverage or premium charges, including” the Highlander’s principal place of garaging and customary operators.
The Court observed that in several other places on the renewal documents, Ameriprise warned the Feldbergs about the term of the policy’s “False Information” section that allowed the carrier to rescind the policy’s optional coverages where the insureds failed to disclose material information.
Since Ameriprise specifically solicited garaging and customary driver information from the Feldbergs in the renewal form, the Court ruled the renewal form qualified as “negotiation under § 186” as a matter of law. Thus, the Court ruled that the Feldbergs had breached their legal duty to inform Ameriprise about the Highlander’s principal place of garaging in Florida and their daughter-in-law being a customary driver before Ameriprise automatically renewed their policy based on their failure to respond and inform.
The Court finds Mr. Feldberg’s affidavit as to his beliefs and intentions irrelevant for finding a misrepresentation
In considering the import of Mr. Feldberg’s affidavit stating that he believed the garaging of the Highlander was at his primary residence in Peabody, the Court reviewed Mr. Feldberg’s recorded phone calls with Ameriprise and his examination under oath, along with the documentary evidence in the case. After the review, the judges found the affidavit irrelevant based on the undisputed evidence that:
- After adding the Highlander to his policy in September 2016, Mr. Feldberg “almost immediately” moved it to Florida.
- The vehicle never returned to Massachusetts before the July 2018 accident.
- The vehicle remained garaged in Florida at the time the Feldbergs decided not to return the renewal form to Ameriprise in September 2017 and allow the policy to automatically renew
Although Mr. Feldberg’s affidavit claimed that he intended to eventually return the Highlander to Massachusetts once his health improved, the Court found that his future intent had no relevance to the objective garaging status of the vehicle when the policy automatically renewed.
As to the customary driver nondisclosure, the Court found the undisputed evidence established that Mr. Feldberg parked the Highlander at their daughter-in-law’s home for the seven or so months he and his wife resided Massachusetts, leaving the daughter-in-law with her own set of keys and permitting her to drive the vehicle about three times a week.
The fact that the auto policy did not define customary operators and the Feldbergs never expressly stated they knew their daughter-in-law was a customary driver did not move the Court. It ruled that a reasonable insured would interpret the renewal form’s phrase “customary operators” to include a driver, like their daughter-in-law, who drove their vehicle at least three times a week for the more than half the year the Feldbergs resided in Massachusetts.
The Court’s conclusion
The Court’s final statement in its opinion was that “the undisputed facts, therefore, lead us to only one conclusion; the Feldbergs misrepresented information, which was material, regardless of whether the Feldbergs did so intentionally. And…Ameriprise could, as the district court found, rescind the Feldbergs’ coverage as a matter of law after the policy took effect because the misrepresentation breached the Feldbergs’ duty under § 186.”
Once the First Circuit Court of Appeals Court affirmed the district court decision, there are no further appeals by right, and the decision in favor of Ameriprise rescinding the optional auto and umbrella coverage on the Feldman’s Highlander is final.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
To get in touch with me, email or schedule a call via the links below:
