
    [No. C072644.
    Third Dist.
    Sept. 20, 2016.]
    TRENT MILLS, an Incompetent Person, etc., Plaintiff and Appellant, v. AAA NORTHERN CALIFORNIA, NEVADA AND UTAH INSURANCE EXCHANGE, Defendant and Respondent.
    
      Counsel
    Farmer Smith & Lane and Blane A. Smith for Plaintiff and Appellant.
    Coddington, Hicks & Danforth, R. Wardell Loveland and Carrie Dupic Huynh for Defendant and Appellant.
   Opinion

NICHOLSON, Acting P.J.—

Defendant insurance company denied uninsured motorist coverage to a third party beneficiary injured in an automobile accident because it had cancelled the policy before the accident occurred. The third party sued, and the insurer sought summary judgment. The third party opposed, contending the cancellation was invalid because a written notice seeking information sent by the insurer to the insureds prior to cancellation was unreasonable as a matter of law, and disputed facts existed as to whether the insurer had mailed the notice of cancellation and actually cancelled the policy. The trial court granted summary judgment, and we affirm.

FACTS AND PROCEDURAL HISTORY

California law grants an insurer the right to cancel an automobile insurance policy prior to its expiration due to “a substantial increase in the hazard insured against.” (Ins. Code, § 1861.03, subd. (c)(1).)

A “substantial increase in the hazard insured against” occurs when, among other events, the insured refuses or fails to provide the insurer, “within 30 days after reasonable written request to the insured, information necessary to accurately underwrite or classify the risk.” (Cal. Code Regs., tit. 10, § 2632.19, subd. (b)(1).) The written request for information must inform the insured “his or her failure to provide the requested information within the time required may result in the cancellation or nonrenewal of his or her policy.” (Ibid.)

Defendant AAA Northern California, Nevada and Utah Insurance Exchange (AAA) issued an auto insurance policy to plaintiffs Jeff and Denise Fields for an annual period commencing March 18, 2004. The policy identified Jeff Fields, Denise Fields, and their daughter, plaintiff Krystal Fields, as the insured drivers. It granted AAA the right to cancel the policy for any reason permitted by California law by mailing notice to the Fieldses no less than 20 days prior to the date of cancellation.

On February 5, 2005, Jeff and Denise Fields’s son, Patrick, collided with a parked vehicle while driving one of the cars insured under the policy. Patrick was not listed as an insured driver on the policy at that time.

AAA renewed the policy on March 18, 2005, for one year. However, by letter dated March 23, 2005, AAA informed Jeff and Denise Fields it sought information it claimed was necessary to underwrite their policy accurately. It offered them the opportunity to exclude Patrick from coverage by completing and returning an enclosed form. Alternatively, if they wanted to add Patrick to the policy or if they had other questions, they were to call AAA. The letter stated that if the Fieldses did not respond by April 22, 2005, AAA would cancel their policy. We address the letter in greater detail below.

AAA received no response to its request for information from the Fieldses.

By letter dated April 28, 2005, AAA notified the Fieldses it was cancelling their policy effective May 28, 2005. The decision to cancel the policy was “based on the refusal or failure to provide necessary information to accurately underwrite your policy following the request for the same.” AAA again received no response from the Fieldses.

On July 6, 2005, plaintiff Krystal Fields and her passenger, plaintiff Trent Mills, were injured in an automobile accident. Krystal was driving a car her parents had insured under their AAA policy. An uninsured motorist drove the other car. Mills suffered severe injuries, including traumatic brain injury and multiple fractures. He was in a coma for six weeks and suffered permanent cognitive impairments.

Krystal tendered an uninsured motorist claim to AAA under her parents’ policy. AAA denied the claim because it had cancelled the policy prior to the accident.

Mills filed a complaint for personal injuries against the driver and registered owner of the other uninsured vehicle as well as Krystal and her parents. The Fieldses tendered the suit to AAA for defense and indemnity. AAA denied the tender because the policy was not in effect at the time of the accident.

Mills dismissed Jeff and Denise Fields from his action prior to trial, and the court found in favor of Krystal. However, the court granted Mills a default judgment in excess of $12.7 million against the driver and owner of the other uninsured vehicle. Mills requested uninsured motorist benefits from AAA and demanded AAA arbitrate his claim against the Fieldses’ policy. AAA denied the demand, again because it had cancelled the policy before the accident occurred.

In consolidated actions, the Fieldses and Mills sued AAA. Krystal Fields and Mills alleged AAA breached its insurance policy with the Fieldses when it denied their claims for uninsured motorist coverage. Jeff, Denise, and Krystal Fields alleged AAA breached its insurance policy by refusing to defend them against Mills’s action. All plaintiffs alleged AAA breached the implied covenant of good faith and fair dealing. All plaintiffs sought punitive damages.

AAA filed for summary judgment. It contended it lawfully cancelled the Fieldses’ policy prior to the accident due to the Fieldses’ failure to provide necessary information AAA had requested in order to underwrite the policy accurately. AAA introduced evidence showing it forwarded the March 23 request for information and the April 28 notice of cancellation to the Fieldses, those notices complied with all statutory requirements imposed on them, and it acted reasonably in compliance with the implied covenant of good faith and fair dealing.

Plaintiffs opposed the motion for summary judgment, and they also filed a motion for summary adjudication against AAA’s affirmative defense that it lawfully cancelled the insurance policy prior to the accident. They contended AAA had not lawfully cancelled the policy because AAA’s request for information and notice of cancellation failed to comply strictly with statutory requirements, the request for information was not a “ ‘reasonable written request’ ” because it did not actually request any information, and AAA had not established any facts showing there had been a substantial increase in the hazard insured against. Plaintiffs further claimed they did not receive AAA’s letters, and contested facts existed as to whether AAA had actually mailed the letters and cancelled the policy. Alternatively, plaintiffs asked the court to deny AAA’s motion or continue the hearing to allow them time to conduct further discovery on their punitive damages claim, as AAA had allegedly obstructed plaintiffs’ attempts to depose AAA personnel over a period of 17 months.

The trial court granted summary judgment in favor of AAA and denied plaintiffs’ motion for summary adjudication. It ruled that undisputed facts demonstrated AAA lawfully cancelled the insurance policy prior to the accident. AAA requested information from the Fieldses it claimed it needed in order to underwrite the insurance policy, the written request was reasonable, and the Fieldses did not respond to it. The court found no disputed issues of material fact regarding the adequacy of the request for information and whether AAA actually mailed the notice of cancellation and cancelled the policy. Because there was no breach of contract, the court found there could be no breach of the implied covenant. The court also refused to continue its consideration of the motion pending further discovery on the issue of punitive damages.

Only plaintiff Mills appeals from the trial court’s judgment. He contends the court erred in its judgment because:

1. The March 23, 2005, written request for information was not, as a matter of law, a reasonable written request to secure information necessary for AAA to underwrite the risk accurately;

2. Triable issues of material fact exist regarding whether AAA actually sent the notice of cancellation and whether the policy was actually cancelled as of the date of the accident;

3. Triable issues of material fact exist regarding AAA’s alleged breach of the implied covenant; and

4. The trial court abused its discretion by not continuing the hearing on the punitive damages claim as AAA had obstructed all of plaintiffs’ attempts to depose witnesses.

DISCUSSION

I

Standard of Review

Our scope of review is the same as the trial court’s, and we exercise our independent judgment. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334 [100 Cal.Rptr.2d 352, 8 P.3d 1089]; Starzynski v. Capital Public Radio, Inc. (2001) 88 Cal.App.4th 33, 37 [105 Cal.Rptr.2d 525].) A trial court must grant summary judgment “ ‘if all the papers submitted show’ that ‘there is no triable issue as to any material fact’ ([Code Civ. Proc.,] § 437c, subd. (c))— that is, there is no issue requiring a trial as to any fact that is necessary under the pleadings and, ultimately, the law [citations]—and that the ‘moving party is entitled to a judgment as a matter of law’ (Code Civ. Proc., § 437c, subd. (c)). ... In ruling on the motion, the court must ‘consider all of the evidence’ and ‘all’ of the ‘inferences’ reasonably drawn therefrom ([Code Civ. Proc.,] § 437c, subd. (c)), and must view such evidence [citations] and such inferences [citations], in the light most favorable to the opposing party.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 [107 Cal.Rptr.2d 841, 24 P.3d 493].)

In determining whether there is a triable issue of material fact, we consider all the evidence set forth by the parties except that to which objections have been made and properly sustained. (Code Civ. Proc., § 437c, subd. (c); Guz v. Bechtel National, Inc., supra, 24 Cal.4th at p. 334.)

II

Reasonableness of the Request for Information

Mills argues the trial court erred in granting summary judgment because the request for information, contrary to governing regulation, was not a reasonable request that sought information necessary for AAA to underwrite the risk accurately. He contends the request was not a reasonable request as a matter of law because it did not request any specific information, and, in particular, it did not request any information AAA actually needed to determine its risk. We disagree with Mills’s contention. The request for information was a reasonable request.

In 1988, voters passed Proposition 103, which made ‘“numerous fundamental changes in the regulation of automobile and other types of insurance.” (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 812 [258 Cal.Rptr. 161, 771 P.2d 1247], fn. omitted.) One of those changes prohibited an auto insurer from cancelling an insurance policy prior to its expiration date except on certain limited grounds. As already mentioned, one of those grounds allows an insurer to cancel an auto insurance policy due to ‘“a substantial increase in the hazard insured against.” (Ins. Code, § 1861.03, subd. (c)(1).) The Insurance Code does not define what constitutes ‘“a substantial increase in the hazard insured against.”

A regulation promulgated by the Department of Insurance defines what constitutes a ‘“substantial increase in the hazard insured against.” Such an increase occurs when, among other events, the insured refuses or fails “to provide to the insurer, within 30 days after reasonable written request to the insured, information necessary to accurately underwrite or classify the risk.” (Cal. Code Regs., tit. 10, § 2632.19, subd. (b)(1) (hereafter section 2632.19).) Other than to require the written request to inform the insured in English and Spanish that “his or her failure to provide the requested information within the time required may result in the cancellation or nonrenewal of his or her policy” (ibid.), the regulation imposes no requirement on what a request for information must contain or request in order to be considered reasonable. The parties have not found any other authority directly on point, and neither have we.

To determine what a “reasonable written request” is, we rely first on the regulation’s plain language. (Butts v. Board of Trustees of the California State University (2014) 225 Cal.App.4th 825, 835 [170 Cal.Rptr.3d 604] (Butts).) The term “reasonable” has many meanings, but those most appropriate here are: “Within the limits of what it would be rational or sensible to expect; not extravagant or excessive; moderate. . . . [I]n accordance with reason; not irrational, absurd, or ridiculous; just, legitimate; due, fitting. . . . Sufficient, adequate, or appropriate for the circumstances or purpose; fair or acceptable in amount, size, number, level, quality, or condition.” (Oxford English Dict. (3d ed. 2009) <http://www.oed.com/view/Entry/159072?redirectedFrom=reasonable#eid> [as of Sept. 20, 2016].)

The term “reasonable” has so many meanings, we also look to the voters’ intent for the statutory scheme to define the term’s meaning in section 2632.19. (See Butts, supra, 225 Cal.App.4th at p. 838.) The voters enacted Proposition 103 “to protect consumers from arbitrary insurance rates and practices, to encourage a competitive insurance marketplace, to provide for an accountable Insurance Commissioner, and to ensure that insurance is fair, available, and affordable for all Californians.” (Ballot Pamp., Gen. Elec. (Nov. 8, 1988) text of Prop. 103, § 2, p. 99, some italics omitted.) The initiative states it “shall be liberally construed and applied in order to fully promote its underlying purposes.” (Ballot Pamp., Gen. Elec. (Nov. 8, 1988) text of Prop. 103, § 8, p. 144, italics omitted.)

Thus, to be a “reasonable” written request for information necessary to underwrite or classify the risk accurately, the request must be rational, appropriate for the circumstance, and necessary to the insurer’s ability to evaluate the risk of offering the policy. The request cannot be arbitrary or unrelated to the insurer’s need to reevaluate the risk it incurs.

With these concepts in mind, we turn to the written request for information AAA sent to the Fieldses. The body of the request reads in full:

“It has been brought to our attention that we do not have the necessary information to list a driver who resides in your household or has regular use of your vehicle(s).
“All licensed operators in your household or who have regular usage of your vehicle(s) are potential exposures, and we must ask for certain underwriting information to accurately underwrite your automobile policy to determine the qualification and rating of your policy.
“We do not have all the information necessary to accurately underwrite your automobile insurance policy. We are required to advise you in writing that if you fail to provide the necessary information requested within 30 days of the above date, your policy will be cancelled.
“No hemos obtenido toda la información necesaria para subscribir adecu-adamente la póliza de seguro de su automóvil. Nuestra empresa esta obligada a notificarle por escrito que, de no suministrar los datos requiridos antes del termino de 30 dias a partir de la fecha arriba indicada, su póliza sera cancelada.
“If you choose not to provide the information, you can exclude the driver from your policy.
“To exclude PATRICK FIELDS (son), sign, date, and return the enclosed form in the envelope provided. Please read the endorsement carefully. There is no coverage afforded under the policy while any motor vehicle is being used or operated by an excluded person.
“If the required information or the exclusion is not provided to us by 04/22/2005 your policy will be mid term cancelled due to a substantial increase in the hazard insured against.
“If you choose to add the driver or have any questions, please contact the Sacramento—Madison District Office at (916) 331-7610 or the Member Service Center at 800-922-8228.”

Included with the letter was a form for the Fieldses to use if they chose to exclude Patrick from their policy.

This letter was a reasonable written request for information necessary to underwrite or classify AAA’s risk. There is no evidence showing the letter was arbitrary or unrelated to AAA’s needs. It arose from having a car AAA insured incur damage in an accident by a family member who was not named on the policy. It was reasonable for AAA to attempt to seek information to determine whether Patrick would be a regular driver of a family vehicle or, if not, to seek to have Patrick excluded from coverage.

Mills contends the written request is unreasonable because it does not contain a request for the information Mills claims AAA needed in order to evaluate its risk from Patrick’s use of the family vehicles. He argues the insurance policy authorized AAA to cancel the policy if the driver’s license of any operator who either lives in the insured’s household or customarily operates the insured’s autos is suspended or revoked. Thus, Mills argues, in order to evaluate its risk regarding Patrick under the terms of the policy, AAA had to know only whether Patrick resided with his parents, held a driver’s license, and regularly used their cars. He claims the written request was not reasonable because it did not specifically ask for that information. Indeed, he asserts the request does not request any specific information at all.

We disagree with Mills’s assertion. Section 2632.19 does not require a written request to contain certain questions or identify specific information requested. Rather, it requires the written request to be reasonable, and the request here satisfies that requirement. The writing asks if the Fieldses intend to include or exclude Patrick from coverage. If the Fieldses were willing to exclude Patrick from coverage, AAA would not likely need any additional information, as its risk would remain unchanged. If, however, the Fieldses were not willing to exclude Patrick from coverage, AAA would need additional information. Hence, AAA asked the Fieldses to call AAA to include Patrick in their coverage or ask other questions. Had the Fieldses made that call, AAA then could request the additional information Mills suggests it would need to determine whether to continue underwriting the policy.

Mills also asserts AAA’s use of the letter somehow failed to comply strictly with Insurance Code provisions that govern cancellation of insurance policies. Mills correctly states that policy cancellation “can only be accomplished by strict compliance with the terms of any statutory provisions applicable to cancellation” (Mackey v. Bristol West Ins. Service of Cal., Inc. (2003) 105 Cal.App.4th 1247, 1258 [130 Cal.Rptr.2d 536]), and with the terms of the policy itself. (Lee v. Industrial Indemnity Co. (1986) 177 Cal.App.3d 921, 924 [223 Cal.Rptr. 254].) However, as shown above, there are no statutory or regulatory requirements imposed on the written request for information except that it be reasonable, and Mills has not alleged AAA’s written request somehow violated the terms of AAA’s policy with the Fieldses.

Based on the undisputed facts, we cannot say AAA sent the letter for an arbitrary purpose or sought irrelevant or unnecessary information unrelated to its analysis of risk under the particular circumstances. The letter was a reasonable written request within the meaning of section 2632.19, and the trial court did not err in finding so as a matter of law.

Ill, IV

DISPOSITION

The judgment is affirmed. Costs on appeal are awarded to defendant AAA. (Cal. Rules of Court, rule 8.278(a).)

Murray, J., and Duarte, J., concurred. 
      
       See footnote, ante, page 528.
     