Can The Insurer Change Your Policy Without Notice?

A recent Washington Court of Appeals decision emphasizes that insurers can change policy terms upon renewal with only minimal notice to the insured, even if the notice consists only of a terse email with a hyperlink to “terms and conditions.”

The insurer’s renewal notice is a common pitfall for policyholders, who often set their policy premiums to pay automatically and set the policy to renew automatically. Having set the policy on “autopilot,” the policyholder receives the automatic renewal notice and thinks they do not need to closely read it, on the assumption that renewing the old policy means they are getting the same coverage. But insurers often add material changes to their policies in renewal notices, which policyholders may not realize until years later when a loss they thought was covered turns out to be excluded under the modified policy.

This was the issue in the Washington Court of Appeals’ recently-published decision in Jackson v. Esurance Insurance Company, Case No. 75506-4-L. The court’s decision parses coverage under Mr. Jackson’s Esurance auto insurance policy and the policy’s exclusion for racing. Whether a car was involved in racing at the time of an accident would seem straightforward, but that was not the case for Mr. Jackson, whose policy included an expanded racing exclusion Esurance added in the fine print of his renewal policy. This decision reminds policyholders to always check the fine print of the insurance policy renewal notice because it may not be consistent with their expectations.

In February 2006, Mr. Jackson purchased a personal auto insurance policy from Esurance. Esurance delivered the policy to Mr. Jackson electronically pursuant to Esurance’s business model as an internet-based insurance company. Mr. Jackson’s original policy excluded: “Loss to ‘your covered auto’ or any ‘non-owned auto’, located inside a facility designed for racing, for the purpose of: a. Competing in; or b. Practicing or preparing for any prearranged or organized racing or speed contest.” In January 2010, Mr. Jackson renewed his Esurance policy. The renewal policy contained a broader racing exclusion, also excluding: “Participating in any racing school, driving school, driver training, skills training, race driving experience, or race adventure program.”

In June 2014, Mr. Jackson attended an Audi driving-skills training program at the Pacific Raceways racecourse. Mr. Jackson wanted to make sure his insurance covered him for any damages that might occur during the event, so he checked the copy of his policy available on Esurance’s website. Esurance’s website only contained the original policy with the narrow racing exclusion that did not exclude “driving school” participation.

Mr. Jackson crashed his vehicle during the driving skills program. He made a claim with Esurance. Esurance denied his claim under the expanded racing exclusion’s exclusion for racing school participation, quoting the current policy language.

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Melting snow from higher up the mountain created this impromptu waterfall on Kachess Ridge, near Cle Elum.

Mr. Jackson sued Esurance under Washington’s Insurance Fair Conduct Act (“IFCA”) and Consumer Protection Act (“CPA”), as well as bringing claims for breach of the policy contract and common law bad faith. He claimed that Esurance failed to properly notifyhim of the 2010 policy amendment expanding the racing exclusion, and that Esurance’s conduct was deceptive and unlawful in violation of the Consumer Protection Act. The trial court dismissed Mr. Jackson’s lawsuit. Mr. Jackson appealed to the Court of Appeals, who affirmed the dismissal.

First, the Court of Appeals held Esurance’s 2010 broadening of the racing exclusion was enforceable. The Court of Appeals agreed with Mr. Jackson that Washington law required Esurance to notify him before amending or modifying the policy. But the court noted Washington law does not require notice be given in a specific manner, and permitted Esurance to deliver notices of policy changes electronically. Mr. Jackson consented to receive policy notices electronically when purchasing his original policy from Esurance. Even though Esurance’s renewal consisted of a terse email with a hyperlink to renewal “terms and conditions” not contained in the email itself, the court ruled this was sufficient to give Mr. Jackson notice of the expanded racing exclusion.

Second, the Court of Appeals determined Esurance’s electronic notice of the expanded racing exclusion was not deceptive or unlawful under the Consumer Protection Act. Mr. Jackson argued his difficulty in locating the actual policy on Esurance’s website rendered Esurance’s notice procedures deceptive. The court rejected that argument because Esurance provided Mr. Jackson instructions to access his policy when he first purchased it in February 2006. The court attributed Mr. Jackson’s difficulty solely to his decision not to carefully read the renewal notices Esurance sent him.

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