Kingston bought a home built in the 1800s and applied for insurance from Continental. The agent entered the year “1990,“ rather than the actual year of construction on the application. Kingston maintains that he told the agent that the home was built in the 1800s, and extensively remodeled in 1990. He claimed the agent chose to put 1990 as the year of construction.
For three years, Kingston timely paid all premiums on the policy. On July 4, 1997, the home caught fire, causing substantial damage. Immediately after the fire, inspectors informed Continental that “[t]he home is over one hundred years old.“ At about the same time, Continental advised Kingston that the loss was covered and paid for demolition and restorative work. Additionally, Continental authorized and paid for Kingston's temporary living quarters, and told Kingston it would pay for his personal property losses.
In January 1998, as part of its claims investigation, Continental examined Kingston under oath. Around this time, Continental pulled the original application and discovered that “1990“ was listed as the year of construction. In March 1998, Continental advised Kingston of its intent to rescind the insurance on the ground of material misrepresentations on the application. In that same month it sent a reservation of rights letter to Kingston , and renewed the policy for an additional year. Kingston sued for breach of the insurance contract arguing that Continental waived its right to rescind the policy by its post-fire conduct. The trial court granted summary judgment to the insurer and Kingston appealed.
The appeals court concluded that the facts indicated Continental's unequivocal intent to relinquish any right to deny coverage to Kingston , thus constituting waiver as a matter of law. “Continental's course of conduct clearly demonstrated its intent to cover the losses on the home, regardless of the age of the home. As of July 11, 1997, if not earlier, Continental had knowledge that the home was over one hundred years old.“
Notwithstanding this knowledge, and without being concerned enough about the home's age to check its records to make sure this was the risk it had underwritten, Continental paid for living expenses, informed Kingston that his loss was covered, authorized demolition of the home's interior, undertook repairs to restore the home, obtained commitments from contractors to do restoration work, authorized restoration work and required Kingston to prepare an extensive personal property inventory to establish the amount of personal property loss. Continental never evinced an attitude that its insurance of a home of this age would in any way be exceptional, never informed Kingston that the age of the home was a concern, and never suggested that it was going to consider rescinding the policy based on the age of the home. Under the totality of the circumstances, these acts inarguably demonstrate a distinct intent to continue the policy and to cover losses without regard to the age of the home.
The court also said that the fact that waiting six months after it knew that Kingston's home was over 100 years old to pull the policy application undercuts the force of the insurer's materiality argument. “… if it were extraordinary for Continental to insure homes as old as this one, it is peculiar indeed that it did not immediately review its records to see how such a decision contrary to its corporate policy had been made. The matter-of-fact way in which it greeted the information that the home was over 100 years old suggests that the age of the home was not actually of great concern, i.e., was not material.“
As conclusively shown by its post-fire course of conduct, Continental intentionally relinquished its right to rescind the contract. As a result, whether a misrepresentation was made by Kingston on the policy application and whether the misrepresentation was material have no bearing on this case and, therefore, the trial court erred in granting summary judgment in favor of Continental.
This case is Continental Insurance Company v. Kingston, 114 P.3d 1158 (2005).