Opinion
No. 1562 C.D. 2001.
Submitted: May 8, 2002.
Filed: September 25, 2002.
Appeal from the Court of Common Pleas of Allegheny County, No. 353 SA 2001, Dauer, J.
Marc A. Werlinsky and Timothy P. Wile, Asst. Counsel In-Charge, King of Prussia, for appellant.
William C. Beitler, appellee, pro se.
Before: Honorable Bernard L. McGinley, Judge; Honorable Doris A. Smith-Ribner, Judge; Honorable Dan Pellegrini, Judge; Honorable Rochelle S. Friedman, Judge; Honorable Ren´e L. Cohn, Judge; Honorable Robert Simpson, Judge; Honorable Mary Hannah Leavitt, Judge.
OPINION
The Department of Transportation, Bureau of Motor Vehicles (DOT) appeals from an order of the Court of Common Pleas of Allegheny County (trial court) that sustained William C. Beitler's (Registrant) appeal from DOT's suspension of the registration of his Suzuki sedan. We vacate and remand.
On March 13, 2001, DOT notified Registrant that his automobile registration was being suspended for three months, effective April 17, 2001, under authority of Section 1786(d) of the Vehicle Code, 75 Pa.C.S.A. § 1786(d). Specifically, DOT's suspension was based upon a notice it received from New Hampshire Indemnity Company (New Hampshire) that Registrant's policy of automobile insurance had lapsed for more than 31 days. Upon receipt of the notice of suspension from DOT, Registrant filed a timely pro se appeal with the trial court.
Section 1786 provides, in pertinent part, as follows:
(a) General rule. — Every motor vehicle of the type required to be registered under this title which is operated or currently registered shall be covered by financial responsibility.
. . .
(d) Suspension of registration and operating privilege. — The Department of Transportation shall suspend the registration of a vehicle for a period of three months if it determines the required financial responsibility was not secured as required by this chapter and shall suspend the operating privilege of the owner or registrant for a period of three months if the department determines that the owner or registrant has operated or permitted the operation of the vehicle without the required financial responsibility. The operating privilege shall not be restored until the restoration fee for operating privilege provided by section 1960 (relating to reinstatement of operating privilege or vehicle registration) is paid. Whenever the department revokes or suspends the registration of any vehicle under this chapter, the department shall not restore the registration until the vehicle owner furnishes proof of financial responsibility in a manner determined by the department and submits an application for registration to the department, accompanied by the fee for restoration of registration provided by section 1960. This subsection shall not apply in the following circumstances:
(1) The owner or registrant proves to the satisfaction of the department that the lapse in financial responsibility coverage was for a period of less than 31 days and that the owner or registrant did not operate or permit the operation of the vehicle during the period of lapse in financial responsibility.
75 Pa.C.S.A. § 1786 (emphasis added).
At the hearing before the trial court, DOT produced several documents. They included DOT's notice to Registrant of his vehicle registration suspension, the electronic message received by DOT from New Hampshire informing DOT that Registrant's insurance had terminated on November 23, 2000, and a copy of DOT's registration record for Registrant.
In response, Registrant produced a financial responsibility card with an effective date of November 23, 2000. Registrant also testified that New Hampshire cashed his checks for premium payments made in November and December of 2000; copies of the cancelled checks were produced at the hearing. Registrant's wife testified that neither she nor her husband received any notice from New Hampshire of an impending termination of insurance coverage. They both testified that the very first indication that their automobile insurance may have terminated was a letter received from DOT in January of 2001, at which point they immediately contacted their insurance agent to straighten out the matter. Upon questioning by DOT's attorney about whether Registrant had filed a complaint with the Insurance Department, Registrant replied: "We are not lawyers."
The trial court sustained Beitler's appeal after concluding that the lack of coverage on his automobile "was the result of the insurance carrier's neglect and not the result of any action or inaction on the part of the Defendant." This appeal by DOT followed.
The issue before us is whether DOT established a lapse in Registrant's financial responsibility coverage as required for a registration suspension under 75 Pa.C.S.A. § 1786(d). DOT claims that it did and that the trial court erred in sustaining the appeal of the Registrants. DOT asserts that if Registrant did not receive an advance notice of termination of coverage from New Hampshire, his only recourse was to seek redress from the Insurance Department. We disagree.
Our standard of review is whether the trial court's findings are supported by competent evidence and whether the trial court committed an error of law or an abuse of discretion. Todd v. Department of Transportation, Bureau of Driver Licensing, 555 Pa. 193, 723 A.2d 655 (1999); Department of Transportation, Bureau of Driver Licensing v. Scott, 546 Pa. 241, 684 A.2d 539 (1996).
A vehicle registration may be suspended for three months where DOT can demonstrate that a policy of financial responsibility on a registered vehicle has lapsed and the registrant has not obtained new coverage within 31 days of the lapse. O'Hara v. Department of Transportation, Bureau of Motor Vehicles, 691 A.2d 1001 (Pa.Cmwlth. 1997), affirmed per curiam, 551 Pa. 559, 713 A.2d 60 (1998). In O'Hara, this Court overruled its prior decision in Department of Transportation, Bureau of Driver Licensing v. Shepley, 636 A.2d 1270 (Pa.Cmwlth. 1994) because it appeared to be inconsistent with its holding in Stone v. Department of Transportation, Bureau of Driver Licensing, 647 A.2d 287 (Pa.Cmwlth. 1994). The two holdings, however, are not inconsistent because Shepley arose from a policy cancellation, and Stone arose from a policy lapse. In a lapse, a policy expires by its own terms; a cancellation is a termination of a policy prior to its expiration. The regulatory implications for each are different. COUCH ON INSURANCE § 30:1 (3d ed. 1995). O'Hara and Stone apply to the factual circumstance of a policy lapse, but they do not apply where there has been a policy cancellation. We use this appeal to clarify the scope of our holding in O'Hara.
It is also required that during the period of lapse the registrant not operate the vehicle. 75 Pa.C.S.A. § 1786(d)(1). The record was silent on the issue of operation; it is not relevant because DOT asserts that Registrant's lapse exceeded 31 days.
In Shepley, this Court held that an unknowing failure to pay an insurance premium will not support a suspension of a motor vehicle registration. An insurer cannot effect a cancellation unless it has given the insured prior written notice of the impending cancellation. In the absence of a legally effective insurance cancellation, DOT cannot suspend a motor vehicle registration for failure to satisfy the Vehicle Code's financial responsibility requirements. 75 Pa.C.S.A. § 1786(d).
In Stone, this Court upheld a motor vehicle suspension where the insured was unaware of his automobile coverage lapse. This Court held that there is no requirement that DOT prove that the owner actually received notice of an imminent lapse of coverage.
See our companion opinion, Cain v. Department of Transportation, 811 A.2d 38 (Nos. 1486, 1487 and 1488 C.D. 2001, filed September 25, 2002).
Pennsylvania statute regulates the conduct of insurers in their cancellation of automobile insurance policies and in their underwriting decisions to refuse to write policies or to refuse to renew policies. Article XX of The Insurance Company Law of 1921, Act of May 17, 1921, P.L. 682, as amended by the Act of June 17, 1998, P.L. 464, No. 1998-68, 40 P. S. § 991.2001-2013 (Article XX). It establishes the grounds for a lawful non-renewal or cancellation of an automobile insurance policy as well as the mechanism for carrying out this decision. Article XX provides, inter alia, that a policy cancellation cannot be effected without prior notice. It states:
The 1998 enactment replaced an earlier statute popularly known as "Act 78." Act of June 5, 1968, P.L. 140, 40 P. S. § 1008.1 — 1008.11. The provisions of the repealed Act 78 are similar to those in Article XX and, therefore, many cases arising under Act 78 continue to have precedential effect. The Insurance Department adopted a cancellation and non-renewal regulation at 31 Pa. Code Chapter 61 under authority of Act 78 but it has not adopted a similar regulation under Article XX. Accordingly, Chapter 61 of the Pennsylvania Code no longer has the force and effect of law. Cases interpreting Chapter 61 no longer have precedential effect unless they also relate to statutory provisions of Act 78 that are now found in Article XX. Federal Kemper Insurance Co. v. Insurance Department, 509 Pa. 1, 500 A.2d 796 (1984), for example, construed Act 78 and 31 Pa. Code § 61.10(b) to develop its "knowing nonpayment" standard.
A cancellation or refusal to renew by an insurer of a policy of automobile insurance shall not be effective unless the insurer delivers or mails to the named insured at the address shown in the policy a written notice of the cancellation or refusal to renew.
Section 2006 of Article XX, 40 P. S. § 991.2006 (emphasis added). By contrast, Article XX exempts from its terms the policy lapse; it provides:
(c) Nothing in this article shall apply:
(1) If the insurer has manifested its willingness to renew by issuing or offering to issue a renewal policy, certificate or other evidence of renewal or has manifested such intention by any other means.
Section 2002(c)(1) of Article XX, 40 P. S. § 991.2002(c)(1) (emphasis added). The common "means" for the insurer to manifest this willingness is to send a premium invoice along with a new declarations page. If a policyholder chooses not to pay the renewal premium, then the policy will lapse on its own accord. There is no obligation upon the insurer to send a notice of lapse. Id.
The scope of Article XX is determined by its definitional section. The statute does not define "renewal" by what is actually stated on the face of the policy. It states:
[A]ny policy with a policy period or term of less than twelve (12) months or any period with no fixed expiration date shall for the purpose of this article be considered as if written for successive policy periods or terms of twelve (12) months.
Section 2001 of Article XX, 40 P. S. § 991.2001 (emphasis added). Accordingly, a termination of a policy before the twelve-month anniversary date is a cancellation, and this is true even if the policy states a coverage period of six months. Thus, if a policyholder does not pay a premium invoice sent to "renew" a contractual six-month policy, he is entitled to a notice of cancellation. Indeed, a notice must be issued or the cancellation will not be effected. Section 2006 of Article XX, 40 P. S. § 991.2006.
The coverage period stated in the policy still has significance. It allows the insurer to implement any rate increases that have been approved without having to wait for the twelve-month anniversary date.
To summarize, a cancellation or non-renewal is not effective unless the insurer provides advance written notice of its intent to effect a cancellation or non-renewal. On the other hand, where the insurer sends a premium invoice to effect a renewal of coverage at the twelve-month anniversary date, the insurer does not have a duty to give any notice of the policy lapse if the policyholder does not pay the premium.
In no case is it necessary to show that the required notice of cancellation or non-renewal was actually received by the policyholder, only that it has been sent. Further, a copy of the actual notice of cancellation does not need to be produced to prove that it was sent. "Proof of the office [of the insurer's] filing procedures with proof that the notice was written in the normal course of business and was placed in the normal course of mailing is sufficient to show receipt of the item." Donegal Mutual Insurance Co. v. Insurance Department, 694 A.2d 391, 394 (Pa.Cmwlth. 1997).
In registration suspension cases, it has long been held that challenges to the insurer's action must be presented to the Insurance Department. See, e.g, Department of Transportation, Bureau of Driver Licensing v. Riley, 615 A.2d 905 (Pa.Cmwlth. 1992). It is true that only the Insurance Department can order remedial action or impose sanctions if the insurer violates the statute. However, Article XX does not require Insurance Department intervention to prevent the occurrence of a cancellation where the insurer has not sent the requisite notice. By operation of law, i.e., Section 2006 of Article XX, a cancellation does not occur absent the required notice. In the absence of a cancellation being effected, there is nothing to appeal to the Insurance Department.
It has long been the law of Pennsylvania that where a notice of cancellation is required by statute or by the policy itself, the insurer's failure to follow the requirement results in the continuation of coverage. Royal Indemnity Co. v. Adams, 455 A.2d 135 (Pa. Super 1983).
This has significance in registration suspension cases. DOT may not suspend a vehicle's registration for lack of financial responsibility unless it can prove coverage has not been in effect for at least 31 days. 75 Pa.C.S.A. § 1786. If the insurer has not sent the required notice of non-renewal or cancellation, coverage does not terminate, and there is no factual or legal basis for a suspension of registration.
See supra note 1 for text of 75 Pa.C.S.A. § 1786.
In Riley this Court stated that "[i]n order to sustain its burden of proof, DOT must establish: (1) that the vehicle in question is of a type required to be registered in the Commonwealth; and (2) that the required automobile liability insurance had been cancelled or otherwise terminated." Id. at 907 (emphasis added). To sustain its burden of proof, DOT must establish the policy period and whether it terminated on the twelve-month anniversary date or at mid-policy. Next, it must show that in a termination for non-payment of premium, a notice of cancellation was sent, if required. In the absence of such notice, a cancellation is not effected and the predicate act for suspending a registration has not occurred. In light of the procedures set forth in Donegal, this evidentiary burden is not significant.
Simply relying on the insurer's statement that coverage has terminated is insufficient. The insurer's statement is untrue if it has not sent the required notice of cancellation. An untrue statement cannot trump in a registration suspension hearing.
DOT asserts that the burden was on Registrant to appeal his policy cancellation to the Insurance Department. This is an unrealistic burden where, as here, Registrant asserts that he never received any notice from New Hampshire. A notice of cancellation, inter alia, advises the policyholder of the right to appeal a cancellation to the Insurance Department. In the absence of this notice, unless the consumer is one sophisticated in insurance regulatory law, he or she will have no idea of this appeal right. This is not what was intended by Article XX.
Statutes are to be construed in pari materia. Reading Article XX against the requirements of the Vehicle Code means that DOT must prove that an insurance policy cancellation has been effected. DOT does not meet its burden of proving that the vehicle owner was without insurance coverage for 31 days until it proves that the insurer sent a notice of cancellation or non-renewal. In the case of a policy lapse, the evidentiary burden requires only that the insurer offered to renew, but the policyholder allowed the policy to lapse by not paying the premium required for the issuance of a successor twelve-month policy.
We thus clarify that the holding of O'Hara applies only to a lapse that has occurred at the expiration of a twelve-month automobile insurance policy; its principles do not extend to the circumstance of a policy cancellation. DOT's reliance on O'Hara here is misplaced because it did not establish whether November 23, 2000 was the anniversary date of Registrant's policy, or a six-month or quarterly billing cycle. In order to suspend Registrant's vehicle registration, DOT must demonstrate that Registrant's insurance lapsed because he failed to respond in a timely manner to an offer to renew for 12 months by paying the premium. If it was not a true lapse, and New Hampshire never sent Registrant a cancellation notice, then a cancellation of Registrant's coverage was never effected. If so, then the trial court's holding must be affirmed because Registrant's vehicle was insured and not without coverage for 31 days.
Because the record is incomplete on these key facts, we vacate the trial court's order and remand for further proceedings consistent with our opinion.
ORDER
AND NOW, this 25th day of September, 2002, the order of the Court of Common Pleas of Allegheny County in the above-captioned matter is hereby vacated and the case remanded for further proceedings consistent with the attached opinion.
I respectfully dissent. The majority holds that the motor vehicle owner in a vehicle registration suspension appeal may collaterally attack the underlying cancellation of insurance coverage and that, in such cases, the Department of Transportation, Bureau of Driver Licensing (DOT) has the burden of proving that the owner received proper notice of the cancellation. Although I would like to agree with the result reached by the majority, I must dissent because I believe that the result is inconsistent with the law as enacted by the legislature.
Section 1786(e)(3) of the Vehicle Code states that an insurer shall notify DOT if motor vehicle liability insurance has been "canceled or terminated by the insured or by the insurer." 75 Pa. C.S. § 1786(e)(3). Here, the insurance company notified DOT that the insurance was canceled or terminated by either the insured or the insurer.
The majority states that the insurer's notice to DOT is not sufficient to make a prima facie case that a vehicle owner's insurance coverage has been canceled or terminated; in support of this statement, the majority suggests that the insurer's statement might be untrue. (Majority op. at 8 n. 10.) However, I see no reason for DOT to assume in every case that the notice is untrue or that the vehicle owner will raise the notice's veracity as an issue in a statutory appeal. If the owner were to raise such an issue, it would constitute a collateral attack on the underlying cancellation or termination.
In that regard, I note that the majority frames the issue in this case as whether DOT established a lapse in the registrant's insurance coverage. (Majority op. at 3.) However, I believe the issue in this case is whether, in a vehicle registration suspension appeal, the vehicle owner may collaterally attack the underlying cancellation or termination of insurance coverage. As indicated below, our court has addressed this issue clearly in O'Hara v. Department of Transportation, 691 A.2d 1001 (Pa.Cmwlth. 1997).
Section 1786(c) of the Vehicle Code states that, upon registering a motor vehicle, the owner "shall be deemed to have given consent to produce proof, upon request, to [DOT] . . . that the vehicle registrant has the financial responsibility required. . . ." 75 Pa.C.S.A. § 1786(c) (emphasis added). Here, DOT presented evidence showing that, prior to the registration suspension, DOT requested proof of the required financial responsibility.
Section 1786(d) of the Vehicle Code authorizes DOT to suspend the registration of a motor vehicle for three months if DOT determines that the vehicle owner failed to secure the required financial responsibility. 75 Pa.C.S.A. § 1786(d). Here, when the motor vehicle owner failed to produce proof of the required financial responsibility, DOT suspended the registration. Although DOT fulfilled its obligations under the law, the owner filed an appeal.
In O'Hara v. Department of Transportation, 691 A.2d 1001 (Pa.Cmwlth. 1997), this court held that, when appealing a vehicle registration suspension, a vehicle owner cannot collaterally attack the cancellation or termination of insurance coverage. We explicitly stated that DOT isnot required to prove that the owner was at fault or that the owner actually received notice of the imminent lapse in insurance coverage. Id. at 1004 (quoting Stone v. Department of Transportation, Bureau of Driver Licensing, 647 A.2d 287, 288 (1994)). Nevertheless, the owner in this case challenged the cancellation of the insurance coverage, specifically asserting that there was no notice.
The majority states that it is clarifying, not overruling, this court's holding in O'Hara. (Majority op. at 9.) However, the majority's holding is directly contrary to O'Hara, now allowing a collateral attack on an underlying cancellation and requiring DOT to produce proof that there was notice of the cancellation.
Moreover, the majority's clarification is to limit the holding in O'Hara to cases involving a lapse that occurs at the expiration of a twelve-month insurance policy. (Majority op. at 9.) However, the O'Hara case did not involve a lapse that occurred at the expiration of a twelve-month insurance policy. In O'Hara, the insurer cancelled the policy for nonpayment of premiums; when the insurer did not send a normal quarterly premium bill, the owner neglected to pay the premium.
Clearly, under the Vehicle Code and O'Hara, DOT must prevail here. However, because I see great injustice in allowing DOT to suspend a motor vehicle registration despite alleged insurance company errors, I would hope that the legislature would review the existing law and remove the inequities from it.
Judge Judge Pellegrini joins in this dissent.