Opinion
C.A. No. 05C-08-088 RRC.
Submitted: May 8, 2006.
Decided: June 23, 2006.
On Plaintiffs Classie Hunter and Ira Brown's Motion for Partial Summary Judgment. DENIED.
On Defendant Dairyland Insurance Company's Motion for Summary Judgment. GRANTED.
Kenneth M. Roseman, Esquire Ciconte, Roseman Wasserman, Wilmington, Delaware, Attorney for Plaintiffs.
Nicholas E. Skiles, Esquire, Swartz Campbell, LLC, Wilmington, Delaware, Attorney for Defendant.
Dear Counsel:
Currently before this Court are two cross motions for summary judgment. The first motion for partial summary judgment was filed on February 2, 2006, by Plaintiffs Classie Hunter and Ira Brown ("Plaintiffs"), to which Defendant Dairyland Insurance Company ("Dairyland") responded with its own motion for summary judgment, filed on February 24, 2006. The issue in this case is whether Dairyland's cancellation of the insured's policy for nonpayment of premium was effective where the notice of cancellation did not advise the insured of the right to apply for a hearing on the merits before the Insurance Commissioner ("Commissioner"). If the answer to that query is in the affirmative, then Plaintiffs are not entitled to coverage.
I. FACTS
The facts are not in dispute. On December 2, 2004, Dairyland issued a policy which provided coverage for two vehicles owned by Kenya Hunter ("the insured"). On April 13, 2005, Dairyland mailed a "Notice of Cancellation" to the insured indicating that the policy would be cancelled, effective May 3, 2005, due to nonpayment of premiums. After then having received no payment from the insured towards the past-due premiums, Dairyland cancelled the policy on the date specified in the notice. Then, on May 27, 2005, Plaintiffs (neither of whom were the insured) were involved in an accident while driving one of the vehicles that was covered under the insured's then-cancelled policy. On June 23, 2005, Dairyland denied coverage to the Plaintiffs under the cancelled policy.
II. STANDARD OF REVIEW
Upon cross motions for summary judgment, this Court will only grant summary judgment if there is no genuine issue of material fact and if one of the parties is entitled to judgment as a matter of law. Superior Court Civil Rule 56(h) provides:
Gallaher v. USAA Cas. Ins. Co., 2005 WL 3062014, * 1 (Del.Super.) (granting summary judgment for plaintiff where there were no genuine issues of material fact and where plaintiff was entitled to collect benefits under the plain language of the contract).
Where the parties have filed cross motions for summary judgment and have not presented argument to the Court that there is an issue of fact material to the disposition of either motion, the Court shall deem the motions to be the equivalent of a stipulation for decision on the merits based on the record submitted with the motions.
As the parties do not argue that any material facts of this case are in dispute and they agree that the sole legal issue is whether Dairyland effectively cancelled the insurance policy under which Plaintiffs are now seeking coverage, the issues are legal rather than factual and, thus, partial summary judgment for Plaintiffs or summary judgment for Dairyland is appropriate.
Id. Plaintiffs' motion is for partial summary judgment because the amount of damages would still be at issue should the motion be granted.
III. APPLICABLE STATUTORY SCHEME
"Insurance companies doing business in Delaware . . . are statutorily obligated to give their policyholders notice that their coverage will be terminated in certain circumstances." The Delaware Code provides that a notice of cancellation issued by an insurer will be effective if it is based, among other things, on nonpayment of the premium. 18 Del. C. § 3905(a) provides that the insurer shall give the insured 10 days notice where the cancellation is for nonpayment of premium. A further statutory requirement provides that "[e]ach notice of cancellation, except as provided in § 3903(b), or nonrenewal of a policy shall contain or be accompanied by a notice of the named insured's right to apply to the Commissioner for a hearing thereon."
State Farm Mut. Auto. Ins. Co. v. Mundorf, 659 A.2d 215, 218 (Del. 1995) (affirming trial court's holding that plaintiff's "assigned risk policy" remained in effect through date of accident because insurer did not send notice of cancellation to plaintiff).
18 Del. C. § 3905(a) (". . . where cancellation is for nonpayment of premium, at least 10 days notice of cancellation accompanied by reason therefore shall be given.").
18 Del. C. § 3903(b) ("Sections 3903-3907 of this title shall not apply to any policy which has been in effect less than 60 days that the time of notice of cancellation is mailed or delivered by the insurer, unless it is a renewal policy.").
18 Del. C. § 3905(e).
Finally, referring specifically to hearings before the Commissioner, a
named insured who wishes to contest the reason or reasons for a cancellation or nonrenewal to which § 3904 of this title is applicable shall not less than 15 days prior to the effective date of cancellation or nonrenewal mail or deliver to the Commissioner a request for a hearing, which shall state clearly the basis for the appeal . . . This subsection shall not apply to cancellation for nonpayment of premium.
18 Del. C. § 3906(a) (emphasis added).
IV. CONTENTIONS OF THE PARTIES
Plaintiffs claim that the "Notice of Cancellation" was defective as it did not contain "notice of the named insured's right to apply to the [Insurance] Commissioner for a hearing[,]" as purportedly required under 18 Del. C. § 3905(e). Plaintiffs argue that as a result of the supposed ineffective notice, the insured's policy was not properly cancelled and, thus, Plaintiffs are entitled to coverage under the policy. Plaintiffs also argue that the language of § 3905(e), which provides that notices of cancellation must also give notice of the insured's right to apply for a hearing before the Commissioner, is only limited by § 3903(b), which Plaintiffs claim is irrelevant for present purposes. Plaintiffs assert that "[i]f the drafters of § 3905(e) intended that provision to be subject to limitations contained in § 3906(a), the drafters would have expressly setforth that limitation."
Pls.' Mot. for Part. Summ. J. ¶ 3.
Id. ¶ 7.
Pls.' Reply ¶ 2-3.
Id. ¶ 3.
Dairyland responds that the applicable sections of the Delaware Code, particularly § 3906(a), are "explicit that, where a policy is cancelled for non-payment of premiums, that cancellation is not subject to hearing before the Commissioner." Dairyland also argues that if Plaintiffs' interpretation of the statutory scheme is used, then the "generally-worded, procedural notice provision [of 18 Del. C. § 3905(e)] would improperly be permitted to trump and void 18 Del. C. § 3906(a)'s substantive exclusion from the right to [a] hearing [before the Commissioner regarding] policy cancellations due to unpaid premium[s]." Moreover, Dairyland contends that if Plaintiffs' theory prevails, then the "Commissioner would be overburdened with policy cancellation hearings the basis of which is already well-known to the cancelled policy holder, who failed to pay the premium in the first place." Thus, because the notice of cancellation complied with the relevant statutes, Dairyland asserts that the insured's vehicle, in which Plaintiffs were injured, was uninsured by Dairyland at the time of the accident.
Def.'s Mot. for Part. Summ. J. Resp. to Pls.' Mot. for Part. Summ. J. ¶ 9.
Id. ¶ 11.
Id.
Id. ¶ 13, 14.
V. DISCUSSION
The issue in this case is whether an insurer's cancellation of the insured's policy for nonpayment of premium is effective where the notice of cancellation does not advise the insured of the right to apply, in certain situations, for a hearing on the merits before the Insurance Commissioner. The answer to that question determines whether or not Plaintiffs are entitled to coverage under the "cancelled" policy. Under the relevant statutes and case law, a named insured who receives a timely notice of cancellation for nonpayment of premiums is not entitled to apply for a hearing before the Commissioner. Therefore, this Court finds that a notice of cancellation for nonpayment of premiums that does not give the insured notice of any right to apply for a hearing before the Commissioner, to which he has no statutory right, is effective. Thus, as Dairyland's notice of cancellation complied with the statutory requirements, Plaintiffs cannot claim coverage for injuries sustained in the accident, which occurred after the cancellation date specified by Dairyland. Dairyland is entitled to judgment as a matter of law and therefore, Plaintiffs' motion for partial summary judgment is DENIED and Dairyland's motion for summary judgment is GRANTED.
The relevant statutes, viewed in isolation of each other, are clear by themselves; however, when read together, they appear at first blush to be inconsistent. Section 3905(e) states that all notices of cancellation, except for situations not relevant here, are required to give notice to the insured of the right to apply for a hearing before the Commissioner. However, § 3906(a) specifically excludes cancellations for nonpayment of premiums from triggering the right to apply for a hearing on the merits before a Commissioner. It is the duty of this Court, under well settled rules of statutory construction, to read these statutes together and attempt to harmonize them in a way that would give effect to the intent of the General Assembly. "[E]ach section of a particular chapter must be construed in relation to every other section to produce a consistent whole. Thus, a court cannot interpret a term or phrase in one statute in a manner that nullifies the plain intent of another statute in the same chapter."
Allstate Ins. Co. v. Gillaspie, 668 A.2d 757, 761 (Del.Super.Ct. 1995) (following the plain language of the statute as it gave effect to the intent of the legislature), aff'd, 676 A.2d 903 (Del. 1996).
State of Delaware Dep't. of Natural Res. and Envtl. Control v. Murphy, 2001 WL 282817, * 3 (Del.Super.) (citing George Lynch, Inc. v. Div. of Parks and Recreation, Dep't of Natural Res. and Envtl. Control, 465 A.2d 345, 350 (Del. 1983) (construing various statutes of a single chapter harmoniously as to further the intent of the General Assembly); 2A Norman J. Singer, Sutherland Statutory Construction § 45:10, at 56 (2000) ("[A]n examination of all legislation in a particular field is necessary for a full appreciation of any specific enactment.").
Those Delaware Courts that have confronted the question of whether a notice of cancellation for nonpayment of premiums requires notice of an insured's right to apply for a hearing before the Commissioner have all concluded, in essence, that "the [general] right to a hearing afforded by § 3905(e) is qualified in § 3906, which states that his [or her] right is not applicable to cases of cancellation for non-payment of premium." Another Delaware Superior Court case has recognized the existence of two specific exceptions to the general notice requirement of § 3905(e): "when (1) the insurer manifests its intention to renew coverage [or] (2) the cancellation or non-renewal is based on the insured's failure to pay his premium." A party is not generally owed notice of a right to which it is not entitled; in other words, a party will not be prejudiced by not receiving notice of a right that it does not have.
Collins v. Liberty Mutual Ins. Co., 1991 WL 190390 (Del.Super.) (granting summary judgment in favor of defendant insurance company, whose notice of cancellation was effective even though it did not give insured notice of the right to apply for a hearing before the Insurance Commissioner) (quoting Johnson v. Albright, Del. Super., C.A. No. 81C-FE-63, Martin, J (Jan. 18, 1983) (Letter Op.) (same)). See also Sutherland, § 46:05, at 177 ("Where there is inescapable conflict between general and specific terms or provisions of a statute, the specific will prevail.").
Clark v. Quaker City Ins. Co., 1999 WL 1442052 (Del.Super.) (holding that insured was still covered under his policy, as insurer failed to give insured adequate notice of cancellation, on the grounds that the court ruled that insurance company could not use exceptions of § 3905, specifically that insured did not pay premiums).
See, e.g., In re Green, 464 A.2d 881 (Del. 1983).
Both Collins and Johnson are factually similar to and legally indistinguishable from the case at bar. In Collins, the plaintiff was injured in an accident as a passenger in an automobile that was owned by a third-party and insured by the defendant insurance company. However, the insurance company sent the owner a notice of cancellation for nonpayment of premiums and then cancelled the policy prior to the accident. The plaintiff argued that the notice was ineffective because the insured was not given notice of her right to apply for a hearing before the Commissioner and, therefore, the policy was still in effect at the time of accident. The court rejected that argument. The Collins court, relying on the decision in Johnson, held that the notice requirement of § 3905(e) is specifically limited by the exclusionary language in § 3906(a). Therefore, a notice of cancellation for nonpayment of premium is effective to cancel the insured's policy on the date specified in the notice if it lacks notice of the insured's right to apply for a hearing before the Commissioner.
Collins, 1991 WL 190390, at * 1.
Id.
Id.
Id. (quoting Johnson, at 2 (rejecting plaintiff's argument that the insured is entitled to apply for a hearing before the Commissioner upon receipt of a notice of cancellation for nonpayment of premiums)).
This holding illustrates the purpose behind the specific exclusion of cancellation for nonpayment of premiums from the general notice requirement of § 3905(e). The hearing before the Commissioner is designed to give the insured an opportunity to "contest the reason or reasons for a cancellation[.]" However, the General Assembly, by including the exclusionary language in § 3906(a), has determined that an insured who allows a policy to be cancelled for nonpayment of premiums has no right such a hearing. One Delaware Superior Court decision states that although people may not completely understand insurance coverage, they "have to know that insurance coverage costs money" and that when they do not pay for coverage, ignore "clear warnings that their coverage would be . . . cancelled" and then protest the cancellation only after an accident, there is no set of facts that would support "reading the insurance code in a way that makes [an insured] entitled to insurance coverage for which [he or she] paid no one." As the necessary premiums were not paid, the insured here has no right under § 3906(a) to apply for a hearing "contest[ing]" the cancellation of a policy for which no money was paid. Therefore, the notice of cancellation was adequate and the policy was effectively cancelled.
Dimenco v. Selective Ins. Co. of Amer., 833 A.2d 984 (Del.Super.Ct. 2002) (granting defendant premium finance company's motion for summary judgment on the grounds, among others, that the "Notice of Intent to Cancel" was adequate under the statute and there was "only one reasonable way to read [the company's] ten day notice" in that plaintiff's insurance coverage was to be cancelled on the date specified), aff'd, 832 A.2d 1250 (Del. 2003).
VI. CONCLUSION
For the foregoing reasons, Plaintiffs' Motion for Partial Summary Judgment is DENIED and Dairyland's Motion for Summary Judgment is GRANTED.