Opinion
4-23-1959
Raymond H. JENSEN, Dorothy J. Jensen, Marian Morrow, and Vincent James DiMatteo, by and through his Guardian ad litem John DiMatteo, Plaintiffs and Appellants, v. TRADERS & GENERAL INSURANCE COMPANY, a corporation, Defendant and Respondent. * Civ. 18167.
Nichols, Williams, Morgan & Digardi, Edward Digardi, Sheridan, Hoffman & Mendel, Oakland, for appellants. Partridge, O'Connell & Partridge, Wallace O'Connell, San Francisco, for respondents.
Raymond H. JENSEN, Dorothy J. Jensen, Marian Morrow, and Vincent James DiMatteo, by and through his Guardian ad litem John DiMatteo, Plaintiffs and Appellants,
v.
TRADERS & GENERAL INSURANCE COMPANY, a corporation, Defendant and Respondent.
April 23, 1959.
Hearing Granted June 18, 1959.
Nichols, Williams, Morgan & Digardi, Edward Digardi, Sheridan, Hoffman & Mendel, Oakland, for appellants.
Partridge, O'Connell & Partridge, Wallace O'Connell, San Francisco, for respondents.
KAUFMAN, Presiding Justice.
Plaintiffs Raymond Jensen, Dorothy Jensen and Marian Morrow recovered judgment against plaintiff Vincent (Jim) DiMatteo for injuries sustained in an automobile accident and now have joined with DiMatteo in bringing the present action against his insurance carrier, Traders & General Insurance Company. DiMatteo claimed a right to be reimbursed for the cost of defending the first action. Defendant claimed it had cancelled the policy before the accident. At the first trial, a verdict for the plaintiffs was returned, but on appeal, reversed by this Court (Div. I) on the ground that on instruction conditioning cancellation upon return of the premium was prejudicial to Traders & General. Jensen v. Traders & General Ins. Co., 141 Cal.App.2d 162, 296 P.2d 434. At the second trial, the jury returned a verdict in favor of the defendant. Plaintiffs now appeal.
On April 19, 1951, plaintiff 'Jim' DiMatteo, a minor, accompanied by his parents, purchased a used car on a conditional sales contract from A. A. Moschetti, doing business under the name of West Coast Motor Sales. The conditional sales contract included an item by way of premium on the policy. Moschetti (who was not an agent of the defendant) placed the insurance with defendant's agent Lotz. Defendant issued its policy of public liability and property damage insurance, naming as insured, plaintiff Jim DiMatteo, and his father plaintiff John DiMatteo. The DiMatteos received their policy by mail and read it to check coverages but did not read the fine print.
There is uncontroverted evidence that the DiMatteos paid all premiums due from May through November. The payments were made to Moschetti. Moschetti had sold the DiMatteo contract to a finance company in April and received the cash proceeds thereof, including the amount sufficient to pay the insurance premium in full. Moschetti did not remit this amount to defendant's agent Lotz until September 14, 1951.
Defendant offered competent evidence of mailing of cancellation notices (two separate notices, one addressed to Jim DiMatteo, one to his father) on Friday, August 10, 1951. The letters were not returned to the defendant's office. The plaintiffs testified that no cancellation notices were received and that they had to inkling of any cancellation until November, when the accident occurred. They continued making their payments to Moschetti in August, September, October and November. Plaintiff John DiMatteo testified he would not have permitted his son to drive without insurance.
The sole issue on appeal is the propriety of the following instruction given to the jury. 'When a policy of insurance provides as in this case that the policy may be cancelled by the company by mailing to the insured at the address shown on the policy a written notice stating when, not less than five days thereafter, such cancellation shall become effective and further provides that the mailing of such notice shall be sufficient proof of notice it is not necessary that the notice so mailed shall be received by the insured in order to be effective. If you find that the defendant Traders and General Insurance Company mailed a notice of cancellation to John and Jim DiMatteo they have done everything which the policy and the law requires of them and the policy ceased to remain in effect after the date specified in said notice regardless of whether or not the DiMatteos or either of them ever actually received such notice.'
Plaintiffs argue that the concellation clause does not warrant such an instruction; that the instruction is contrary to California law and public policy; and that the instruction erroneously deprived them of having the fact of receipt of the notices determined by the jury. '23. Cancelation. This policy may be canceled by the named insured by surrender thereof or by mailing to the company written notice stating when thereafter such cancelation shall be effective. This policy may be canceled by the company by mailing to the named insured at the address shown in this policy written notice stating when not less than five days thereafter such cancelation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice and the effective date and hour of cancelation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the named insured or by the company shall be equivalent to mailing.'
The question here presented has not been directly ruled upon in this state. In Naify v. Pacific Indemnity Company, 11 Cal.2d 5, at page 10, 76 P.2d 663, at page 666, 115 A.L.R. 476, the court said: 'At the outset we are met with a question raised by amici curiae on behalf of various insurance companies, namely, whether a notice of cancellation, sent to the address of the assured as stated in the policy, and pursuant to a provision in the policy stating that the mailing thereof shall be sufficient notice, is effective despite lack of receipt by the insured. In this simple form, the question may perhaps be answered in the affirmative.'
The court held, however, that under the special circumstances of the case (insured had no choice of policy and never received the policy; pro-rata payments were accepted by the seller who did not notify the insured), the doctrine was entirely inapplicable. American Building Maintenance Co. v. Indemnity Ins. Co., 214 Cal. 608, 7 P.2d 305, states that the mailing of notice under a similar policy clause would have been sufficient, but then held that if the notice sent by mail was not received, the cancellation is ineffective, citing Farnum v. Phoenix Ins. Co., 83 Cal. 246, 23 P. 869. However, the American B. M. case involved modification of the policy, while in the Farnum case the policy provided for termination on 'giving notice'. See also Truck Ins. Exchange v. Industrial Acc. Comm., 36 Cal.2d 646, at page 650, 226 P.2d 583.
An examination of the authorities on this question in other jurisdictions reveals a sharp conflict. See 29 Am.Jur. 285; 123 A.L.R. 1008, and such cases as Donarski v. Lardy, 1958, 251 Minn. 358, 88 N.W.2d 7; Grimes v. State Auto Mut. Ins. Co., 1953, 95 Ohio App. 254, 118 N.E.2d 841; Medford v. Pacific Nat. Fire Ins. Co., 189 Or. 617, 219 P.2d 142, 222 P.2d 407, 16 A.L.R.2d 1181. In part, this conflict may be explained by variations in the provisions of policies and statutes involved.
In Griffin v. General Acc. Fire & Life Assur. Co., 1953, 94 Ohio App. 403, 116 N.E.2d 41, cited by the plaintiffs, the court in construing a similar provision, indicated that 'sufficient proof' was not 'conclusive proof.' In the Griffin case, however, the agent of the insurer had knowledge that the notices had not been delivered as they were returned by the post office and the agent also had notice of where the insured could be found. In Donarski v. Lardy, 1958, 251 Minn. 358, 88 N.W.2d 7, the issue was whether the policy had been cancelled despite an express finding by the lower court that the notice of cancellation had not been received by the insured. The court held in favor of the plaintiff policy-holder, finding an ambiguity in the words 'sufficient proof of notice' by referring to the meaning of 'sufficient evidence', and held that even if the clause were interpreted as contended for by the insurance company, it would violate the public policy of the state which was to give the insured notice of cancellation so he could obtain other insurance and fulfill his obligation to those he may injure or damage through the use of his automobile.
Other courts have found that the standard policy provision is neither ambiguous nor contrary to public policy. For example, in Midwestern Insurance Co. v. Cathey, Okl. 1953, 262 P.2d 434, at page 436, the court said: 'There is no ambiguity in the language of the policy as contained in the cancellation provision. Under the very strictest construction of the policy, the contrasting language is not of doubtful meaning. Neither can it be said that the provision is unreasonable or unjust. Under the provision, the assured assumed the risk of receiving the notice when properly mailed to him at the address given in the policy. Under a policy containing the provision involved herein, it would place an unreasonable and unfair burden on the company to say that notice of the cancellation must be actually delivered to the assured. To make such a requirement would be placing additional words in the policy far beyond the actual terms of the policy agreed to by the parties.'
See also Service Fire Insurance Co. of N.Y. v. Markey, Fla.1955, 83 So.2d 855; Wisconsin Natural Gas Co. v. Employers Mut. Liability Ins. Co., 1953, 263 Wis. 633, 58 N.W.2d 424; Aetna Ins. Co. v. Aviritt, Tex.Civ.App., 199 S.W.2d 662; American Fire & Casualty Co. v. Combs, Ky.1954, 273 S.W.2d 37; Duff v. Secured Fire & Marine Ins. Co., Tex.Civ.App.1949, 227 S.W.2d 257; Putman v. Deinhamer, 1955, 270 Wis. 157, 70 N.W.2d 652; Womack v. Fenton, 1953, 28 N.J.Super. 345, 100 A.2d 690. Following these authorities (and others involving clauses with slightly different language such as Gendron v. Calvert Fire Ins. Co., 47 N.M. 348, 143 P.2d 462, 149 A.L.R. 1310; Trinity Universal Ins. Co. v. Willrich, 13 Wash.2d 263, 124 P.2d 950, 142 A.L.R. 1), a federal district court in this state has concluded that California would adopt a similar rule. Superior Insurance Co. v. Restituto, D.C., 124 F.Supp. 392; Pierce v. General Casualty Co., D.C., 136 F.Supp. 367; see also Traders & General Ins. Co. v. Champ, 9 Cir., 225 F.2d 802, 805, and 9 Cir., 226 F.2d 829. The facts of the Restituto case are somewhat similar to the instant case as is the clause involved. The court said in 124 F.Supp. at page 395: 'Parties to a contract may contract on such method of giving notice as they desire and unless public policy is contravened, the contract should be enforced as made. The use of the mails has become too well integrated into our economic and business life for such a public policy question to concern us.'
The insurance company argues that the contract is clear and that courts may not rewrite the contracts of the parties. It is difficult to imagine that the standard cancellation clause here involved which has given rise to so many different interpretations by courts is clear to laymen, like the plaintiffs. The plaintiffs here, like most laymen on receiving a policy of insurance, looked at the coverages. Their attention was not called to the fine print. In the instant case, the parties did not bargain for the provisions of the contract. Rather, the insurance company selected the language and the insured is 'stuck' with it. 43 Columbia L.R. 629. It has long been the law that in such situations, the construction more favorable to the insured must be adopted. Hobson v. Mutual Benefit H. & A. Ass'n, 99 Cal.App.2d 330, 221 P.2d 761; Island v. Fireman's Fund Indemnity Co., 30 Cal.2d 541, 184 P.2d 153, 173 A.L.R. 896; Pacific Heating & Ventilating Co. v. Williamsburgh City Fire Ins. Co., 158 Cal. 367, 111 P. 4. In following the rule of construing insurance policies in favor of the policy-holder, the Supreme Court of Minnesota in Donarski v. Lardy, 251 Minn. 358, at page 363, 88 N.W.2d 7, at page 11, said: 'The mere fact that some degree of proof is required in the cancellation provision in question indicates that the parties contemplated that some notice of the cancellation of the insurance policy should actually be received by the insured. Therefore, construing this provision consistently with the rule of construction laid down in Freyberg v. London & Scottish Assur. Corp. supra [246 Minn. 417, 75 N.W.2d 203] and in the light of the cases definding 'sufficient evidence,' it is our opinion that the provision means that mailing is a proper mode of communicating notice of cancellation to the insured, but that it does not thereafter relieve the insurance company of the obligation of establishing that the insured received the notice. It further establishes a rule of evidence entitling a trier of fact to find that an insured does have notice of cancellation when the company introduces evidence of the mailing of notice, but on the other hand it would also entitle the finder of facts to find that the notice was not received where the insured has testified that the notice was not received. In case the latter fact is found, as in the case at bar, it must be held that the policy was not cancelled.'
We think the reasoning of the Minnesota court on the rule of evidence is particularly applicable here. As was pointed out on the first appeal of this case, Jensen v. Traders & General Ins. Co., 141 Cal.App.2d 162, at pages 164-165, 296 P.2d 434, there was here a conflict of evidence as to the mailing of the notices. Under the instruction given, the jury could not have found that the notices were not received. We think the plaintiffs were entitled to have the jury determine the fact of receipt as well as the fact of mailing.
There is, however, a further and more compelling reason for our view here. Even if the clause were interpreted as contended for by the insurance company, it would be a violation of the public policy of this state. The insurance company argues that our Legislature has already declared the public policy of the State of California to be in accordance with its view of the clause. We cannot agree. Sections 10363 and 10369.9 of the Insurance Code merely permit certain kinds of cancellation clauses in disability policies. Section 651, which like section 10369.9 was enacted after the events leading to this litigation, specifically applies to automobile liability policies and merely states, '* * * no cancellation by an insurer * * * shall be effective prior to the mailing or delivery to the named insured at the address shown in the policy, of a written notice of the cancellation stating when * * * the cancellation shall become effective.' There are other public policy considerations besides the sanctity of contracts urged by the insurance company. We have already mentioned the rule of construing insurance policies in favor of the insured. The other considerations were well stated by the Minnesota court in Donarski v. Lardy, supra, at pages 364 to 365 of 251 Minn., at page 12 of 88 N.W.2d: 'Clearly the object of the insured when he buys a policy of the kind involved here is to receive protection in order that he might fulfill his obligations to those he has injured or damaged through the use of his automobile. The provision in the policy providing for notice of cancellation is obviously to give the insured an opportunity to procure other insurance. If the policy can be cancelled at any time by merely depositing notice in the mails with no regard to whether or not notice is actually received, then the object of the notice may be completely nullified and there may be no chance of fulfilling the object sought in obtaining the insurance.'
Our own financial responsibility law (Vehicle Code, § 410 et seq.), assigned risk plan (Insurance Code, § 11620 et seq.) and other authorities indicate a policy strongly favoring the protection of the public in the field of liability insurance coverage for automobile owners, and support our view that the overriding public policy of this state is like that of Minnesota in this respect. Samson v. State of California, 55 Cal.App.2d 194, 130 P.2d 452; 35 A.L.R. 1011; California State Automobile, etc., Bureau v. Downey, 96 Cal.App.2d 876, 216 P.2d 882, affirmed 341 U.S. 105, 71 S.Ct. 601, 95 L.Ed. 788; Continental Casualty Co. v. Phoenix Construction Co., 46 Cal.2d 423, 296 P.2d 801, 57 A.L.R.2d 914. In Truck Ins. Exchange v. Industrial Acc. Comm., 36 Cal.2d 646, 226 P.2d 583, the doctrine of estoppel was used to reach a just result. That doctrine has no application to facts here presented.
If the public policy of this state were otherwise, as contended by the insurance company, the result in this case, as well as many others, would be inequitable and unjust. For example, automobile insurance could be cancelled while the insured was away on a 10-day vacation; or the company could provide in its policy that cancellation could be accomplished by merely posting its intention on a bulletin board in its home office. We do not think that the right to fully enter into contracts without impairment of such right demands such results.
The instruction complained of was therefore erroneous. The question as to whether the notice was in fact received should have been submitted to the jury with an appropriate instruction. If the notice was in fact received, the cancellation was effective; otherwise not.
Judgment reversed.
DOOLING, J., concurs.
DRAPER, J., concurs in the judgment. --------------- * Opinion vacated 345 P.2d 1. * Under Moschetti's arrangements with Lotz, Moschetti periodically received statements covering the balance due. In March and April the accounts were paid in full. In May, Lotz was in the process of changing his bookkeeping system. At the end of May a balance was owing from Moschetti to Lotz; the June statement showed a balance owing from Lotz to Moschetti. On September 14, Moschetti made a payment to Lotz and closed the account. The verdict rendered against Moschetti at the first trial was not appealed.