Opinion
Rehearing Denied Oct. 20, 1967.
Hearing Granted Nov. 30, 1967.
Gene E. Smith, San Diego, for appellant.
Strop & Hamrick, San Diego, for defendant.
OPINION
WHELAN, Associate Justice.
Defendant State Farm Fire and Casualty Company (insurer) appeals from a directed verdict in favor of Leslie D. Sawyer (plaintiff).
The present action was instituted after plaintiff had recovered, in another action, a default judgment against one Anna Marie Kingston (Kingston), the insured under a policy of automobile liability insurance issued by insurer.
FACTUAL BACKGROUND
Kingston and her husband, while residents of the San Francisco area, had liability insurance with the insurer covering a Plymouth automobile, on which the premium was prepaid when Kingston and her husband changed their residence to Hanford and acquired a second vehicle.
The Kingstons went to the Hanford agent of the insurer to obtain coverage on the second vehicle and give notice of change of address. The agent took their application on August 31, 1961, forwarded it to the insurer which issued a policy covering both vehicles and sent policy #9004 996-D29-05 covering both vehicles to the Hanford agent who signed it and mailed it to the Kingstons. The face sheet of the policy described, the vehicles covered, the nature and amount of the coverage, and the total premium of $106.77.
The printed form of policy prepared by the insurer contained this clause:
'STATE FARM FIRE AND CASUALTY COMPANY * * * in consideration of the premium paid and in reliance upon the declaration made a part hereof, agrees with the insured named herein, subject to the provisions of the policy: * * *'
Another provision was as follows:
'Cancellation. * * *
'The company may cancel this policy by written notice, addressed to the insured named in the declarations and mailed to the address shown therein, stating 'The mailing of the notice shall be sufficient proof of notice and the effective date and hour of cancellation stated therein shall become the end of the policy period. Delivery of written notice shall be equivalent to mailing.
'* * * If the company cancels, earned premiums shall be computed pro rata. Premium adjustment may be made at the time cancellation is effected or as soon as practicable thereafter, but the payment or tender of unearned premiums is not a condition of cancellation.'
On November 13, 1961, Mr. Kingston wrote to the Hanford agent a letter received by the agent which requested a policy endorsement showing a loss payable clause in favor of a finance company and the sending of a certificate to such company.
On August 31, 1961, when the Kingstons made their application in Hanford, the amount of the unearned premium on their original policy was $22.28. Thereafter two payments of $28 and $16.24, respectively, were made by Mr. Kingston. Thereafter the insurer billed the Kingstons for a claimed balance of premium of $42.25.
On February 13, 1962, the insurer mailed to the Kingstons a notice of cancellation of the policy for nonpayment of premium to be effective February 26, 1962.
On February 28, 1962, Kingston, who had by then moved to San Diego County, while operating the Plymouth automobile described in the policy, caused it to collide with a vehicle operated by plaintiff.
Kingston promptly reported the accident to the insurer, which made an investigation. The agent in charge of the investigation concluded that Kingston was liable to plaintiff and that plaintiff's claim had a potential value in excess of the policy limit of $10,000.
The insurer notified Kingston that she was not covered because of the cancellation of the policy.
Plaintiff brought his action against Kingston who turned the summons and complaint over to the insurer, whose attorneys returned the papers to Kingston. A written demand had been made by Kingston that the insurer defend the action, which it refused to do.
Plaintiff made an offer to the insurer to settle his claim for $10,000, which was refused. Plaintiff's counsel wrote the insurer threatening to take default against Kingston and stating that the amount of recovery in such event would in his opinion greatly exceed $10,000.
In due time a default judgment was obtained by plaintiff against Kingston for $27,530.45.
The matters hereinbefore recited with regard to the amount actually paid on the premium and with regard to attempted cancellation of the policy do not appear in evidence, but in statements of counsel and in offers of proof made by the insurer to which objections were sustained by the court. Because of the views hereinafter expressed, we are of opinion that those objections were properly sustained.
THE QUESTIONS PRESENTED ON APPEAL
1. Does appellant's policy contain an acknowledgment of the receipt of the premium?
2. Does appellant have the right to cancel its policy for nonpayment of premium upon proper notice before an accident occurs?
3. Does appellant's policy contain language that precludes conditional delivery?
DOES THE POLICY CONTAIN AN ACKNOWLEDGMENT OF THE RECEIPT OF THE PREMIUM?
Yes. Section 484 of the Insurance Code, based upon former section 2598, Civil Code, is as follows:
'An acknowledgment in a policy of the receipt of premium is conclusive evidence Policies have been held to contain an acknowledgment of the receipt of the premium based upon such language as the following:
"In consideration of the application upon which this Policy is issued, which is made a part hereof, and of the payment in advance of One Hundred & twenty four & 25/100 (124.25) Dollars, * * *" (Masson v. New England M. L. Ins. Co., 85 Cal.App. 633, 638, 260 P. 367, 369.);
"This insurance is granted in consideration of the application herefor, a copy of which is attached hereto and made a part of this contract, and of the payment of the annual premium of One Hundred Seventy-One and 65/100 Dollars and of the payment of a like premium on or before the Eighty day of April in each succeeding year. * * *" (Kamischer v. J. Hancock Mut. L. Ins. Co., 1 Cal.App.2d 629, 630, 37 P.2d 126.)
and
"in consideration of twelve dollars paid, and the payment of installments when due on an installment note for forty-eight dollars, due as follows: 'Twelve dollars on the 1st days each of June, 1898, 1899, 1900, 1901." (Palmer v. Continental Ins. Co., 132 Cal. 68, 70, 64 P. 97.)
The significant language of the present policy is identical with that in Palmer v. Continental Ins. Co., supra, 132 Cal. 68, 64 P. 97, except that here the word 'premium' rather than the amount of the premium is mentioned before the word 'paid.'
In the context, the word 'paid' means that the premium was or had been paid; the other possible meanings would require the introduction of additional words so as to mean 'to be paid,' or 'if paid,' or 'when paid.'
Under a well-recognized rule, the language must be construed most strongly against the insurer. (Masson v. New England M. L. Ins. Co., 85 Cal.App. 633, 643, 260 P. 367.)
In Masson, notes had been given for three-quarters of the first annual premium which was delinquent, and the company communicated notice to the insured that the policy would lapse if payment were not made by a certain date, which date passed without payment's having been made.
In Palmer v. Continental Ins. Co., supra, 132 Cal. 68, 70, 64 P. 97, the court said:
'By the recital in the policy that it was made 'in consideration of twelve dollars paid,' the defendant is estopped from showing, for the purpose of disputing the validity or binding effect of the policy, that such payment had not been made.'
based upon the conclusive presumption declared by section 2598, Civil Code.
(Cf. Grantham v. State Farm etc. Ins. Co., 126 Cal.App.2d Supp. 855, 272 P.2d 959, 48 A.L.R.2d 1088, cited by plaintiff, where a receipt for a renewal premium that in fact had not been paid was in error mailed to the insured after the original term of the policy had expired, and in which it was held that section 484 of the Insurance Code did not apply.)
DOES THE INSURER HAVE THE RIGHT TO CANCEL ITS POLICY FOR NONPAYMENT OF PREMIUM UPON PROPER NOTICE BEFORE AN ACCIDENT OCCURS?
No; not under the facts here present, because of the conclusive presumption that the premium had been paid.
If an automobile insurance policy permitted cancellation at the will of either party, as did the one in question, cancellation might have been made upon grounds other than for nonpayment of premium and without specifying the grounds, prior to the
However, where a notice of cancellation specifies as the sole reason for the cancellation of an automobile insurance policy grounds not legally available to the insurer, the notice is not effective.
While the point has not heretofore been presented directly, the case of Peterson v. Allstate Ins. Co., 164 Cal.App.2d 517, 330 P.2d 843, has some bearing on the question. In Peterson, the insurer mailed and the insured received a notice of cancellation for nonpayment of premium which stated that $23.25 was past due on the first installment of premium when in fact only $16.67 was past due. In holding the notice of cancellation ineffective, the court said:
'The record as summarized * * * amply supports the conclusion of the trial court that had the insurer known the true state of affairs it would not have sent the notice of cancellation on May 3, and that since the cancellation notice was sent under a mistake of fact, it was consequently ineffective.' (p. 521, 330 P.2d p. 846)
In Farnun v. Phoenix Ins. Co., 83 Cal. 246, 251, 23 P. 869, 870, the policy contained this provision:
"The insurance may be terminated at any time, at the option of the company, on giving notice to that effect, and refunding a ratable proportion of the premium for the unexpired term of the policy."
It was held there that if an attempted cancellation for nonpayment of premium was given during a period for which credit had been extended by the company, it would be ineffective.
It appears, in fact, that the notice sent to Kingston contained language to the effect that if the premium had been paid the notice was to be disregarded.
Kingston testified that she did not receive the notice of cancellation.
It is recognized that in order for it to be effective, a notice of cancellation need not actually have been received by the party to whom it has been given in accordance with the terms of the policy. (Jensen v. Traders & General Ins. Co., 52 Cal.2d 786, 345 P.2d 1.)
DOES THE POLICY UNDER CONSIDERATION CONTAIN LANGUAGE THAT PRECLUDES CONDITIONAL DELIVERY?
We consider the question to be of no consequence. As a matter of law the delivery of the policy was not a conditional delivery. Neither the evidence received nor the subject matter of any of the offers of proof made by the insurer to which objections were sustained would support a contrary conclusion.
Some of the offers of proof embody a theory that when Mr. Kingston, about November 13, 1961, asked for a policy endorsement showing a loss payable clause in favor of a finance company, the insurer issued a new policy which was sent to the Hanford agent and retained by him without being signed by him or delivered to the insured; and that such policy was effective to supersede the policy dated October 19 which had been delivered to the Kingstons. Such suppositious policy had a different numerical designation than the October 19 policy.
We note that the complaint herein alleges that the insurer issued its policy #9004 996-D29-05 on October 19, 1961; the answer alleges that that policy referred to in the complaint had lapsed and expired by reason of the nonpayment of premiums and that notice to that effect was given to the Kingstons. This is wholly inconsistent with the claim half-heartedly made at trial that the The judgment is affirmed.
GERALD BROWN, P. J., and COUGHLIN, J., concur.