Perkins v. American Mutual Fire Insurance Co. , 274 N.C. 134 ( 1968 )

161 S.E.2d 536 (1968) 274 N.C. 134

Lee PERKINS
v.
AMERICAN MUTUAL FIRE INSURANCE COMPANY.

No. 200.

Supreme Court of North Carolina.

June 14, 1968.

Mullen, Holland & Harrell and Thomas H. Morgan, Gastonia, for plaintiff appellant.

Hollowell, Stott & Hollowell, Gastonia, for defendant appellee.

BOBBITT, Justice.

The principal question presented by plaintiff's assignments of error is whether defendant's liability under the policy terminated on February 7, 1963, at 12:01 a. m. on account of plaintiff's failure to pay in full the renewal premium. In our view, the holding designated Finding of Fact No. 28 is in substance a conclusion of law and is so treated.

The policy was issued February 7, 1962, and provided the compulsory coverage then required by the Vehicle Financial Responsibility Act of 1957 (Session Laws of 1957, Chapter 1393) as a prerequisite to the registration of a motor vehicle by the owner thereof. Swain v. Nationwide Mutual Insurance Co., 253 N.C. 120, 116 S.E.2d 482.

With reference to termination of coverage, Section 2 of said 1957 Act, later codified as G.S. § 20-310 in the 1959 and 1961 Cumulative Supplements to the General Statutes, provided:

"No contract of insurance or renewal thereof shall be terminated by cancellation or failure to renew by the insurer until at least fifteen (15) days after mailing a notice of termination to the named insured at the address shown on the policy. Time of the effective date and hour of termination stated in the notice shall become the end of the policy period. Every such notice of termination for any cause whatsoever sent to the insured shall include on the face of the notice a statement that proof of financial responsibility is required to be maintained continuously throughout the registration period and that operation of a motor vehicle without maintaining such proof of financial responsibility is a misdemeanor. Upon the termination of insurance by cancellation or failure to renew, notice of such cancellation or termination shall be mailed by the insurer to the Commissioner of Motor Vehicles not later than fifteen (15) days following the effective date of such cancellation or other termination."

The quoted statutory provision was in force at all times pertinent to decision herein. It is noted the statute (G.S. § 20-310) was subsequently amended (1) by Chapter 842, Session Laws of 1963, applicable to policies written or renewed after September 1, 1963, and (2) by Chapter 964, Session Laws of 1963, effective October 1, 1963, and (3) by Chapter 1135, Session Laws of 1965, effective July 1, 1965, and (4) by Chapter 857, Session Laws of 1967, effective June 21, 1967. As amended, the statutes are brought forward and codified as G.S. § 20-310(a), (b) and (c) in the 1965 Replacement and 1967 Cumulative Supplement. However, the said amendments have no application to the present case.

Defendant contends it offered to renew the policy upon payment by plaintiff of the required ($55.00) premium; that the policy was not terminated by it but by plaintiff's failure to pay the premium; and that it was not required to give plaintiff a notice containing the provision, including the warning, set forth in the quoted statute.

No notice given by defendant to plaintiff set forth on the face thereof, in addition to the date and hour of termination, "a statement that proof of financial responsibility is required to be maintained continuously throughout the registration period and that operation of a motor vehicle without maintaining such proof of financial responsibility is a misdemeanor." Where applicable, the requirement of the quoted statute that the notice contain the provisions, including the warning, set forth therein, is mandatory. Crisp v. State Farm Mutual Automobile Insurance Co., 256 N.C. 408, 124 S.E.2d 149; Levinson v. Travelers Indemnity Co., 258 N.C. 672, 129 S.E.2d 297. The question is whether, in the factual situation under consideration, a notice containing the provisions, including the warning, set forth in the quoted statute, was prerequisite to termination for failure to renew on account of nonpayment of premium.

The manifest purpose of said 1957 Act was to provide protection, within the required limits, to persons injured or damaged by the negligent operation of a motor vehicle. Swain v. Nationwide Mutual Insurance Co., supra; Nixon v. Liberty Mutual Insurance Co., 255 N.C. 106, 120 S.E.2d 430; Lane v. Iowa Mutual Insurance Co., 258 N.C. 318, 128 S.E.2d 398. The quoted statute must be considered in context with other provisions of said 1957 Act. The primary intent of the General Assembly was that every motorist maintain continuously proof of financial responsibility; and the obvious purpose of the notice required by the quoted statute was to confront the insured with the fact that operation of a car without maintaining proof of financial responsibility was a misdemeanor. The quoted statute relates to the notice and warning that must be given the policyholder in the event his policy is terminated by the insurer, whether the termination is by cancellation or by failure to renew. We are of the opinion, and so hold, that the defendant was required to give such notice and warning, and that in the absence of such notice and warning the policy continued in force and effect notwithstanding plaintiff's failure to pay in full the required premium.

As noted in Faizan v. Grain Dealers Mutual Insurance Co., 254 N.C. 47, 118 S.E.2d 303, the provisions of the quoted statute and of § 313 of the Vehicle and Traffic Law of New York, are similar in all respects pertinent to decision in the present case. See McKinney's Consolidated Laws of New York, Book 62A, c. 71, pp. 106-107. The New York statute provides, inter alia, that "(n)o contract of insurance or renewal thereof * * * shall be terminated by cancellation by the insurer or failure to renew by the insurer" until notice is given as prescribed; and that "(e)very such notice of termination for any such cause whatsoever sent to the insured shall include * * * a statement that proof of financial security is required to be maintained continuously throughout the registration period * * *" (Note: This statute was formerly codified as Section 93-c of the Vehicle and Traffic Law of New York.)

A brief reference to the two New York decisions discussed in Faizan, namely, Connecticut Fire Insurance Company v. Williams, 9 A.D.2d 461, 194 N.Y.S.2d 952 (1959) and Caristi v. Home Indemnity Company, New York, 24 Misc. 2d 136, 202 N.Y.S.2d 340 (1960), seems appropriate. In Williams, the Court said: "It was recently held in Teeter v. Allstate Ins. Co., 9 A.D.2d 176, 181, 192 N.Y.S.2d 610, 616, that cancellation can only be accomplished by giving the insured notice under Section 93-c * * *." No notice of termination for failure to renew was mailed by the insurer to the insured. The Court concluded: "The court below correctly determined that there was here a unilateral failure to renew by the insurer and since section 93-c was not complied with, the insurance continued in effect." In Caristi, it was held the ruling in Williams would apply unless it was found the insured had rejected a renewal policy.

Later New York decisions, to wit, Mong v. Allstate Insurance Company, 15 A.D.2d 257, 223 N.Y.S.2d 218 (1962), and La Barre v. Nationwide Mutual Insurance Company, 16 A.D.2d 842, 227 N.Y.S.2d 632 (1962), and Monette v. Nationwide Mutual Insurance Co., Sup., 230 N.Y.S.2d 939 (1962), involve factual situations substantially similar to that under consideration in the present case. In each of these cases, the court rejected the contention that compliance by the insurer with Section 313 was unnecessary. In each instance, it was held the policy period extended beyond the expiration date stated therein and that the policy was in force when the accident occurred. The basis of the decisions is succinctly and accurately stated in this headnote in Mong: "Automobile insurance termination notice which did not contain statement that failure to maintain proof of financial security is misdemeanor was ineffective to cancel insurance for nonpayment of insurance premium, under statute requiring every notice of termination to contain such a statement. Vehicle and Traffic Law, § 313."

It is noted that Mong, La Barre and Monette, and also Williams, quote, in whole or in part, the following from Teeter v. Allstate Insurance Company, 9 A.D.2d 176, 192 N.Y.S.2d 610, 616, affd. 9 N.Y.2d 655, 212 N.Y.S.2d 71, 173 N.E.2d 47:

"Once a certificate of insurance * * * has been issued by the insurance company and filed with the Commissioner, the contract of insurance ceases to be a private contract between the parties. A supervening public interest then attaches and restricts the rights of the parties in accordance with the statutory provisions. Many common-law contractual rights are restricted by the statute. Thus, for example, there is, at common law, the absolute right to refuse to renew a policy upon the expiration of its term but this is restricted by the statute so that the policy continues in force after its expiration date without a renewal, unless and until notice of termination is given in accordance with the statute."

With reference to the ground of decision, this excerpt from the opinion in Mong is pertinent: "The notice which appellant claims to have mailed to Drone does not contain this statement required by section 93-c. The requirement that the notice should inform the insured that proof of financial security is required to be maintained and that failure to maintain it is a misdemeanor, is essential to carrying out the purposes of the act stated in subdivision 2 of section 93 thereof by assuring as far as possible that no uninsured automobile is operated in this state."

The policy here involved was issued by defendant to plaintiff under the North Carolina Automobile Assigned Risk Plan promulgated by the Commissioner of Insurance pursuant to authority conferred by G.S. § 20-279.34. Provisions thereof then in effect are noted. Section 13 provided in part that "(a) risk shall be assigned to a designated company for a period of 3 consecutive years." Section 14B provided in part: "At least 45 days prior to the inception date of the first and second renewal policies the designated company shall notify the applicant that (1) a renewal policy will be issued provided the renewal premium is received at least 22 days prior to the inception date of such policy, or (2) A renewal policy will not be issued for the reason that the applicant is not entitled to insurance under the Plan."

Nothing else appearing, defendant was obligated under the Plan to renew the policy upon timely payment by plaintiff of the required premium. The only notice by defendant to plaintiff prior to February 7, 1963, was dated December 5, 1962. It was received by plaintiff prior to January 7, 1963, presumably forty-five days or more prior to February 7, 1963. It gave notice the renewal premium ($55.00) had to be paid twenty-two days in advance of February 7, 1963. Defendant had ample opportunity to give the fifteen day notice required by the quoted statute before February 7, 1963, the expiration date stated in the policy.

The ground of decision in Faizan was that the insured rejected the defendant's offer to renew the policy. In Faizan, notices given by the defendant to the plaintiff, although not in full compliance with the provisions of the quoted statute, were sufficient to advise the insured plainly of the consequences of his failure to renew. The insured made no response to the insurer's notices. Instead, he "applied through the Assigned Risk Plan for further insurance, but the policy thus obtained (from another insurer) was not in effect at the time of the accident in question."

In the present action, there is no evidence or finding that plaintiff rejected defendant's offer to renew upon payment of a premium of $55.00. Rather, it appears uncertainty had arisen whether the proper premium was $43.00 or $55.00. While the court found $55.00 was the correct amount of the premium, the findings indicate a definite desire on the part of plaintiff to renew the policy.

We have not overlooked the assignments of error based on plaintiff's Exceptions Nos. 1 and 2. Exception No. 1 relates to the court's exclusion of evidence as to loss of wages on account of revocation of driver's license. The exception is without merit. The complaint contains no allegation as to such loss. Exception No. 2 relates to the refusal of the court to allow plaintiff to amend the complaint. This exception is without merit. It was permissible for the judge in his discretion to deny such motion.

For the reasons stated herein, the judgment of the court below is reversed; and the cause is remanded with direction that plaintiff be awarded judgment for such amount (the present findings of fact being insufficient with reference thereto) as he may establish in further proceedings.

Reversed and remanded.

HUSKINS, J., took no part in the consideration or decision of this case.