Zeman v. Zack Agency, Inc.

• Decision Date: 23 June 1980
• Citation: 75 A.D.2d 261,429 N.Y.S.2d 444
• Parties: Stephen T. ZEMAN, Jr. et al., Plaintiffs-Respondents, v. ZACK AGENCY, INC. et al., Defendants-Respondents, Agricultural Insurance Company, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 444

429 N.Y.S.2d 444

75 A.D.2d 261

Stephen T. ZEMAN, Jr. et al., Plaintiffs-Respondents, v. ZACK AGENCY, INC. et al., Defendants-Respondents Agricultural Insurance Company, Appellant.

Supreme Court, Appellate Division, Second Department.

June 23, 1980.

Bouck, Holloway & Kiernan, Albany (John R. Casey, Albany, of counsel), for appellant.

Martin Rosenblum, Middletown (Michael M. Platzman, Middletown, of counsel), for plaintiffs-respondents.

Appelbaum & Eisenberg, Liberty, for defendant-respondent Middletown Sav. Bank.

Before MOLLEN, P. J., and HOPKINS, TITONE and WEINSTEIN, JJ.

WEINSTEIN, Justice.

This appeal places before the court important issues pertaining to insurance law. In particular, we are called upon to determine the liability of an insurance carrier to provide coverage after a policy has lapsed and where no premiums have been paid beyond the date of the lapse, in those instances where the carrier has failed to inform the insured as to the lapse of the policy and has not billed the insured for renewal of the policy.

The facts are not in dispute. Plaintiffs, Stephen and Patricia Zeman, took title to a house in Walden, New York, on May 4, 1972. On the same day, they procured, through defendant Zack Agency, Inc. (hereafter Zack), a comprehensive homeowners insurance policy issued by defendant-appellant Agricultural Insurance Company. The policy provided $25,000 coverage for the dwelling, and $12,500 for certain personal property contained therein. The policy was for a term of three years. Annual premiums were billed by, and remitted to, Zack.

In anticipation of the expiration of the policy, and pursuant to a communication from the insurance company, Zack wrote to the Zemans on February 3, 1975, in pertinent part, as follows:

"On May 4, 1975 your present Homeowners Policy will expire. At present, the amount of Policy coverage is $25,000. Would appreciate your advising this office if the above amount is in order, or if you feel the amount on the dwelling should be increased. Please advise this office within the next ten (10) days, if any changes are desired " (emphasis added).

Having received no reply from the Zemans, Zack wrote to them again on March 24, 1975, stating:

"On Feb. 3rd we asked if the amount of $25,000 was in order, or if the amount should be increased to keep in line with the value. Would appreciate your advising this office as soon as possible, in order that we may have the company issue the proper renewal."

These were the only communications between either Zack or the insurance company and the Zemans during or after this period. No notice of cancellation was sent to the Zemans, no further premiums were billed and, indeed, after the policy lapsed on May 4, 1975, the Zemans did not remit any further premium payments. Mr. Zeman testified, at an examination before trial, that it did not strike him as odd that he received no notice of premiums due; he simply "wasn't thinking of it."

On July 5, 1976, 14 months after the policy expired, a fire damaged the Zemans' house and property to the extent of $30,000. The insurance company disclaimed any liability for coverage on the ground that the policy had expired and had not been renewed. Thereupon, the Zemans brought this action against the insurance company, Zack, and the mortgagee of their house, Middletown Savings Bank, for negligence in monitoring the expiration date of the policy and failing to notify the Zemans thereof, and for not renewing the policy automatically pursuant to the alleged custom and usage among the parties.

The insurance company moved for summary judgment dismissing the complaint as to it on the ground that the policy had expired and had not been renewed. Special Term denied the motion in an order dated August 2, 1979, on the ground that issues of fact existed, apparently relating to the prior course of dealings among the parties. The instant appeal is taken by the insurance company from that order. After a review of the applicable statutes and case law, we conclude that summary judgment in favor of the insurer was properly denied. Furthermore, pursuant to the court's authority under CPLR 3212 (subd. (b)), we direct that summary judgment be entered in favor of the Zemans and against the insurance company.

The relevant statute dealing with nonrenewal of a homeowners insurance policy is section 167-a (subd. (4), par. (a)) of the Insurance Law, which provides, in pertinent part:

"Unless the insurer, at least forty-five, but not more than sixty days in advance of the end of the policy period, mails or delivers to the named insured, at the address shown in the policy, a written notice of its intention not to renew a covered policy, or to condition its renewal upon change of limits or elimination of any coverages, the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal. The specific reason or reasons for nonrenewal or conditioned renewal shall be stated in, or shall accompany the notice required by this subdivision."

By applying the statute to the facts in the instant matter, we note two issues for our determination: first, whether the two communications from Zack to the Zemans, quoted above, constituted notice of the insurer's intention not to renew within the purview of subdivision (4) of section 167-a; and if not, second, whether the Zemans' failure to make timely premium payments nevertheless entitled the insurer to disclaim liability.

The first issue is the easier to resolve; we hold, as a matter of law, that the communications did not constitute the required notice. We base this holding on the fact that the language contained in the communications is devoid of words sounding in or connoting nonrenewal. They merely requested the Zemans to notify the agency if, and only if, any change in the amount of insurance coverage was desired. It is settled that insurance cancellation or nonrenewal notice requirements are strictly construed against the insurer (Government Employees Ins. Co. v. Mizell, 36 A.D.2d 452, 320 N.Y.S.2d 936; Matter of State Farm Mut. Automobile Ins. Co. v. Matthews, (App.Div.) 426 N.Y.S.2d 30 (2d Dept., 1980)). Furthermore, the specific reason for nonrenewal was not stated in, and did not accompany, the notice, as required by the statute; this is not surprising, since the insurer obviously had no intention that these communications should constitute notice of nonrenewal. Finally, the insurer had no basis in fact, nor any reason within contemplation of the applicable statute, for nonrenewal. This is because subdivision (5) of section 167-a of the Insurance Law requires that any notice of nonrenewal issued during the first three years (or, on occasion, longer) that a policy is in effect must be based upon a ground set forth in paragraph (b) of subdivision (3) of that section, such as nonpayment of premium, conviction of a crime, or fraud, and there is no indication in the record that the Zemans had provided any basis for nonrenewal as set forth in that paragraph.

Given that no notice of nonrenewal, timely or otherwise, was sent to the Zemans, we must focus our attention on that part of section 167-a (subd. (4), par. (a)) which provides that "the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal." In this case, of course, the Zemans remitted no such timely payment of the premium for the period beyond the date of the expiration of the original policy. The statute contains no explicit provision as to rights and liabilities of the insurer and the insured when there is neither notice of nonrenewal nor payment of renewal premiums. The...