Boyce v. National Commercial Bank & Trust Co. of Albany

• Decision Date: 28 February 1964
• Citation: 41 Misc.2d 1071,247 N.Y.S.2d 521
• Parties: Lyle A. BOYCE and Gwen M. Boyce, Plaintiffs, v. The NATIONAL COMMERCIAL BANK AND TRUST COMPANY OF ALBANY, New York, Defendant. The NATIONAL COMMERCIAL BANK AND TRUST COMPANY OF ALBANY, New York, Defendant and Third-Party Plaintiff, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Third-Party Defendant. Lyle A. BOYCE and Gwen M. Boyce, Plaintiffs, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Defendant.
• Court: New York Supreme Court

Page 521

247 N.Y.S.2d 521

41 Misc.2d 1071

Lyle A. BOYCE and Gwen M. Boyce, Plaintiffs, v. The NATIONAL COMMERCIAL BANK AND TRUST COMPANY OF ALBANY, New York, Defendant.

The NATIONAL COMMERCIAL BANK AND TRUST COMPANY OF ALBANY, New York, Defendant and Third-Party Plaintiff, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Third-Party Defendant.

Lyle A. BOYCE and Gwen M. Boyce, Plaintiffs, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Defendant.

Supreme Court, Equity Term, Albany County.

Feb. 28, 1964.

Carter & Conboy, Albany, for plaintiffs.

Francis H. Trombly, Albany, for defendant National Commercial Bank & Trust Co.

Brown & Gallagher, Albany, for defendant Nationwide Mut. Fire Ins . Co.

ELLIS J. STALEY, Jr., Justice.

The above actions were tried at an Equity Term of the Supreme Court by the Court. The plaintiffs in their action against the defendant, Nationwide Mutual Fire Insurance Company, are seeking to recover damages pursuant to a contract of insurance insuring premises located on the Schenectady-Altamont Road in the Town of Guilderland, Albany County, New York against loss by fire of the dwelling, its contents and for additional living expenses.

The plaintiffs purchased their home on the 29th day of January, 1959 at which time they executed an F.H.A. mortgage with the National Commercial Bank and Trust Company in the sum of $11,300.00. On the same day the defendant, Nationwide Mutual Fire Insurance Company, issued a three-year home owners' policy providing for fire insurance coverage of the dwelling in the sum of $12,000.00 and for personal property contents in the sum of $4,800.00 and for any additional living expenses incurred by reason of a fire in the dwelling in the sum of $1,200.00.

The original annual premium in the sum of $56.10 was paid by the insureds and the annual premium due on January 29, 1960 was paid by the insureds, but it is claimed by the defendant Nationwide that the annual premium that became due on January 29, 1961 was neither paid by the insureds nor the mortgagee; and that a notice of cancellation was duly mailed to the insureds on February 6, 1961; and that a letter of cancellation was mailed to the defendant bank as mortgagee on March 1, 1961; and that by reason thereof the policy was legally and validly cancelled prior to the date of July 2, 1961 when the dwelling owned by the plaintiffs was damaged by fire resulting in the alleged loss to the plaintiffs for damage to their dwelling in the total sum of $11,125.60, for damage to the contents of the dwelling in the sum of $4,800.00 and damages incurred for additional living expenses in the sum of $1,200.00 making a total claim for damages in the sum of $17,125.60.

In the plaintiffs' cause of action against the defendant bank the plaintiffs seek to recover the damages incurred by reason of the fire on the ground that the defendant bank negligently failed to pay to the defendant Nationwide the annual premium on the said fire insurance policy which became due on January 29, 1961 pursuant to an agreement by the plaintiffs and the defendant bank contained in the F.H.A. mortgage wherein the defendant bank collected monthly installments to be held in escrow for the express purpose of paying the annual fire insurance premiums when they became due. The defendant bank has commenced a third-party action against the defendant Nationwide for indemnity and reimbursement for any judgment that might be recovered by the plaintiffs against the defendant bank.

The primary issue in the first cause of action is whether or not the defendant Nationwide legally and validly cancelled the said fire insurance policy as to the insureds' interest and as to the interest of the mortgagee prior to the occurrence of the fire on July 2, 1961 . The terms of the policy providing for cancellation of the policy were identical with the provisions of section 168 of the Insurance Law and are stated as follows:

'This policy may be cancelled at any time by this Company by giving to the insured a 5 days' written notice of cancellation with or without tender of the excess of paid premium above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand. Notice of cancellation shall state that said excess premium (if not tendered) will be refunded on demand.

'If loss hereunder is made payable, in whole or in part, to a designated mortgagee not named herein as the insured, such interest in this policy may be cancelled by giving to such mortgagee a 10 days' written notice of cancellation.' (Plaintiffs' Exhibit No. 1.)

Although it is immaterial here the period of 5 days' written notice to the insured was extended to 10 days by endorsement on the policy.

The defendant Nationwide claims that on February 6, 1961 when the annual premium on the fire insurance policy was past due that a notice of cancellation was mailed to the plaintiffs and to the agent, James W. Shaughnessy, who wrote the original policy which notice of cancellation the plaintiffs deny was ever received and the copy of which notice of cancellation the agent's testimony was contradictory as to whether or not he could recall receipt of any such notice of cancellation. (Exhibit No. 14, pp. 8, 9, 12, 13, 21 and 22.)

The first question to be determined, therefore, is whether or not the mailing of a notice of cancellation by the defendant Nationwide by ordinary mail addressed to the plaintiffs was sufficient compliance with the terms of the policy to effect an absolute cancellation thereof after 10 days from the date of mailing. The policy provides that the policy may be cancelled at any time by the company by giving to the insured a 5(10) days' written notice of cancellation.

In the cases dealing with interpretation of a provision that requires that a notice should be 'given', it has been held that the requirement is not fulfilled until the party entitled to notice has received the required notice. (64 A.L.R.2d 982-1024.)

In the case of Sasmor v. Vivaudou, Inc., 200 Misc. 1020, 1023-1024, 103 N.Y.S.2d 640, the Court construed a provision requiring that notice be given by either party to the other in writing for cancellation of an agreement and stated as follows:

'The plaintiff argues that notice is 'given' when it is 'received', not when it is 'mailed', and that, since the contract requires that notice be 'given by either party to the other in writing on or before October 1, 1948,' proof of mailing on September 29, 1948, is insufficient, in the face of his denial of receipt.'

'In the situation at bar, the issue is not the making of the contract but rather its meaning after it has already been made. A contract, once entered into, may provide that notices therein specified are effective if mailed, or that they must be received and not merely sent. Vassar v. Camp, 11 N.Y. 441. While there is no clear specific provision in that regard spelled out in the present contract, I am inclined to construe the requirement of 'given' to mean 'delivered'. Peabody v. Satterlee, 166 N.Y. 174, 59 N.E. 818, 52 L.R.A. 956.'

In the case of Louisiana Public Utilities Company v. Atlas Assurance Company, 238 App.Div. 474, 264 N.Y.S. 603, affd. 263 N.Y. 595, 189 N.E. 714, the insured sent a letter to the insurance company requesting cancellation of insurance coverage which letter was mailed on October 1, 1928 and received by the insurance company on October 3, 1928, 2 days after the fire loss occurred. The Court stated in holding that the insurance was in effect even though the letter of cancellation might have been mailed prior to the occasion of the fire loss stated (238 App.Div. p. 477, 264 N.Y.S. p. 606) as follows:

'The law is quite clear that a cancellation of insurance is not effective, irrespective of the intention of the insured, until notice thereof is actually received either by the insurer or by his agent authorized to receive and accept such notice.'

In the case of Rose Inn Corporation v. National Union Fire Insurance Company, 133 Misc. 440, 232 N.Y.S. 351, the insurance company attempted to transmit a notice of cancellation of a fire insurance policy by registered mail to the insured, but the notice was not delivered and was returned to the agency. Thereafter a fire occurred and it was held that the insured was entitled to recover on the fire insurance policy and that it had not been validly cancelled . The policy involved in the Rose case had a similar provision for cancellation as the one involved in the instant action. In the interpretation of that clause the Court stated as follows 133 Misc. at page 444, 232 N.Y.S. at page 356:

'The method of cancellation prescribed in the policy must be strictly followed. The insured must have actual notice of cancellation, or such a situation must be brought about as to put him on inquiry which, if made, would...