Capuano v. Kemper Ins. Companies

• Decision Date: 19 August 1981
• Docket Number: No. 80-402-A,80-402-A
• Parties: John J. CAPUANO, Administrator of the Estate of John D. Capuano et al. v. KEMPER INSURANCE COMPANIES. ppeal.
• Court: Rhode Island Supreme Court

Page 949

433 A.2d 949

John J. CAPUANO, Administrator of the Estate of John D. Capuano et al. v. KEMPER INSURANCE COMPANIES.

No. 80-402-Appeal.

Supreme Court of Rhode Island.

Aug. 19, 1981.

Seth K. Gifford, Providence, George F. McDonald, Steven J. Ferdinandi, Cranston, for plaintiffs.

Carroll, Kelly & Murphy, Joseph A. Kelly, C. Russell Bengtson, Providence, for defendant.

OPINION

MURRAY, Justice.

This case comes before the court on an appeal by the defendant, Kemper Insurance Companies (Kemper), from a judgment of the Superior Court entered on a complaint for declaratory relief ¹ by the plaintiff, John J. Capuano, in which he sought a determination of the amount of insurance coverage available to him in a pending wrongful-death action.

On July 24, 1977, at approximately 1 a. m., John D. Capuano and Kevin M. Synon (Synon) were both killed in a one-car collision in which the 1969 Chevrolet Corvette in which they were both traveling crashed into a stone wall in South Kingstown and was demolished. At the time of the mishap the Corvette was registered to Synon's grandmother, Vera DiSandro (DiSandro). As a result of the fatal collision, John J. Capuano, the administrator of the deceased Capuano's estate, instituted a wrongful-death action in the Superior Court against DiSandro in her capacity as the administratrix of the Synon estate. DiSandro subsequently filed a counterclaim against plaintiff in which she alleged that Capuano was the operator of the Corvette at the time of the accident and that his negligence was the cause of the collision and of the death of the two young men. Both parties sought recovery in the amount of $500,000.

On December 7, 1979, plaintiff instituted this action in the Superior Court for a declaratory judgment in which he sought to determine the amount of insurance available to the Capuano estate in defense of DiSandro's counterclaim for wrongful death. ² The case was submitted by the parties to a justice of the Superior Court on an agreed statement of facts. The context of the present controversy may best be understood by detailing these facts in chronological order.

On June 8, 1974, Kemper, through its company, Lumberman's Mutual Casualty Company, issued an automobile insurance policy (No. VZ425 057) to Vincent DiSandro. ³ The insurance agency representing the insured in connection with this policy was the Laren Insurance Agency of Providence, Rhode Island. That policy covered a 1969 Oldsmobile and provided for $100,000 in bodily-injury coverage. By an endorsement dated October 22, 1974, Synon, the grandson of Vincent and Vera DiSandro, was added to the policy as an additional driver. Another endorsement on June 10, 1977, added the 1969 Corvette as a second insured vehicle under the policy. Vera DiSandro was listed on the policy as the registered owner of the Corvette.

Kemper, upon receipt of the latter endorsement, wrote to the Laren Agency on June 22, 1977, requesting that it eliminate Synon and the Corvette from the policy. Kemper added that "(u)nless this vehicle is eliminated from the policy, we will have no other choice other than to issue nonrenewal notices." ⁴ On June 28, 1977, Laren notified Kemper that it would "delete vehicle and driver as soon as we have same placed with assigned risk."

On that same day, Insurance Underwriters, Inc. (Underwriters), which apparently in some way is associated with the Laren Agency, wrote to Synon, informing him that Kemper would not insure the Corvette under the DiSandro policy. As an alternative, Underwriters suggested coverage under the Rhode Island Automobile Insurance Plan (Rhode Island Plan) and enclosed an application form. On July 20, 1977, Underwriters received Synon's application along with a premium payment in the amount of $579.20. That same day, Underwriters issued a binder of insurance to Synon for $25,000 bodily-injury coverage on the Corvette. Also that same day, Underwriters forwarded Synon's application and premium to the Rhode Island Plan in New York and asked for assignment to a company for immediate coverage. The Rhode Island Plan received Synon's application on July 22, 1977. Two days later, on July 24, 1977, the fatal accident occurred. On July 25, 1977, Underwriters notified Kemper concerning the DiSandro policy, stating, "Effective 7/20/77 please delete 2d car, a 1969 Corvette. As of this date vehicle was placed (sic ) in assignment risk." The following day, the Rhode Island Plan assigned the risk of Synon's coverage to Lumberman's Mutual Casualty Company. Subsequently, Lumberman's issued a policy (No. WE472 841) to Synon covering the Corvette and providing for $25,000 in bodily-injury coverage. The policy was made effective from July 20, 1977, to July 20, 1978.

Several months later, DiSandro requested that her policy (No. VZ425 057) be canceled. Kemper issued a declaration cancelling coverage on the Corvette, effective July 20, 1977. Kemper also issued DiSandro a check in the amount of $382.50 as a premium rebate.

On February 20, 1978, Underwriters told Kemper to cancel Synon's policy (No. WE472 841) as of July 25, 1977. Kemper canceled the policy and issued a premium rebate of $1,423.63 to Synon's estate.

Capuano contended before the trial justice, as he does now, that both policies (Nos. VZ425 057 and WE472 841) covered the Corvette and the driver at the time of the accident; No. VZ425 057 because Kemper had not deleted coverage of the Corvette from the policy or canceled the policy, and No. WE472 841 by reason of the binder issued by Insurance Underwriters. Kemper, on the other hand, contended that only Synon's policy (No. WE472 841) was effective on the date of the collision, and thus only $25,000 in coverage was available to the Capuano estate.

In his decision, the trial justice found that although the facts indicated that Kemper's initial correspondence with the Laren Agency concerned the possibility of Kemper's exercising its option of nonrenewal in the event that Synon and the Corvette were not deleted from the DiSandro policy, the end result was a cancellation of coverage under the policy by Kemper. In such circumstances, the burden was on Kemper to prove that it complied with the cancellation provisions of the policy. Because there had been no effective cancellation or deletion of coverage under the policy by Kemper, the trial justice concluded that both policies of insurance (Nos. VZ425 057 and WE472 841) were in effect at the time of the accident, and he declared that the amount of insurance coverage available to plaintiff in the pending wrongful-death action was $125,000, the sum of both policies. A judgment incorporating the findings in the trial justice's decision was subsequently entered, from which Kemper has brought the present appeal.

Before us, Kemper contends that the trial justice erred in ruling that the DiSandro policy was in effect on the date of the collision. In support of this contention, Kemper advances several arguments that can best be resolved by discussing each separately while detailing the trial justice's findings pertinent thereto.

Kemper argues first that at the time of the accident the DiSandro policy was in full force and effect. It contends that the deletion of coverage of the Corvette from the policy did not constitute a cancellation of the policy; thus, Kemper was not required to comply with the cancellation procedures provided for in the policy issued to plaintiff.

The cancellation clause of the policy in question, in pertinent part, reads as follows:

"This policy may be cancelled by the company by mailing to the insured named in Item 1 of the declarations at the address shown in this policy written notice stating when not less than ten days thereafter such cancellation shall be effective."

Generally, the purpose of a notice-of-cancellation clause in an insurance policy is for the benefit of the insured. It is intended to make the insured aware that his policy is being terminated and to afford him time to obtain other insurance prior to termination of the existing policy. See Taylor v. MFA Mutual Insurance Company, 322 So.2d 842, 845 (La.App.1975); Buffalo Insurance Company v. Best, 312 S.W.2d 270, 271 (Tex.Civ.App.1958). When insurance coverage is being canceled, public policy demands strict compliance with the cancellation provisions of the policy. See United Farm Bureau Mutual Insurance Co. v. Adams, 145 Ind.App. 516, 251 N.E.2d 696 (1969). As one court has stated:

"In the absence of fraud or mistake, the power to cancel an insurance policy during the period for which premium has been paid must be founded upon a term of the policy. The policy may empower the insured or the insurer to cancel the policy and may specify the method of cancellation. 3 Richards on Insurance ; p. 1366.9, § 414. In order for a cancellation to be operative, the method of cancellation provided in the policy must be strictly complied with." (Citations omitted.) Beach Treat, Inc. v. New York Underwriters Insurance Company, 301 A.2d 298, 300 (Del.Super.1972).

Regardless of whether we accept Kemper's characterization of the removal of the coverage of the Corvette from the DiSandro policy as a "deletion of coverage" or consider it as a cancellation of the policy, there is no merit in Kemper's contention that it need not have complied with the cancellation provisions of the policy.

General Laws 1956 (1979 Reenactment) § 27-9-41 provides that the commissioner of insurance may promulgate reasonable rules and regulations. Section 27-8-11 specifically authorizes the commissioner to promulgate regulations concerning the cancellation and the renewal of liability and property-damage insurance for private passenger automobiles. Pursuant to this statutory authority, the commissioner issued Regulation XVI, entitled "Automobile Insurance Policies; Cancellation and Renewal Provision," effective May 1, 1969. ⁵ The regulation decrees that "in all policies issued on and after April 1, 1969...