Carter v. Empire Mut. Ins. Co.

Decision Date23 March 1978
Citation6 Mass.App.Ct. 114,374 N.E.2d 585
CourtAppeals Court of Massachusetts

David B. Cohen and Sanford A. Kowal, Boston, for Colony Finance Corp. & another.

Franklin P. Anastas, Boston, for Empire Mut. Ins. Co.

Stephen A. McNerney, Worcester, for Bertha Carter.


GOODMAN, Justice.

These cross appeals arise out of the purchase by the plaintiff of a motor vehicle liability insurance policy issued by Empire Mutual Insurance Company (Empire) for the year 1974; the policy included coverage for damage to the plaintiff's automobile. The plaintiff paid part of the total premium in cash and financed the balance through a premium finance agreement (G.L. c. 255C, § 1, definition 4) with Main Street Insurance Agency, Inc. (Main), Empire's agent. The agreement, dated January 3, 1974, included a promissory note signed by the plaintiff payable to Main in monthly installments; Main assigned the agreement to Colony Finance Corp. (Colony). In her complaint the plaintiff alleged that the premium finance agreement did not meet the disclosure requirements of G.L. c. 140C and G.L. c. 255C and sought to have the three defendants subjected to the penalty prescribed by G.L. c. 140C, § 10(b). The plaintiff also claimed that a notice of cancellation of her policy sent by Colony to Empire was ineffective to permit Empire to cancel the policy and that she was therefore entitled to recover from the defendants her losses arising from an automobile accident in which she was involved on June 29, 1974, five days after the notice of cancellation purported to become effective.

The judge filed findings of fact and an order for judgment pursuant to Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974), and on the same day entered a judgment declaring that the cancellation of the plaintiff's policy was void and that the policy was in full force and effect on the date of the accident. The judgment further provided that the plaintiff recover from the defendants jointly and severally her losses arising from the automobile accident. The judge's findings of fact were silent on the question whether the premium finance agreement met the disclosure requirements of G.L. c. 140C and G.L. c. 255C, and the judgment was likewise silent as to the penalty prescribed by G.L. c. 140C, § 10(b). The plaintiff filed a motion under Mass.R.Civ.P. 52(b), 365 Mass. 817 (1974), that the judge find that the premium finance agreement did not meet the disclosure requirements of G.L. c. 255C and as a result also violated G.L. c. 140C and G.L. c. 93A 2 and that the judgment be amended accordingly so as to award the plaintiff the minimum $100 penalty (and attorney's fees and costs) prescribed by G.L. c. 140C, § 10(b), together with a trebling pursuant to G.L. c. 93A, § 9(3) of the damages already awarded the plaintiff for her losses in the accident. The motion also sought interest on all the damages. The motion was denied. Within the time provided by Mass.R.A.P. 4, 365 Mass. 846 (1974) for appeal from the judgment, all parties filed notices of appeal. 3

The Defendants' Appeals

1. The validity of the cancellation. We summarize certain facts which are not in question. The premium for the 1974 motor vehicle liability insurance policy which the plaintiff purchased through Main was $294.80. On December 31, 1973, the plaintiff paid Main $50, and on January 3, 1974, she paid Main an additional $58.80. On the latter date the plaintiff signed a note which provided that she pay Main $247.52. Although the plaintiff had paid Main a total of $108.80, the face of the note indicated that Main had received a cash down payment of $73.80 on the premium and that the $247.52 amount of the note represented a $221 unpaid balance on the premium, a $1 credit for life insurance, and a $25.52 finance charge. 4 By the terms of the note the plaintiff was to pay the $247.52 in eight monthly payments of $30.94. The note contained a power of attorney allowing its holder to "perform all acts necessary or appropriate to effect cancellation" of the plaintiff's insurance policy.

Main assigned the note to Colony, and Colony transmitted $294.80 to Main which then sent the $294.80 to Empire in payment of the premium. Main transmitted to Colony $73.80 of the $108.80 which the plaintiff had paid Main on December 31 and January 3, and applied the remaining $35 from the plaintiff's $108.80 payment to the purchase of an automobile club membership in the plaintiff's name.

The plaintiff mailed payments of $30 to Colony on February 28, March 21, and April 25. Colony received these payments on March 4, March 25, and April 29, respectively. By June 3 Colony had received no further payments from the plaintiff, and, the plaintiff being in arrears, Colony sent her, by registered mail, notice that it was cancelling her policy effective June 24, 1974, because of "default of payment on premium finance contract." This notice was returned to Colony unopened, and the plaintiff claims never to have received it. On June 11 Colony received from the plaintiff a money order for $30 dated May 21. On the same day Colony sent the plaintiff a letter stating that it was in receipt of her payment and adding, "However, in order to reinstate your insurance, which will be cancelled effective June 24, we must receive $42.86 which includes late charges and a $2.00 reinstatement fee, before June 20. No personal checks will be accepted." The plaintiff received this letter on June 13. As a result of a telephone conversation with an employee of Colony, the plaintiff, on June 23, sent Colony $30.94 which Colony received on June 28 and accepted.

On June 29, while passing through Georgia on a trip to Alabama, the plaintiff was involved in an automobile accident. On July 1, the plaintiff sent Colony a further payment of $40; but this payment was not accepted. Empire, on June 25, received notification from Colony that the plaintiff's policy was to be cancelled effective June 24. Empire processed the cancellation in early July. It has since refused the plaintiff's claim under the policy for her loss in the accident on the ground that the policy had been cancelled when it happened.

The judge found that Main had improperly applied $35 of the $108.80 which the plaintiff had paid to Main on December 31, 1973, and January 3, 1974, to the purchase of an automobile club membership in the plaintiff's name. The judge found that the plaintiff had not agreed to purchase such a membership and "was unaware of such motor club enrollment and thought that the $108. (80) she had paid Main Street Insurance Agency, Inc. was to be put toward her 1974 car insurance premium." He further found that if Main had done so instead of diverting $35 to a motor club membership, the plaintiff's premium payments, including those which Colony received on June 11 and 28, would have carried the policy into July. He concluded that Main "is responsible for any loss incurred by the plaintiff and that Colony and Empire held out Main . . . as their agent to collect monies due and to apply them properly towards insurance coverage and to forward the premium payments to them, and that they are legally obligated for any losses incurred by the plaintiff which are covered risks under the policy issued by Empire." There was no error.

There was sufficient evidence to support the judge's finding (see Mass.R.Civ.P. 52(a), 365 Mass. 816 (1974)) that Main had, without authority, diverted $35 of the $108.80, intended as premium, to the purchase of a motor club membership in the plaintiff's name: The plaintiff had, through Main, insured her automobile for the year 1973 with the Hanover Insurance Company; simultaneously she had purchased through Main membership in an automobile club for 1973. Late in 1973 Main sent the plaintiff a "Final Notice Before Cancellation" to complete and return to Main an enclosed application for the renewal of her motor vehicle insurance policy for the year 1974. The instructions for completing the renewal form stated, "Unless otherwise requested, your insurance will be renewed on the same basis as in 1973." The plaintiff visited Main's office on December 31, 1973, and January 3, 1974, in order to arrange for insurance. She intended that the full $108.80 which she paid to Main on those dates be applied to the payment of her premium. No one at Main's office said anything to her concerning the purchase of an automobile club membership in her name and she made no application therefor. 5 The defendants are not aided by the language quoted above in the instructions to the insurance renewal form, on which they rely. As the judge correctly pointed out, the language in the instructions refers only to the renewal of insurance, not to the renewal of an automobile club membership. And, in any event, the plaintiff apparently did not merely return the enclosed forms as contemplated by the instructions but personally went to Main's office, where she bought new insurance instead of renewing her insurance on the same basis as in 1974. As the judge points out, "The plaintiff's insurance on her car changed substantially in 1974 from that of 1973 in that she was insured with a different insurance company and there was also a change in her deductible amount under Coverage C, Division 2, Damage to Insured Motor Vehicle." (It was reduced from $100 to $50.)

Since the diversion of the $35 payment by Main was unauthorized, Main's duty was to apply that sum to the premium. In view of the judge's uncontested finding that Main was Colony's agent (see Bousquet v. Commonwealth, --- Mass. ---, --- - --- a, 372 N.E.2d 257 (1978), that duty is likewise imposed on Colony. See New England Acceptance Corp. v. American Manufacturers Mut. Ins. Co., --- Mass.App. ---, --- - --- b, 344 N.E.2d 208 (1976), id., --- mass. --- [fnc],...

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