Commercial Ins. Co. v. American and Foreign Ins. Ass'n
| Citation | 370 F. Supp. 345 |
| Decision Date | 02 January 1974 |
| Docket Number | Civ. No. 343-70. |
| Parties | COMMERCIAL INSURANCE COMPANY, Plaintiff, v. AMERICAN AND FOREIGN INSURANCE ASSOCIATION et al., Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
Charles M. Cordero, San Juan, Puerto Rico, for plaintiff.
David Rivé-Rivera, for Rieckehoff, Calderón, Rosa Silva & Vargas, Hato Rey, San Juan, Puerto Rico, for defendants.
The following motions are presently before this Court in this case:
1. Plaintiff's motion under Rule 60(b), filed on February 7, 1973, requesting that our Order of December 20, 1972 be vacated and our Order of September 28, 1972 be reinstated. Defendants have filed opposition to this motion.
2. Defendants' motion for protective order filed on March 15, 1973. Plaintiff has filed opposition to this motion.
3. Defendants' motion for continuance of deposition of March 15, 1973.
4. Plaintiff's motion filed on March 23, 1973 requesting that a date for taking of depositions be set by this Court.
5. Plaintiff's motion for sanctions filed on March 23, 1973.
The parties have submitted their respective briefs and new documentary evidence and have appeared for oral argument. This Court now rules on the merits of the respective motions.
Our Order of September 28, 1972 held that defendants American and Foreign Insurance Association, hereinafter called AFIA, and Compañía de Seguros "La Continental" had both acted as unauthorized insurers in Puerto Rico and ruled that therefore AFIA was required to post the security bond required of unauthorized insurers by 26 L.P.R.A. § 1006(1) and that "La Continental" was required to file an appearance before this Court following service through the Insurance Commissioner of Puerto Rico as an unauthorized insurer, pursuant to 26 L.P.R.A. § 1005(2).
The Court at that time set forth the facts in this case and ruled on the applicability of sections 303(1), 1006(1), 1005(1), and 329(1) of the Insurance Code of Puerto Rico (26 L.P.R.A.). However, upon reconsideration this Court found that under the provisions of 26 L.P.R.A., Section 303(4), defendants AFIA and "La Continental" were not required to obtain authorization from the Insurance Commissioner in order to transact insurance in Puerto Rico and, therefore, have not acted as unauthorized insurers in Puerto Rico. Our Order of December 20, 1972, consequently, vacated and set aside our Order of September 27, 1972, denied Commercial Insurance Company's motion for security bond and granted Compañía de Seguros "La Continental's" motion to quash summons.
Upon reconsideration, the main issue to be resolved by this Court is whether the provisions of 26 L.P.R.A., Section 303(4) do, in fact, determine that AFIA and "La Continental" were not required to obtain authorization of the Insurance Commissioner in order to transact insurance in Puerto Rico. If the Court so finds, our Order of December 20, 1972 must be affirmed; otherwise, said Order must be vacated and set aside.
As may be recalled, the Court based its determination on the following argument:
1. The only insurance policy which can provide grounds for a finding that AFIA and "La Continental" are "unauthorized insurers" is the policy issued by "La Continental" in favor of codefendant Cristalería Peldar, S. A.
2. The Insurance Code of Puerto Rico specifies the instances where an insurer does not require the authorization of the Commissioner of Insurance in order to transact insurance in Puerto Rico.
3. Section 303(4) of the Insurance Code specifically covers the situation in this case as it provides that: "As to an insurance coverage on a subject of insurance not resident, located, or expressly to be performed in Puerto Rico at time of insurance, and solicited, written, and delivered outside Puerto Rico, no such authority shall be required of an insurer as to subsequent transactions in Puerto Rico on account thereof." (Emphasis added.)
4. The insurance policy in question was solicited, written and delivered outside Puerto Rico on December 31, 1966 and, at that time, it covered no subject of insurance resident, located or expressly to be performed in Puerto Rico.
In other words, this Court found that since codefendant "La Continental" issued its policy on December 31, 1966, under the provisions of 26 L.P.R.A. § 303(4), she could not be held an unauthorized insurer because, at that time, the policy did not cover a subject of insurance located or expressly to be performed in Puerto Rico. Further, since "La Continental" was not acting as an unauthorized insurer, then codefendant AFIA could not be considered an unauthorized insurer under 26 L.P.R.A., Sec. 1005(1) for her services on behalf of "La Continental."
Plaintiff's motion for reconsideration alleges that this Court committed error in that the applicable policy was not the one issued on December 31, 1966, for said policy expired on December 31, 1967. Plaintiff's position is that the policy applicable to the case at bar was issued by "La Continental" on December 31, 1968, to expire on December 31, 1969, and that at the time of issuance, this policy did cover a subject of insurance to be performed in Puerto Rico and a risk located in Puerto Rico. Therefore, plaintiff argues, the provisions of 26 L.P.R.A. § 303(4) cannot be invoked to maintain that "La Continental" is not an unauthorized insurer in Puerto Rico and that, as a consequence, AFIA cannot be considered an unauthorized insurer either.
Clearly, in order to decide the controversy regarding the provisions of 26 L. P.R.A. Sec. 303(4), this Court must determine if the policy in force at the time liability was incurred (June 23, 1969) was issued on December 31, 1968 rather than on December 31, 1966 and, in either case, whether or not it specifically covered a subject of insurance located or expressly to be performed in Puerto Rico and a risk located therein at the time of issuance.
As a general rule, a renewal of insurance, where there is no provision in the policy for its renewal, is a new contract on the same terms as the old one, while renewal in accordance with a policy provision is simply an extension of the old contract. See: Firemen's Ins. Co. v. Floss, 67 Md. 403, 10 A. 139; Epstein v. Northwestern Nat. Ins. Co., 267 Mass. 571, 166 N.E. 749; Farmers Ins. Exchange v. Allstate Ins. Co., D.C.Mich., 143 F.Supp. 213; Okst v. Metropolitan Life Ins. Co., Sup., 50 N.Y.S.2d 919; International Life Ins. Co. v. Mowbray, 7 Cir., 22 F.2d 952; Steele v. Great Eastern Casualty and Indemnity Co., 158 Minn. 160, 197 N.W. 101; Maryland Medical Service, Inc. v. Carver, 238 Md. 466, 209 A.2d 582; Rice v. Provident Life and Accident Insurance Co., 231 Mo.App. 560, 102 S.W.2d 147; Pearl Assurance Co. v. School District No. 1, 10 Cir., 212 F.2d 778; Government Employees Insurance Co. v. United States, 400 F.2d 172 (10th Cir. 1968), and March v. Snake River Mutual Fire Insurance Co., 89 Idaho 275, 404 P.2d 614.
We must, therefore, address ourselves to the original insurance policy issued by "La Continental" to Cristalería Peldar to determine the actual express agreement as to the duration of the insurance coverage and whether or not said original policy contains any provision for extension of the insurance coverage upon expiration of the original period.
According to the Insurance Code of Puerto Rico, an insurance contract must be construed according to the terms and conditions set forth in the policy and the policy must contain the entire contract — sections 1125, 1118. The policy must specify, among other things, "the time at which the insurance thereunder takes effect and the period during which the insurance is to continue," — Section 1114(3)(e). The statute also provides that "any insurance policy terminating by its terms at a specified expiration date and not otherwise renewable, may be renewed . . . for a specific additional period or periods by a certificate or by endorsement of the policy, and without requiring the issuance of a new policy." — Section 1126.
An examination of the policy itself shows that policy No. RC-0328, issued by "La Continental" to codefendant Cristalería Peldar, specifies clearly that said policy shall be in force from December 31, 1966 to December 31, 1967, and that no provision is contained therein as to extension of the policy upon expiration. In fact, the policy specifically states that coverage is limited to the period in which the policy is in force . Additionally, the sworn statement of Mr. Pablo Andrade Mejía, President of "La Continental," flatly declares that policy No. RC-0328, issued to Cristalería Peldar, was effective December 31, 1966 and expired on December 31, 1967.
The evidence also shows that policy No. RC-0328 has been renewed five times, each time for a specified period of one year, as expressly stated in the renewal documents. The renewals have been as follows:
RENEWAL
NUMBER COVERED PERIOD
4322 From December 31, 1967 to December 31, 1968
5330 From December 31, 1968 to December 31, 1969
6419 From December 31, 1969 to December 31, 1970
7894 From December 31, 1970 to December 31, 1971
11960 From December 31, 1971 to December 31, 1972
In short, from the evidence now before the Court there is no question that the policy issued on December 31, 1966 expired on December 31, 1967 and that the insurance contract in force at the time liability was incurred was the contract entered into through renewal number 5330, and which covered the period of December 31, 1968 to December 31, 1969.
The question then narrows itself to a determination of whether at the time the applicable contract was issued, it covered a subject of insurance resident, located or expressly to be performed in Puerto Rico.
Examination of the policy terms shows that products liability insurance provisions covered the insured's liability arising from the risks and dangers inherent in the use or...
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