Conrad v. Universal Fire & Cas. Ins. Co., 23S04-9705-CV-302

• Decision Date: 31 October 1997
• Docket Number: No. 23S04-9705-CV-302,23S04-9705-CV-302
• Citation: 686 N.E.2d 840
• Parties: James CONRAD and Carol Conrad, Appellants, v. UNIVERSAL FIRE & CASUALTY INSURANCE COMPANY, Appellee.
• Court: Indiana Supreme Court

Page 840

686 N.E.2d 840

James CONRAD and Carol Conrad, Appellants, v. UNIVERSAL FIRE & CASUALTY INSURANCE COMPANY, Appellee.

No. 23S04-9705-CV-302.

Supreme Court of Indiana.

Oct. 31, 1997.

Robert O. Williams, Covington, for Appellants.

Jeffrey A. Doty, Indianapolis, for Appellee.

ON PETITION TO TRANSFER

BOEHM, Justice.

This case presents the issue of whether an insurance company's mailing of notice of cancellation of a policy by certified mail, return receipt requested, creates an irrebuttable presumption of notice under a policy calling for proof of mailing to constitute proof of notice, where the notice was returned to the company marked "unclaimed." We hold that it does not.

Factual and Procedural Background

Universal Fire & Casualty Insurance Company issued a homeowner's insurance policy to James and Carol Conrad in March of 1992. The policy had been placed through an insurance agent, Dennis Stansbury. After issuing the policy, Universal inspected the home, decided it was a poor insurance risk, and concluded to invoke a provision permitting it to cancel within the first sixty days "for any reason." The policy provided:

We may cancel this policy only for the reasons stated in this condition by notifying you in writing of the date cancellation takes effect. This cancellation notice may be delivered to you, or mailed to you at your mailing address shown in the Declarations. Proof of mailing shall be sufficient proof of notice.

On April 30 Universal sent notice of cancellation to the Conrads at their designated address by certified mail, return receipt requested, to be effective May 10. The notice was returned to Universal marked "unclaimed." On May 31, Universal entered the unearned premium amount due the Conrads on its "Agent Statement" for the Stansbury Agency. On or about June 10, Universal sent a check to the Stansbury Agency refunding the unearned premium less the amount of the commission already paid to Stansbury. There was no communication between either Stansbury or Universal and the Conrads until after July 23 when the Conrads' house was destroyed by fire. Approximately a week after July 23, Stansbury returned the unearned premium to the Conrads. The Conrads filed a claim with Universal, Universal denied it, and the Conrads sued.

The Conrads contended in their complaint that Universal did not effectively cancel the policy because it failed properly to notify the Conrads of its intent to cancel and because of its failure to refund the unused portion of the premium within a reasonable time, as required by the policy. ¹ Universal answered and moved for summary judgment on the ground that the policy had been canceled on May 10, pursuant to the terms of the policy. Universal contended that summary judgment was proper because the undisputed facts showed that Universal mailed the notice of cancellation to the Conrads on April 30. Mailing, Universal claimed, was proper "proof of notice" under the policy and Indiana law. The trial court granted Universal's motion and the Conrads appealed. The foregoing facts are not disputed. Because we are reviewing a grant of summary judgment, we accept the facts recited in the affidavits opposing summary judgment. The only material fact for purposes of this decision is that the Conrads did not receive the notice. The reasons for this failure are not in the record.

The Court of Appeals affirmed, holding that when an insurance policy provides that proof of mailing of notice shall be sufficient proof of notice, actual receipt is not required. Conrad v. Universal Fire & Cas. Ins. Co., 670 N.E.2d 936, 938 (Ind.Ct.App.1996). Because it was undisputed that the notice was mailed, the court concluded that the notice was effective. ² We granted transfer to consider whether proof of mailing of a notice of cancellation by certified mail, return receipt requested, is sufficient to establish notice as a matter of law when the notice is returned unclaimed under the standard policy cancellation provision involved in this case. We hold that it is not and reverse the trial court.

Discussion

Because it is not disputed that Universal sent the notice of cancellation to the Conrads at the designated address, the only issue is the significance of Universal's decision to rely on certified mail to send the notice of cancellation. The policy provision neither required, authorized, nor prohibited the use of certified mail. It simply stated that "[p]roof of mailing shall be sufficient proof of notice." This provision has been construed to mean that actual receipt of notice is not required. In general, proof of mailing the notice has been held to be enough. ³ American Family Ins. Group v. Ford, 155 Ind.App. 573, 578, 293 N.E.2d 524, 526 (1973) and Allstate Ins. Co. v. Morrison, 146 Ind.App. 497, 256 N.E.2d 918 (1970) both citing United Farm Bureau Mutual Ins. Co. v. Adams, 145 Ind.App. 516, 522, 251 N.E.2d 696, 700 (1969) ("the issue of receipt is factually irrelevant and the issue ... turns exclusively upon proof of mailing."). See also Farber v. Great Am. Ins. Co., 406 F.2d 1228 (7th Cir.1969); State Farm Mutual Automobile Ins. Co. v. Perrin, 331 F.2d 565 (7th Cir.1964) (both relying on an Illinois appellate court decision in applying Indiana law to hold that conclusive proof of mailing overcomes evidence of nonreceipt). This construction of the provision is in accord with the majority of other states, see generally 40 A.L.R.4th 867, § 6[a] (1985). It is frequently justified on the ground that proof of mailing gives rise to a presumption that the notice will be received. American Family Ins. Group, 155 Ind.App. at 578, 293 N.E.2d at 526 (proof of proper mailing of a communication justifies the inference that the mailing was received in due course); 2 LEE R. RUSS & THOMAS F. SEGALLA, COUCH ON INSURANCE 3D § 32.19 (1995) (when actual receipt is not required, proper mailing "generally establishes a presumption that the mailed notice was received."); 43 AM.JUR.2D Insurance § 392 (1982) (suggesting, as one rationale for this view, that there is no need for actual notice because the policy provision designates the U.S. Post Office as the insured's agent for the purpose of receiving the notice).

However, this construction of the proof of mailing clause envisions use of ordinary mails as the "mailing" which the insurance company must prove. Ordinary mail has been traditionally viewed as reasonably assured of delivery and as reliably fulfilling the purpose of providing notice. This is of course the critical point because the purpose of providing notice is to enable the insured to obtain other coverage. Moore v. Vernon Fire & Cas. Ins. Co., 142 Ind.App. 334, 234 N.E.2d 661 (1968); see also 2 RUSS & SEGALLA, supra, at § 32.1. This rule's often unarticulated premise is that opening the door to a swearing contest on the issue of receipt of an item of mail will generate extensive litigation and the opportunity for fraud or wilful refusal to accept legitimate notices. ⁴ Moreover, if the insurer sends the notice to the address specified by the addressee, there may be little more it can do.

Certified mail, return receipt requested, however, requires a signature from the recipient in order to be received. If the recipient is not present to sign, the mail is returned to sender as occurred in this case. As a result, as a "mailing" device, it is not reasonably calculated to ensure receipt, particularly if sent to a residence. In this era of two income families often no adult is at home during postal hours and retrieving an item from the post office may be inconvenient. Certified mail, return receipt requested, is useful for the sender. If used successfully, it creates a solid paper documentation of both the giving and receipt of notice. However, if it is not received, as in this case, it is returned and the sender is put on notice that the communication was ineffective. For this reason, certified mail, return receipt requested, is not a sufficiently reliable means of notifying the insured of the need to find new coverage that it can be elevated to an irrebuttable presumption that equates to a rule of law. Rather, if conclusively presumed to establish "notice" it is likely to create a pool of blithely uninsured individuals. For this reason, "courts have generally held that [under this notification provision] sending the notice of cancellation by registered letter does not constitute a compliance with the requirement as to the mailing of notice." 43 AM.JUR.2D at § 393 & Supp.1997; see also 40 A.L.R. 4th at § 12[b]. But see id. at § 12[a]; 43 AM.JUR.2D at § 393 n. 22 & Supp.1997 for courts taking the opposite view. ⁵

In this case, Universal acknowledged that it received the returned cancellation notice marked "unclaimed" by the post office. This put Universal on notice that its attempt to notify the Conrads had failed. More importantly, because of the contingencies of certified mail, that failure could be caused by a number of reasons not attributable to any action or inaction of the Conrads. If ordinary mail had been sent to the correct address and nothing called nonreceipt to the insurer's attention, that would be enough to invoke the traditional sufficiency of proof of mailing. However, we agree with the courts that have held that proof of mailing, by certified mail or by ordinary mail, creates a presumption of delivery, but the presumption of delivery may be rebutted where a certified letter is returned undelivered. Larocque v. Rhode Island Joint Reinsurance Ass'n, 536 A.2d 529, 532 (R.I.1988) (notice sent by certified mail but returned to insurer unclaimed required that insurer do more to effect notice of cancellation); compare Fichtner v. State Farm Fire and Cas. Co., 148 Misc.2d 194, 560 N.Y.S.2d 94 (N.Y.Sup.Ct.1990) (when notice was sent three times by certified mail, return receipt requested, but not received, whether the notice requirement was met is a question of fact for jury) with Beasley...