Fenton v. Federal Ins. Administrator, 79-1356

• Decision Date: 05 January 1981
• Docket Number: No. 79-1356,79-1356
• Parties: Estelle M. FENTON, Plaintiff-Appellee, Cross-Appellant, v. FEDERAL INSURANCE ADMINISTRATOR and John W. Macy, Director of the Federal Emergency Management Agency, Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1119

633 F.2d 1119

Estelle M. FENTON, Plaintiff-Appellee, Cross-Appellant, v. FEDERAL INSURANCE ADMINISTRATOR and John W. Macy, Director of the Federal Emergency Management Agency Defendants-Appellants, Cross-Appellees.

No. 79-1356.

United States Court of Appeals Fifth Circuit.

Jan. 5, 1981.

Patricia G. Reeves, William Kanter, Nancy M. Floreen, Appellate Staff, Civil Div Dept. of Justice, Washington, D. C., for defendants-appellants, cross-appellees.

Wolfson, Urich & Associates, P.A., Stephen C. Shenkman, Robert Urich, Miami, Fla., for plaintiff-appellee, cross-appellant.

Appeals from the United States District Court for the Southern District of Florida.

Before RONEY, HILL and FAY, Circuit Judges.

RONEY, Circuit Judge:

This controversy arises under the Federal Crime Insurance Act, 12 U.S.C.A. § 1749bbb-10a et seq. (1980). Plaintiff recovered for burglary losses under an insurance policy issued pursuant to the Act. On appeal, defendants argue that the policy had lapsed prior to the burglary for nonpayment of an installment premium. We affirm the district court's decision that the nonpayment was excused because plaintiff failed to receive the bill notifying her that the installment was due.

Plaintiff cross-appeals from the denial of attorney's fees, which she claims are allowable under Florida insurance law. We affirm the denial on the ground that federal law preempts Florida law and does not permit the recovery of attorney's fees in a suit to enforce coverage under this type of policy.

The facts, stipulated by the parties, are not in dispute. On June 25, 1975, the plaintiff, Estelle Fenton, submitted an application for a Federal Crime Insurance policy. This coverage is provided by the Department of Housing and Urban Development and the Federal Insurance Administrator ("FIA"), the defendants in this action.

The premium for the policy was payable in annual or semiannual installments at the option of the applicant. Fenton elected to pay semiannually and enclosed a check for the first installment with her application. A policy was issued, with coverage effective from July 7, 1975. The policy did not indicate when the second installment would be due.

On February 10, 1976, Fenton's residence was burglarized, and she sought recovery under the policy for the property loss. The FIA denied coverage, however, contending that the policy lapsed approximately a month prior to the theft because Fenton had not paid the second installment. Fenton admitted nonpayment, but argued that she failed to pay because she had never received a bill notifying her that the premium was due. The parties stipulated that a bill for the second installment was mailed to plaintiff at least 45 days prior to the due date.

The lawsuit was tried without a jury. The district court held that receipt of the bill, not mailing, controlled whether the policy could be cancelled for nonpayment of premium. Since the court found that Fenton had not received the bill, it held that the policy was still in effect at the time of the burglary. The court awarded her the amount of loss previously stipulated by the parties.

I. Failure to Receive the Bill as an Excuse for Nonpayment

The controlling issue on appeal is whether Fenton's failure to receive the bill for the second installment excuses her nonpayment. The resolution of this issue depends upon the provisions of the policy.

If an insurance policy provides that the mere mailing of the bill is sufficient proof of notice that a payment is due, then the policy may be cancelled for nonpayment even if the insured never in fact receives the bill. If the policy does not provide that mailing is sufficient notice, however, the insured must be afforded an opportunity to show lack of receipt as an excuse for nonpayment. See Kavanaugh v. Security Trust & Life Insurance Co., 117 Tenn. 33, 96 S.W. 499 (1906). See generally 45 C.J.S. Insurance, § 616(b) (1946).

Defendants concede that neither the application form nor the policy itself expressly provides that the mailing of the bill is sufficient notice that the second installment is due. They contend, however, that a reasonable interpretation of the documents is that such a provision is "contemplated" or "implied." We reject this contention, in light of the settled law that ambiguity in the policy provisions will be resolved in favor of the insured. See, e. g., Ranger Insurance Co. v. Algie, 482 F.2d 861, 863 (5th Cir. 1973); Connecticut General Life Insurance Co. v. Craton, 405 F.2d 41, 49 (5th Cir. 1968).

The application form states only that the second installment "will be billed" approximately 45 days before its due date, and that policy coverage will terminate without further notice if payment is not received by the due date. It is completely silent on whether mailing or receipt constitutes proof of notice that payment is due. The policy itself does state that the mailing of a notice of cancellation is sufficient proof of notice, but there is no indication that this notice-by-mailing language was intended to apply as well to the bill for the second installment. In fact, the express inclusion of this language in the notice of cancellation provision but not in the billing notice provision weighs against defendants' contention that the policy contemplates mere mailing of the bill as sufficient proof of notice.

Defendants' interpretation of the policy also appears untenable in light of the crucial role the bill plays under this policy in notifying the insured of when payment for the second installment is due. The application and the policy do not expressly indicate this due date. Although it may be reasonable to interpret these documents as implying that, since the payments were scheduled on a semiannual basis, the second installment would be due six months after the first, there were at least two dates from which the six months could begin: the date Fenton submitted the application with the first installment (June 25, 1975), or the effective date of the policy (July 7, 1975). The application provided only that the second installment would be "billed." Thus, the bill was the first and only indication to Fenton of exactly when she was expected to pay the premium.

Defendants contend a contrary interpretation is supported by reading the billing clause in the application form in conjunction with the cancellation clause in the policy. Defenda...