Fontenot v. State Farm Mut. Ins. Co.

Decision Date21 March 1960
Docket NumberNo. 4955,4955
Citation119 So.2d 588
PartiesEdward FONTENOT v. STATE FARM MUTUAL INSURANCE COMPANY et al.
CourtCourt of Appeal of Louisiana — District of US

Hynes, Mathews & Lane, Baton Rouge, John Rarick, St. Francisville, for appellant.

Wm. T. Bennett, Clinton, Dodd, Hirsch, Barker & Avant, Baton Rouge, for appellee.

Before ELLIS, LOTTINGER, TATE, FRUGE and LANDRY, JJ.

LANDRY, Judge.

This appeal, by defendants State Farm Mutual Automobile Insurance Company (hereinafter referred to simply as 'State Farm') and one Prosper Reech, is from the judgment of the lower court condemning said defendants, in solido, to pay plaintiff, Edward Fontenot, the sum of $4,146.54, with interest and costs, for personal injuries and medical expense sustained and incurred in an automobile accident which occurred within the municipal limits of Jackson, Louisiana, on February 14, 1959, and involved a Ford Pick Up Truck owned and being operated by defendant Reech.

Liability of defendant State Farm is predicated upon its being the admitted insurer of a 1953 Chevrolet owned by Reech but not involved in the accident. Plaintiff concedes the uninsured Ford Pick Up owned by Reech and not the insured Chevrolet was the vehicle Reech was operating on the occasion in question but urges liability of State Farm on the basis of a policy provision referred to as a 'temporary substitute automobile clause'. Both plaintiff and defendant Reech maintain coverage afforded on the Chevrolet was extended to the Ford truck under the express terms of the temporary substitute automobile clause which states in substance that liability of State Farm extends to any vehicle used by the insured Reech while the Chevrolet was temporarily withdrawn from service for repair.

In the lower court judgment was rendered against defendants upon the finding that the negligence of Reech was the proximate cause of the accident and an amendment to the temporary substitute automobile clause prior to the accident of February 14, 1959, was ineffective and inoperative be cause of its unconstitutionality and consequently, the lack of coverage plead by defendant State Farm was without merit. Negligence on the part of Reech is now conceded by both defendants.

State Farm appeals that portion of the lower court judgment decreeing its liability under the policy involved and also complains of the action of the lower court in adjudging the policy revision unconstitutional.

Defendant Reech appealed the judgment against him but does not seek its reversal, merely its affirmation insofar as it holds his insurer State Farm liable under the policy.

It is undisputed that State Farm issued Reech what is known as a 'Family Automobile Policy' covering a six month period commencing February 8, 1958. Unlike stock companies which issue such policies for periods of one year from effective date and renew by issuance of a completely new written policy on or before expiration, State Farm (a mutual company), as is the custom and practice with mutuals, renews its policies at six month intervals by the expedient of mailing the insured a notice of premium due which, if paid within ten days of expiration date, extends the policy for an additional six month period thereby eliminating the writing and mailing of a completely new policy. From its inception Reech's policy was kept in continuous force and effect by successive renewals and was admittedly in effect on February 14, 1959, the date of the accident with which we are concerned in this litigation.

All litigants are in accord that the policy issued by State Farm on February 8, 1958, contained a coverage provision stipulating in substance that an automobile used as a temporary substitute for the insured Chevrolet would be covered by the policy. It is likewise conceded that the term 'temporary substitute automobile' as used in the policy is therein defined as follows:

'any automobile or trailer while Temporary used as a substitute for the owned automobile or trailer when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction.'

The parties are in agreement that under the quoted policy provision, any vehicle temporarily used by the insured Reech as a substitute for the insured Chevrolet while the latter vehicle was withdrawn from normal use for repair thereto, was protected the same as the Chevrolet even though the substitute vehicle belonged to the named insured and was not specifically mentioned in the policy.

On April 17, 1958, the Casualty and Surety Division of the Louisiana Insurance Rating Commission (hereinafter referred to as 'The Commission'), issued its bulletin Number 203 to all liability insurers operating within the state announcing certain revisions in the Standard Form Family Automobile Policy which bulletin, inter alia, contained the following:

'The changes are applicable to all new and renewal policies written on or after May 1, 1958. As respects such policies, either (1) the revised policy form, or (2) the present policy form, together with the appropriate amendatory endorsement, must be used.

Among the changes announced in the aforesaid bulletin is the requirement that the words 'not owned by the insured' be inserted after the words 'any automobile or trailer' in the hereinabove set forth policy definition of the term temporary substitute automobile. This revision, of course, eliminated from coverage a temporary substitute automobile belonging to the named insured and, if effective, admittedly relieved State Farm of liability herein.

Reech's policy having been issued February 8, 1958, and being renewable at intervals of six months, had an expiration date February 8, 1959. Meanwhile, (on some date between November 20, 1958, and December 15, 1958), Reech acquired the pick up truck involved in the accident. It is acknowledged that on January 8, 1959, State Farm mailed Reech notice of premium due for renewal of his policy upon expiration February 8, 1959. State Farm contends that in conformity with Directive 203 of the Commission on January 8, 1959, it mailed to Reech (in the same envelope with his premium notice), a printed endorsement setting forth the changes called for in the other together with an undated form letter over the signature of one of its vice presidents explaining that changes in policy coverage would be effective as of the next renewal date and rates increased dependent upon coverage and residence. The printed endorsement in question contained, inter alia, the following:

"Endorsement Attached

"A revised Family Automobile policy has been prescribed for use in Louisiana. The provisions of the revised Family policy are being applied to your present policy by this amendatory endorsement.

"Several changes have been made in the revised policy. One of the principal areas of change is the restriction of coverage on 'non-owned' automobiles furnished for your regular use. If you are now driving such a 'non-owned' automobile you should ask your agent for an endorsement to provide this coverage.

"The attached amendatory endorsement is a part of your contract with the State Farm Mutual Automobile Insurance Company. Please read and place it with your policy.

"Your agent will be glad to answer any questions you may have about your automobile insurance."

6518 Amendment of Family Automobile Policy

"In Part 1, Definitions, 'temporary substitute automobile', the words, 'not owned by the named insured', are inserted after the words 'means any automobile or trailer.' "

Although Reech admits receipt of the premium notice mailed January 8, 1959, he steadfastly denies the envelope in which it was forwarded contained any other document. The trial court found as a fact that Reech did in truth receive the amendatory endorsement along with the premium notice and in this regard, we think his conclusion eminently correct. We deem it unnecessary to indulge in a detailed analysis of the testimony concerning the mailing of the disputed endorsement and sufficient only to point out that certain officials and employees of State Farm testified that the premium notice and other documents were mailed by means of an intricate, modern mailing device, the operation of which was explained in detail from which testimony we conclude (as did the trial court) that the endorsement in question was received by Reech.

The contention that the action of the Commission in ordering a restriction, limitation or reduction in coverage was unconstitutional is predicated on the dual basis (1) the authority of the Commission is expressly limited to rate making and does not extent to amendment or revision of coverage provisions and (2) even if the Commission had authority to decree changes in coverage, its action in the premises constituted a violation of Article 4, Section 15 of the State Constitution of 1921 LSA, in that it amount to an ex post facto law impairing the obligations of an existing contract and divesting Reech of vested rights. Counsel for Reech argues further that since Commission Order 203 expressly limits its own application to policies 'written' subsequent to May 1, 1958, it may not be invoked in the case at bar because the policy of February 8, 1959, was not rewritten by issuance of a completely new instrument in writing but simply continued in force by endorsement.

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