Glockel v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 23 January 1987
• Docket Number: No. 86-361,86-361
• Citation: 224 Neb. 598,400 N.W.2d 250
• Parties: Thomas H. GLOCKEL, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a Foreign Corporation, Defendant.
• Court: Nebraska Supreme Court

Page 250

400 N.W.2d 250

224 Neb. 598

Thomas H. GLOCKEL, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a Foreign Corporation, Defendant.

No. 86-361.

Supreme Court of Nebraska.

Jan. 23, 1987.

Syllabus by the Court

1. Insurance: Rescission: Words and Phrases. The cancellation of an insurance policy is not a rescission, since a rescission avoids the contract ab initio. A cancellation merely terminates the policy as of the time when the cancellation becomes effective.

2. Insurance: Statutes. Unless a cancellation statute is manifestly all-inclusive, a statute specifying the instances under which a party to an insurance contract may cancel it does not make cancellation the exclusive remedy, and it is not in derogation of other remedial rights which are recognized and implemented by other provisions of law.

3. Insurance: Rescission: Fraud. Neb.Rev.Stat. §§ 44-515 to 44-521 (Reissue 1984) do not prevent an insurer from rescinding an automobile liability insurance policy for material misrepresentations made by the insured in the application for the policy.

4. Insurance: Rescission: Fraud. Neb.Rev.Stat. § 44-358 (Reissue 1984) limits but does not eliminate the right of an insurer to rescind an automobile liability insurance policy for fraud in the application.

5. Insurance: Rescission: Fraud. An accident resulting in injury or damage to a third person does not destroy the right of an insurer to rescind an automobile liability insurance policy for fraud in the application.

Peter J. Peters, P.C.; Warren C. Schrempp and Peter J. Hoagland; and Wallace Hopkins, P.C., and Steven M. Watson of Marks, Clare, Hopkins, Rauth, Cuddigan, Offner & Watson, Omaha, for plaintiff.

Joseph K. Meusey and Joseph E. Jones of Fraser, Stryker, Veach, Vaughn, Meusey, Olson, Boyer & Bloch, P.C., Omaha, for defendant.

KRIVOSHA, C.J., and BOSLAUGH, WHITE, HASTINGS, CAPORALE, SHANAHAN, and GRANT, JJ.

BOSLAUGH, Justice.

This case is before the court a second time on a certification of questions of law from the U.S. District Court for the District of Nebraska, pursuant to Neb.Rev.Stat. §§ 24-219 to 24-225 (Reissue 1985).

In 1985 the following three questions were certified to us:

1. Whether the exclusive method of terminating an automobile liability insurance policy is controlled by [Neb.Rev.Stat §§ 44-515 to 44-521 (Reissue 1984) ].

2. Whether, because of the provisions of [§ 44-515(1)(b) ], an automobile liability insurance policy can only be cancelled for "material misrepresentations" once a policy of insurance has been issued.

3. Whether [Neb.Rev.Stat. § 44-358 (Reissue 1984) ] is inapplicable to an automobile liability insurance policy.

(Emphasis in original.) Glockel v. State Farm Mut. Auto. Ins. Co., 219 Neb. 222, 225, 361 N.W.2d 559, 561 (1985) (hereinafter referred to as Glockel I ).

In Glockel I, supra, the first certified question was answered "Yes," and this court stated that "the only way to cancel the automobile liability policy represented by Glockel's application, Glockel's premium payment, and State Farm's binder (assuming that the policy is one described in § 44-514) is to follow the procedures set out in §§ 44-515 and 44-516." 219 Neb. at 229, 361 N.W.2d at 564. Neb.Rev.Stat. § 44-515 (Reissue 1984) limits the grounds for cancellation of policies of the type defined in Neb.Rev.Stat. § 44-514 (Reissue 1984). Among the grounds upon which cancellation may be based is "fraud or material misrepresentation affecting the policy or in the presentation of a claim thereunder...." § 44-515(1)(b). Neb.Rev.Stat. § 44-516 (Reissue 1984) provides in relevant part: "(1) No notice of cancellation of a policy to which section 44-515 applies shall be effective unless mailed by registered or certified mail to the named insured at least thirty days prior to the effective date of cancellation...."

The second question certified in Glockel I, supra, was answered "No" because a § 44-514 type of automobile liability policy can be canceled for reasons other than material misrepresentation, which additional reasons are set out in § 44-515(1)(a) and (c).

The third question certified in Glockel I, supra, was answered "Yes"; that is, Neb.Rev.Stat. § 44-358 (Reissue 1984) was held to be inapplicable to automobile liability policies insofar as it conflicts with Neb.Rev.Stat. §§ 44-514 et seq. (Reissue 1984). Section 44-358 provides:

No oral or written misrepresentation or warranty made in the negotiation for a contract or policy of insurance by the insured, or in his behalf, shall be deemed material or defeat or avoid the policy, or prevent its attaching, unless such misrepresentation or warranty deceived the company to its injury. The breach of a warranty or condition in any contract or policy of insurance shall not avoid the policy nor avail the insurer to avoid liability, unless such breach shall exist at the time of the loss and contribute to the loss, anything in the policy or contract of insurance to the contrary notwithstanding.

After the U.S. District Court had received a certified copy of our opinion in Glockel I, Glockel moved for summary judgment on grounds that State Farm had no right, as a matter of Nebraska law, to rescind or terminate his policy ab initio after the loss. In support of this motion, Glockel relied solely on the answers to the certified questions in Glockel I, supra. He interpreted those answers to mean "that an insurer has no right, under the statutes of Nebraska, to rescind a liability binder policy after it is issued."

The U.S. District Court concluded that, while we had determined that §§ 44-515 to 44-521 provided the exclusive methods for cancellation of this class of automobile liability insurance policies, "the ultimate issue ... dealing with an insurance carrier's right to rescind a policy was not addressed." This conclusion was based on the fact that the Glockel I court had strictly limited itself to answering the certified questions presented and that nowhere in the questions themselves was the term rescission mentioned.

In the memorandum and order, filed December 23, 1985, the district court stated:

In short, the crucial issue in this action is whether an insurance company has the right to rescind a policy under Nebraska law after an insured has suffered a loss or a third party has been injured by the insured.

This Court's reading of the Nebraska Supreme Court's opinion in Glockel leads it to conclude that the crucial issue in this case was not squarely addressed by the Nebraska court's answers to the certified questions. This was probably due to the framing of the questions, none of which went to the heart of the relevant issue. Due to the limited review that the court has of certified questions, as opposed to reviewing "the matter as an appeal from a specific judgment or ruling of a trial court", Glockel, 219 Neb. at 227, 361 N.W.2d at 563, it appears that the Nebraska Supreme Court chose not to stray from the questions presented. The crucial question, therefore, was never answered by the court.

This conclusion is supported by statements made by the court in the Glockel opinion. The court noted: "While the parties brief what seems to be the real issue in the case--that is, when does a purported rescission or cancellation take place?--that question is not submitted to us for answer.... Indeed, the question whether rescission and cancellation signify the same concept or have the same or different meanings under Nebraska law is not submitted on this point. * * * Various jurisdictions take differing positions on the question. Since the question is not submitted to us, we will answer the certified questions assuming that it does not make any difference in our answers which concept is applicable in Nebraska." Id. at 227, 361 N.W.2d at 563. The court also noted the ambiguity of the second question posed problems in the formulation of an answer, when it stated: In the [second] question the word "cancelled" is underlined, which seems to indicate that canceled means something different than some unexpressed concept. It would be a gratuitous assumption on our part to answer that the parties seek to have us differentiate between cancellation and rescission, so our answer will assume, for purposes of this answer only, that the two terms mean the same. Id. at 230, 361 N.W.2d at 564.

Looking at the certified questions themselves, nowhere is the term "rescission" mentioned. Rather, the questions revolve around the Nebraska statutes governing automobile insurance policies and their respective cancellation requirements. The Nebraska Supreme Court noted that the exclusive methods for cancellation of an automobile liability insurance policy are set forth in Neb.Rev.Stat. Sections 44-515 to 44-521 (Reissue 1984), however, the ultimate issue in this case dealing with an insurance carrier's right to rescind a policy was not addressed.

The Nebraska Supreme Court's reluctance to distinguish between "cancel" or "rescind" is evident when it stated: It appears to us that the questions presented seek to determine if an automobile liability insurance policy can be either "canceled," "rescinded," or "terminated" ab initio, rather than prospectively. In answering the questions certified to us, it is really of no concern at this point whether the words "rescission" or "cancellation" mean the same or not. Indeed, if defendant's contention is that recission [sic] is the only way to avoid a contract ab initio, then ab initio rescission is not available under Sections 44-515 to 44-521 because the term "rescission" is not used in any way in such sections. 219 Neb. at 228, 361 N.W.2d at 563.

The district court determined that Glockel I, supra, clearly held that an insurance carrier could not rescind a policy ab initio under §§ 44-515 to 44-521. Nevertheless, the district court concluded that Glockel I did not indicate "whether an insurance carrier can 'rescind' a policy ab initio in a manner other than...