Green Mountain Ins. Co. v. Maine Bonding & Cas. Co., 91-113

• Citation: 608 A.2d 1160,158 Vt. 200
• Decision Date: 20 March 1992
• Docket Number: No. 91-113,91-113
• Court: United States State Supreme Court of Vermont
• Parties: GREEN MOUNTAIN INSURANCE COMPANY v. MAINE BONDING & CASUALTY CO., Carol Carter, Alan Buck, Judye Cheney, Individually and as Next Best Friend of Sheena Cheney Buck and Gregory Hammond.

Page 1160

608 A.2d 1160

158 Vt. 200

GREEN MOUNTAIN INSURANCE COMPANY v. MAINE BONDING & CASUALTY CO., Carol Carter, Alan Buck, Judye

Cheney, Individually and as Next Best Friend of

Sheena Cheney Buck and Gregory Hammond.

No. 91-113.

Supreme Court of Vermont.

March 20, 1992.

Bruce C. Palmer of Downs Rachlin & Martin, St. Johnsbury, for plaintiff-appellant.

Allan R. Keyes and John A. Serafino of Ryan Smith & Carbine, Ltd., Rutland, for defendants-appellees.

Before ALLEN, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.

JOHNSON, Justice.

This is a declaratory judgment action to establish which insurance carrier is primarily liable for damages resulting from an automobile accident. Plaintiff Green Mountain Insurance Company (Green Mountain) appeals from an order of the Orleans Superior Court granting summary judgment to defendant Maine Bonding & Casualty Company (Maine Bonding). Maine Bonding had insured a vehicle involved in a collision with a car insured by Green Mountain, but claimed that its policy had been cancelled. We affirm.

On October 4, 1987, Gregory Hammond was driving a car lent to him by its owner, Carol Carter, when it collided with a car driven by Alan Buck. Hammond was insured by Green Mountain, and the Carter vehicle carried the policy that Maine Bonding claims was cancelled. Each policy provided that its coverage was primary with respect to the policy owner's vehicle and excess with regard to nonowned vehicles, with the result that the Maine Bonding policy would afford primary coverage if it were in effect. The Maine Bonding policy had initially covered a 1976 Ford Pinto, but in March 1987 Carter notified Maine Bonding that she was substituting a 1985 Ford Escort for the Pinto. Prior to learning of the change in cars, Maine Bonding issued declarations of coverage for the period April 7 to October 7, 1987, and on March 16, 1987, sent a bill for $81 for the renewal, with a minimum payment due of $27. The due date for payment was April 8, 1987. Carter received the bill.

On March 23, 1987, Maine Bonding issued Carter two amended declarations with respect to her new car, one covering the initial policy period from October 7, 1986 to April 7, 1987, and the second covering the renewal period from April 7 to October 7, 1987. The first amended declaration reflected a "full term total premium" of $237 and stated at the bottom of the document, "Above amendments identified by * developed a premium of $24.00." The second amended declaration also stated a "full term total premium" of $237 and indicated at the bottom of the document that the amendments identified "developed a premium of $156.00."

By check dated April 3, 1987, Carter paid Maine Bonding $27, apparently in response to the March 16, 1987 bill. Maine Bonding received and negotiated the payment on April 6, 1987, applying $24 of the $27 toward the additional premium due for the new car for the remainder of the initial term, i.e., from March 10, 1987 through April 7, 1987, and applying the balance of $3 to the renewal period.

On April 6, 1987, Maine Bonding rebilled Carter for $24, the difference between the minimum due for the renewal period ($27) and the $3 credit remaining from the check received from Carter on April 6, 1987. Receiving no further payment thereafter, Maine Bonding on April 20, 1987 mailed the following notice to Carter:

YOUR PREMIUM PAYMENT DUE APRIL 08, 1987 HAS NOT BEEN RECEIVED. YOU HAVE AN OPPORTUNITY TO KEEP YOUR POLICY IN FORCE IF THE MINIMUM DUE OF $24.00 IS RECEIVED BEFORE THE CANCELLATION OF MAY 05, 1987. SEND PAYMENT TO P.O. BOX 226, PORTLAND, MAINE 04112. IF YOU HAVE ALREADY MAILED YOUR PAYMENT, PLEASE DISREGARD THIS NOTICE.

Carter testified in deposition with respect to this notice that "I threw it away, because I'd already paid it." The reason for her impression that she had paid the bill was the similarity of the $27 she had paid and the $24 billed.

Nearly five months later, Carter's Ford Escort was involved in the collision that resulted in the present action.

Both Green Mountain and Maine Bonding filed motions for summary judgment. Green Mountain stated that "the essential facts of this case are undisputed" and argued that Maine Bonding could not establish an effective cancellation as a matter of law because its notices to Carter were ambiguous. Maine Bonding's motion also asserted that there were no material facts at issue and argued that its policy had been effectively cancelled as a matter of law. The trial court ruled that Green Mountain had not met its burden of demonstrating that the cancellation notice was ambiguous, finding, on the contrary, that "the surrounding circumstances verify that the cancellation notice was an accurate integration of the bills sent by Maine Bonding and the payment received from Ms. Carter." The court stressed that Carter should have been aware that her new car would require an additional premium and that she made no inquiry of the company after receiving a cancellation notice. The court concluded that retention of the $3 toward payment of the renewal period premium did not estop Maine Bonding from relying on the cancellation notice.

I. Standing

Maine Bonding argues that Green Mountain has no standing to assert that its policy was not validly terminated for nonpayment of the premium. Maine Bonding contends that the present issue is "personal to Carter and Maine Bonding." We disagree. That Carter has a significant interest in the issue cannot be disputed, because her vehicle was involved; but so does Green Mountain, for if the Maine Bonding policy was in force on the date of the accident, then Maine Bonding was the primary carrier, and Green Mountain the excess carrier. It is hard to think of a question that would bear more on both Green Mountain's and Maine Bonding's respective interests in the underlying litigation, and the declaratory judgment action is designed to raise and resolve such issues. 12 V.S.A. § 4722 (purpose of the declaratory judgment is "to settle and to afford relief from uncertainty and insecurity with respect to rights, status and other legal relations and it is to be liberally construed and administered").

Maine Bonding cites no cases in which standing has been denied in a suit between insurance companies over the validity of, or the meaning of a term or clause within, one of the company's policies. Declaratory judgment actions involving such issues are legion. See, e.g., Concord General Mut. Ins. Co. v. Home Indem. Co., 368 A.2d 596, 597 (Me.1977); Motor Club of America Ins. Co. v. All American Rental, Inc., 14 Mass.App. 1031, 442 N.E.2d 739 (1982); Lumbermens Mut. Casualty Co. v. Progressive Casualty Co., 168 A.D.2d 708, 563 N.Y.S.2d 566 (1990). We therefore conclude that Green Mountain Insurance Company had standing to assert that its policy was not validly terminated for nonpayment of premium.

II. Cancellation of the Carter Policy

Green Mountain argues that Maine Bonding did not effectively cancel the policy with the insured because its billing and crediting procedures created ambiguity in the notice of cancellation. As we stated in Isbrandtsen v. North Branch Corp., 150 Vt. 575, 579, 556 A.2d 81, 84 (1988): "Ambiguity will be found where a writing in and of itself supports a different interpretation from that which appears when it is read in light of the surrounding circumstances, and both interpretations are reasonable." Thus, for example, a purported notice of cancellation can fail to include the word "cancellation" and hence not deliver its primary message with sufficient clarity. Travelers Ins. Co. v. Hendrickson, 1 Conn.App. 409, 413, 472 A.2d 356, 358 (1984). Or a cancellation notice plain on its face can fail to be explicit and unequivocal under unusual circumstances. Caduff v. Universal Underwriters Ins. Co., 381 N.W.2d 9, 12 (Minn.Ct.App.1986).

In the present case, Green Mountain does not argue that the cancellation notice itself was ambiguous, but rather that in the context of surrounding events, its message could not be adequately deciphered. We disagree. Carter notified Maine Bonding of a change in the covered vehicle at or near the time when she was renewing her policy with Maine Bonding. Because she gave notice of her new car during the initial coverage period, she incurred an additional premium for that period and should have expected to do so. Although the March 16, 1987 bill arrived before Maine Bonding had processed her request regarding the new car, the premium bill specifically referred to the old car, "1 76 Ford Pinto." The declarations she received a week later, on March 23, 1987, referred to the new car and a new premium. Therefore, she could not reasonably conclude that her obligation to pay her insurance premium was satisfied when she paid the March 16 bill, which referred to her old car.

Maine Bonding received the $27 payment on April 6, 1987, after it had processed Carter's request to change the covered vehicle and after the company sent the March 23, 1987 declaration stating that an additional $24 would be due by subsequent billing for the initial coverage period on account of the new car. ^* Although Green Mountain contends that Maine Bonding "credited payments out of sequence" when it applied the $27 first to the initial premium period and then to the renewal period, that procedure was proper, even though the due date for the initial premium surcharge was later than the due date for the renewal premium. Maine Bonding's crediting procedure prevented a current policy from lapsing, after Carter initiated a change in vehicles. Carter received notice that her vehicle change would result in premium increases for the initial coverage period as well as the renewal period. She was also on notice that the $27 she paid was sufficient only for the minimum renewal payment for her 1976 Pinto and could not have been sufficient to insure her new vehicle because she had received two declarations from Maine Bonding...