Hagin v. Fireman's Fund Ins. Co.

• Decision Date: 08 July 1960
• Docket Number: No. 6506,6506
• Citation: 16 A.L.R.2d 1200,353 P.2d 1029,88 Ariz. 158
• Parties: Kenneth HAGIN and Catherine Hagin, husband and wife, Appellants, v. FIREMAN'S FUND INSURANCE COMPANY, an corporation, Appellee.
• Court: Arizona Supreme Court

Page 1029

353 P.2d 1029

88 Ariz. 158

Kenneth HAGIN and Catherine Hagin, husband and wife, Appellants, v.FIREMAN'S FUND INSURANCE COMPANY, an corporation, Appellee.

No. 6506.

Supreme Court of Arizona.

July 8, 1960.

Paul H. Primock, Shute & Elsing, Phoenix, for appellants.

Moore & Romley and John H. Killingsworth, Phoenix, for appellee.

PHELPS, Justice.

This is an appeal from a judgment in favor of the defendant-appellee, Fireman's Fund Insurance Company.The suit was brought by Kenneth Hagin and Catherine Hagin, husband and wife, to recover for the loss by theft of certain jewelry allegedly covered by a contract of insurance with the appellee.The appellants will hereinafter be referred to as plaintiffs or where particularity is desired as Kenneth Hagin or Catherine Hagin, and the appellee will be referred to as defendant.

The facts stated in a light most favorable to sustaining the judgment below, are as follows: The contract of insurance upon which this action was based is a personal property floater covering certain clothing, household effects and jewelry, among other kinds of loss, loss by theft.The policy issued by the Betts Insurance Agency on behalf of the defendant company was written on the installment plan providing that the entire premium would not have to be paid at the beginning of the three-year period.With the exception of a slight additional fee charged by defendant for the installment privilege, the policy provided for payment in three premiums of equal amount; the first premium being due immediately and the remaining two on successive anniversary dates from the time the policy issued.

The cancellation clause of the policy provided that:

'This policy may be cancelled by the Company by mailing to the Assured at the address shown in this policy or last known address written notice stating when not less than five (5) days thereafter such cancellation shall be effective.The mailing of notice as aforesaid shall be sufficient proof of notice and the effective date of cancellation stated in the notice shall become the end of the policy period.Delivery of such written notice either by the Assured or by the Company shall be equivalent to mailing.'

With respect to return of unearned premiums in the hands of the company in the event the company cancelled, the policy provided that:

'* * * If the Company cancels, earned premiums shall be computed pro rata.Premium adjustment may be made at the time cancellation is effected and, if not then made, shall be made as soon as practicable after cancellation becomes effective. * * *'

The Betts Insurance Agency had for some ten to fifteen years written insurance for plaintiffs on policies of a number of different insurance companies covering both domestic and business interests.During this period a custom of dealing developed between then whereby the Betts agency habitually accepted delinquent payments of premiums on policies sold to plaintiffs.It was in this climate of dealing that the policy in the instant case was issued.

The first two premiums paid by plaintiffs were delinquent to the extent that the first was paid eleven months after it was due.And the third and final premium which is of vital importance in this case was not paid when mature.But insofar as this policy is concerned, the Betts agency was obligated to remit premiums to defendant within sixty days from the date they were due; and there was no showing that defendant was aware of this practice of delinquent dealing between Betts and plaintiffs.

At the time plaintiffs' jewelry was stolen from their home, they had separated and a divorce action was pending between them.Kenneth Hagin had established his residence at a nearby hotel.And although he had been engaged in farming in the State of Texas for nearly two months immediately prior thereto, he had returned to Phoenix two or three days before the theft occurred.

During the life of the policy the plaintiffs had lost a ring and the defendant in due course paid them $375 for the loss.Subsequently, however, when it was found the Betts agency was informed that when the divorce action was settled and it was determined which of the plaintiffs owed the debt, a refund would be made.

On May 25, 1954, the Betts agency mailed a letter to Catherine Hagin at the address shown in the policy.It informed her that the final premium on the policy in question would be due on June 14th, and cautioned that the agency would discontinue the coverage unless the premium was timely paid.It was stipulated at the pretrial conference that this letter was received by the addressee.

Since the premium had not been paid, the Betts agency mailed a notice of cancellation of the policy to plaintiffs at the same address on June 14th.By the terms of the notice the plaintiffs' coverage was to end on June 20th, thereby giving a fiveday period in which to secure other insurance.Included in the notice of cancellation was a provision that:

'Excess of paid premium above the pro rata premium for the expired time, if any, and if not tendered herewith, will be refunded on demand. * * *'

At the time cancellation of the policy became effective there remained in the hands of defendant an unearned premium in the amount of $12.53.This amount was not returned with the notice of cancellation but was tendered by mail in December of 1954, after the complaint in this action had been filed.

On the evening of June 24, 1954, the plaintiffs suffered a loss by burglary of jewelry valued at $3,530, and specifically covered by the policy here under consideration.Having been denied the privilege of filing proof of loss, the plaintiffs instituted the present action.

The plaintiffs make only one assignment of error.This assignment is supported by four propositions of law, three of which we shall discuss in the order of their presentation.The fourth proposition, dealing with the apparent authorty of the Betts agency to accept late premium payments, need not be discussed for as we shall presently develop, even assuming that such authority did exist, the judgment of the lower court must still be affirmed.

It is a general rule that where a custom of dealing develops between an insurer and the insured whereby the policy provision requiring prompt payment of premiums is not enforced, the insurer is precluded from insisting upon strict compliance with the terms of the policy providing for payment of premiums on a date certain without first giving the insured notice thereof within a reasonable time previous thereto.The cases adhering to this rule do so either on the basis of waiver or estoppel, but the result is the same.See for exampleForbes v. New England Mut. Life Ins. Co., 1 Cir., 92 F.2d 806;Vinther v. Sunset Mut. Life Ins. Co., 11 Cal.App.2d 118, 53 P.2d 182;Universal Life Ins. Co. v. Bryant, 196 Ark. 1143, 121 S.W.2d 108;Gleed v. Lincoln Nat. Life Ins. Co., 65 Cal.App.2d 213, 150 P.2d 484;Hebert v. Woodruff's Ins. Co., La.App., 19 So.2d 290;Haggerty v. Metropolitan Life Ins. Co., 131 Pa.Super. 87, 198 A. 822;Bryant v. Continental Life Ins. Co., 168 Va. 585, 192 S.E. 581;Blomquist v. Grays Harbor County Medical Serv. Corp., 48 Wash.2d 718, 296 P.2d 319;Inter-Ocean Insurance Co. v. Banks, 268...