Hensley v. Aetna Cas. & Sur. Co., 55038

CourtUnited States State Supreme Court of Iowa
Citation200 N.W.2d 552
Docket NumberNo. 55038,55038
PartiesRichard L. HENSLEY, Appellee, v. The AETNA CASUALTY AND SURETY COMPANY, a corporation, and E. H. Lougee, Inc., a corporation, Appellants.
Decision Date19 September 1972

Page 552

200 N.W.2d 552
Richard L. HENSLEY, Appellee,
The AETNA CASUALTY AND SURETY COMPANY, a corporation, and E. H. Lougee, Inc., a corporation, Appellants.
No. 55038.
Supreme Court of Iowa.
Sept. 19, 1972.

Johnson, Stuart, Tinley, Peters & Thorn, Council Bluffs, for appellants.

Page 553

Peters, Walker, Campbell & Pearson, Council Bluffs, for appellee.

LeGRAND, Justice.

This is a declaratory judgment action tried at law by which plaintiff seeks a determination of his rights under a contract of insurance with defendant, The Aetna Casualty and Surety Company, hereafter called Aetna. Defendant, E. H. Lougee, Inc., hereafter called Lougee, is the agency through which the policy was written. The trial court held the policy afforded coverage to plaintiff for his liability arising out of an accident on October 16, 1966. We reverse the trial court.

The facts are these: Plaintiff had purchased insurance for some time through Lougee. In 1963, he purchased an automobile policy in Aetna through this agent. The policy was issued for a three-month period and was renewable by the payment of additional premiums each quarter. Premiums were paid through April 9, 1965, which maintained the policy in force until July 9, 1965. No premiums were paid thereafter.

On October 16, 1966, plaintiff was involved in an accident which resulted in personal injuries and property damage to the other party and collision loss to plaintiff. The day following the accident, plaintiff completed an accident report at Lougee's office. The report was sent to Aetna's claim office at Omaha. On November 8, 1966, Aetna advised plaintiff he had no insurance coverage and, indeed, had not had any since July 9, 1965, because of non-payment of premium. Aetna refused to defend plaintiff in the suit subsequently brought as a result of the October 16, 1966, accident. This action resulted in judgments against plaintiff totalling $2284.35. He also incurred attorneys' fees and expenses in the amount of $1300.05.

By this action plaintiff seeks a determination that his policy was in full force and effect on October 16, 1966; that Aetna was obligated to defend any action and to pay any judgment rendered against him within the limits of its liability; and that Aetna had breached its contract by refusing to defend the suit or to pay the judgments. The trial court entered judgment ordering the defendants to pay the items above listed as well as plaintiff's collision damage of $254.14.

The ultimate issue, of course, is whether the policy in question extended plaintiff coverage on October 16, 1966, despite his failure to pay premiums after April 9, 1965. In Hoefler v. Farm and City Insurance Company, 193 N.W.2d 538 (Iowa 1972)--decided after the trial of the present case--we considered this identical question under somewhat different facts. Unless these factual differences make the Hoefler case inapplicable, it is controlling here. We are unable to distinguish them and therefore reverse the trial court's judgment for plaintiff.

This was a law action, and we must accept the trial court's findings of fact if they find substantial support in the record. Rules 334 and 344(f), 1, Rules of Civil Procedure. However, we are not bound by the rules of law which the court applied to those facts. Omaha Standard, Inc. v. Nissen, 187 N.W.2d 721, 723 (Iowa 1971); Henschel v. Hawkeye-Security Insurance Company, 178 N.W.2d 409, 415 (Iowa 1970).

We hold there is substantial support for the trial court's findings, but conclude they do not justify the conclusions reached. We disagree with the pronouncement Aetna was obliged to give plaintiff notice of cancellation of his policy under the terms of section 515.80, The Code.

The pertinent policy provisions are of importance here. Under the policy declarations this appears:

'Policy Period--Quarter-annual period commencing 7--09--63 and, subject to the consent of Aetna Casualty, for successive quarter-annual policy periods as provided in Condition 1.'

Page 554

Condition 1 referred to in the declaration states in part:

'Subject to the consent of Aetna Casualty, this policy may be continued in force for successive policy periods by payment of the required continuation premium to Aetna Casualty on or before the effective date of each successive policy period. If such premium is not paid, when due, the policy shall terminate as of that date and such date shall be the end of the policy period. * * *'

In Hoefler v. Farm and City Insurance Company, supra, we interpreted a similar provision as being beyond the notice requirements of section 515.80. Because we feel that case dictates the result here, we repeat what we said there at page 539 of 193 N.W.2d:

'* * * The parties agree the issue is simply this: Was the policy issued by defendant to plaintiff for a definite period or an indefinite one?

'If for an indefinite period, then plaintiff was entitled to notice under section 515.80, The Code, which provides as follows:

"No policy or contract of insurance * * * shall be forfeited or suspended for non-payment of any premium, assessment, or installment provided for in the policy, * * * unless within thirty days prior to, or on or after the maturity thereof, the company shall serve notice in writing upon the insured that such premium, assessment, or installment is due or to become due * * * which may be made in person, or by mailing in a certified mail letter addressed to the insured at his post office as given in or upon the policy, and no suspension, forfeiture, or cancellation shall take effect until the time thus fixed and except as herein provided, anything in the policy, application, or a separate agreement to the contrary notwithstanding.'

'It is conceded the notice required by this section was not given. Defendant argues, however, that the statute has no application because this is not a suspension, forfeiture or cancellation but merely the expiration of a policy under its specific terms. Defendant argues further that the case is governed by rule 9, Rules of the Insurance Department. (Iowa Departmental Rules, 1966; now appearing as rules 16.1(1) and 16.1(2), I.D.R., 1971) The rule is in part as follows:

"A contract of insurance may specifically provide for a specific term of duration, in which event the contract automatically expires at the end of that term, without the giving of any notice. For illustration, a policy written for a term of one year with the premium paid in advance automatically expires at the end of the year.'

'We find no ambiguity or uncertainty here. The policy was written for a definite and certain period. Both starting and terminating dates were given with certainty. There could be no possible misunderstanding about the term of the policy or its expiration date.

'We hold the policy issued by defendant was for a 'specific term of duration' and that, under rule 9 of the Insurance Department's regulations above referred to, defendant company was not required to give the notice provided for in section 515.80. * * *'

In the present case, too, we hold the policy is for a 'definite and certain period.' It terminated by its own specific terms and defendant was not required to give the notice provided for in section 515.80.

The trial court rule Aetna was estopped from relying on the non-payment of premium for the policy period beginning July 9, 1965. Even if we concur in this conclusion, the estoppel would only save plaintiff's coverage for the ensuing three-month period. The accident did not occur during that time. Surely no one could seriously

Page 555

argue plaintiff's insurance continued indefinitely because of this; yet that is the inevitable result of plaintiff's premise.

The best and can be said for plaintiff is that the conduct of Aetna and Lougee gave him an additional three months of insurance, which would expire (unless renewed as provided in the policy) on October 9, 1965.

Several circumstances occurring thereafter, which the trial court relied on to find coverage existed on October 16, 1966, would not revive a policy previously terminated, as we say this one was. These circumstances include accepting an accident report from plaintiff for a prior accident on January 12, 1966, which, the trial court says, 'lulled plaintiff into the belief his insurance was in effect and defendant should not now profit from those neglectful acts and their failure to exercise the duties which it seems the law requires of them.'

The trial court also held it important that Aetna had $16 of premium money paid by plaintiff as additional premium when he purchased a new car in May of 1965. This amount had never been properly applied by Aetna. A portion of it was returned to plaintiff only after the October 16, 1966, accident. No matter how this amount is treated it could not afford coverage on October 16, 1966. At most it would pay for part of the premium from July 9 to October 9, 1965.

Neither does Lougee's action in accepting an accident report from plaintiff for the October 16, 1966, accident help plaintiff. This was done on the assumption there was coverage. Aetna...

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