Jelsma v. Scottsdale Ins. Co.
| Citation | 437 N.W.2d 778,231 Neb. 657 |
| Decision Date | 31 March 1989 |
| Docket Number | No. 87-794,87-794 |
| Court | Supreme Court of Nebraska |
| Parties | , 86 A.L.R.4th 871 H.L. JELSMA and Tommy Jelsma, doing business as Spa, Inc., Appellees, v. SCOTTSDALE INSURANCE COMPANY, Appellant. |
Syllabus by the Court
1. Declaratory Judgments. A suit for declaratory judgment is an action sui generis and may involve questions of law or equity or both.
2. Declaratory Judgments. Whether a declaratory judgment action is treated as an action at law or one in equity is to be determined by the nature of the dispute.
3. Declaratory Judgments: Appeal and Error. The determination of factual issues in a declaratory judgment action which would otherwise be an action at law will not be disturbed on appeal unless they are clearly wrong.
4. Declaratory Judgments: Appeal and Error. In an appeal from a declaratory judgment, this court, regarding questions of law, has an obligation to reach its conclusion independent from the conclusion reached by the trial court.
5. Insurance: Contracts: Notice. The burden of establishing an effective cancellation before a loss is on the insurer, and notice of cancellation must be in accord, and in substantial compliance, with the provisions of the policy relating thereto, and peremptorily explicit and unconditional.
6. Insurance: Brokers: Agents. An insurance broker is not, as a matter of law, the insured's agent for receipt of a premium refund upon cancellation of the insurance policy.
7. Insurance: Brokers: Agents. Whether an insurance broker is the insured's agent for receipt of a premium refund upon cancellation is a question of fact.
8. Insurance: Brokers: Agents. An insurance broker does not become the agent of the insured for the purpose of accepting a cancellation of the policy by the mere fact that he or she acted as the agent of the insured in procuring the insurance.
9. Insurance: Brokers. Payment of the unearned premium to a broker, who had authority merely to buy insurance for the insured, does not, as a general rule, constitute payment of the unearned premium to the insured.
10. Insurance: Brokers. As a general rule, where the insured negotiates a cancellation through his broker who procured the policy, return of the unearned premium to such broker constitutes a return to the insured.
11. Breach of Contract: Damages. Generally, one who fails to perform a duty to mitigate his or her damages may not recover from the party breaching the contract the damages which would have been avoided had the duty to mitigate been performed.
12. Waiver: Words and Phrases. Waiver is a voluntary and intentional relinquishment or abandonment of a known existing legal right or such conduct as warrants an inference of the relinquishment of such right.
13. Waiver: Estoppel. In order to establish a waiver of a legal right, there must be clear, unequivocal, and decisive action of a party showing such purpose, or acts amounting to estoppel on his or her part.
14. Contracts: Waiver: Proof. A written contract may be waived in whole or in part, either directly or inferentially, and the waiver may be proved by express declarations manifesting the intent not to claim the advantage, or by so neglecting and failing to act as to induce the belief that it was the intention to waive.
15. Insurance: Contracts: Notice: Estoppel. Acquiescence in a cancellation notice will operate to cancel an insurance policy and will work an estoppel to assert that the policy is still in force.
16. Insurance: Contracts. Merely exploring the possibility of obtaining replacement insurance does not necessarily constitute acquiescence in a defective cancellation of the old insurance.
Thomas J. Walsh, Jr., of Walsh, Fullenkamp & Doyle, Omaha, for appellant.
Hal Bauer, of Bauer, Galter & O'Brien, Lincoln, for appellees.
Appellees, H.L. and Tommy Jelsma, brought this declaratory judgment action against the appellant, Scottsdale Insurance Company, seeking a determination in the district court as to whether Scottsdale's cancellation of an insurance policy was effective prior to a fire loss which occurred on July 29, 1986, and whether the policy was in effect as to the loss. From a judgment of the trial court declaring that the cancellation was not effective and that the policy was in effect on the date of the loss, Scottsdale has appealed. We affirm.
A suit for declaratory judgment is an action sui generis and may involve questions of law or equity or both. Beatrice Nat. Bank v. Southeast Neb. Co-op, 230 Neb. 671, 432 N.W.2d 842 (1988).
Whether a declaratory judgment action is treated as an action at law or one in equity is to be determined by the nature of the dispute. Gard v. Pelican Publishing Co., 230 Neb. 656, 433 N.W.2d 175 (1988).
The determination of factual issues in a declaratory judgment action which would otherwise be an action at law will not be disturbed on appeal unless they are clearly wrong. Gard v. Pelican Publishing Co., supra; Beatrice Nat. Bank v. Southeast Neb. Co-op, supra.
In an appeal from a declaratory judgment, the Supreme Court, regarding questions of law, has an obligation to reach its conclusion independent from the conclusion reached by the trial court. County of York v. Johnson, 230 Neb. 403, 432 N.W.2d 215 (1988).
Prior to September 10, 1985, the Jelsmas contacted Alexander & Alexander, Inc., a Lincoln insurance agency, seeking fire insurance coverage for their business, the Royal Grove. Alexander & Alexander requested appropriate coverage through River City Underwriters, Inc., an Omaha business entity which acted as a managing general agent for several insurance companies, including Scottsdale. River City Underwriters arranged for coverage to be provided by six insurers, one of which was Scottsdale, and issued policies insuring the Royal Grove for a period of 1 year, commencing September 10, 1985.
River City Underwriters, on behalf of Scottsdale, issued a notice of cancellation of the Scottsdale policy, dated April 18, 1986, and mailed it to the Jelsmas. At the Jelsmas' request, Alexander & Alexander obtained bids for replacement insurance coverage on the Royal Grove. However the Jelsmas decided not to replace the canceled policy because the premium was too high. Alexander & Alexander advised the Jelsmas of the effect of the potential coinsurance penalty in the event a loss occurred and the canceled coverage was not replaced.
After the Jelsmas' policy was canceled, Scottsdale refunded the unearned premium of $546 to River City Underwriters through the monthly statement sent to River City Underwriters for the month ending April 30, 1986. River City Underwriters, in turn, refunded the unearned premium to Alexander & Alexander for the month ending June 30, 1986. There was evidence that refunding unearned premiums in this manner is standard procedure in the industry. Alexander & Alexander sent a check to the Jelsmas dated December 12, 1986, which included the premium refund Alexander & Alexander had received from River City Underwriters for the canceled Scottsdale policy. The Jelsmas have not cashed the check.
Scottsdale assigns as error: (1) The trial court erred in finding that the cancellation was not in accordance with the provisions of the policy; (2) the trial court erred in failing to find that the return of the unearned premium by Scottsdale to Alexander & Alexander constituted a return of the unearned premium to the Jelsmas and cured any breach of contract which otherwise might have existed in connection with the cancellation notice issued by Scottsdale; (3) the trial court erred in failing to find that the Jelsmas' claim was barred because they failed to mitigate their damages; and (4) the trial court erred in failing to find that the Jelsmas' conduct after receiving the notice of cancellation and before the fire loss constituted a waiver of any breach of the insurance contract by Scottsdale.
The Scottsdale policy provided in part as follows:
This policy may be cancelled at any time by this Company by giving the insured a five days' written notice of cancellation with or without tender of the excess of paid premium above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand. Notice of cancellation shall state that said excess premium (if not tendered) will be refunded on demand.
(Emphasis supplied.)
Below a legend stating "(Applicable item marked [X] )," the body of the cancellation notice sent to the Jelsmas contains several general purpose statements. Within the "Cancellation" section is the information that the effective date of cancellation is "4-30-86." Also within the general purpose portion of the notice is a section entitled "Premium Adjustment" containing four sentences, each preceded by a box, the last two of which are set forth as follows:
[ ] Enclosed is $____, being amount of return premium at pro rata rate for the unexpired term of this policy.
[ ] The excess of paid premium, if any, above the pro rata premium for the expired time, (if not tendered) will be refunded upon demand. (The words "upon demand" do not apply in Kansas.)
(Emphasis omitted.) None of the boxes were marked on the notice of cancellation or nonrenewal sent to the Jelsmas.
The burden of establishing an effective cancellation before a loss is on the insurer, and notice of cancellation must be in accord, and in substantial compliance, with the provisions of the policy relating thereto, and peremptorily explicit and unconditional. Stilen v. Cavalier Ins. Corp., 194 Neb. 824, 236 N.W.2d 178 (1975). Scottsdale argues in its brief that cancellation was in substantial compliance with the provisions of the policy because "the Jelsmas could have and should have been able to glean that information [relating to demand of the refund] without that 'X' being in that box." Brief for...
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