Klein v. Avemco Ins. Co.

• Decision Date: 17 December 1975
• Docket Number: No. 70,70
• Citation: 289 N.C. 63,220 S.E.2d 595
• Parties: Henry J. KLEIN, Administrator of Natalie Lisiewicz Klein, Substitute Plaintiff, v. AVEMCO INSURANCE COMPANY.
• Court: North Carolina Supreme Court

Page 595

220 S.E.2d 595

289 N.C. 63

Henry J. KLEIN, Administrator of Natalie Lisiewicz Klein Substitute Plaintiff, v. AVEMCO INSURANCE COMPANY.

No. 70.

Supreme Court of North Carolina.

Dec. 17, 1975.

Vaughn S. Winborne, Raleigh, for plaintiff appellant.

Smith, Anderson, Blount & Mitchell by C. Ernest Simons, Jr., Raleigh, for defendant appellee.

COPELAND, Justice.

Plaintiff first contends that since the plaintiff had paid $268.10 (seventh-tenths of the total annual premium) the policy should remain in effect for seven-tenths of the year or 255 days, which according to plaintiff's calculation would mean the policy would continue in force until 28 September 1973, some two months past the date of loss. Further, plaintiff contends under his theory that, even if you disregard the last payment, the policy would remain in effect for six-tenths of the year, or 219 days, until 23 August 1973. We do not agree with the plaintiff's method of calculation because it is contrary to the terms of the insurance contract.

'It is elemental law that the payment of the premium is requisite to keep the policy of insurance in force. If the premium is not paid in the manner prescribed in the policy, the policy is forfeited. Partial payment, even when accepted as a partial payment, will not keep the policy alive even for such fractional part of the year as the part payment bears to the whole payment. (Citation omitted.)' (Emphasis supplied.) Clifton v. Insurance Co., 168 N.C. 499, 500, 84 S.E. 817, 818 (1915).

So the first question for us to decide is as follows: Was the policy of insurance effectively cancelled by defendant prior to the date of the loss?

If the Court were to follow the interpretation of the policy advanced by the plaintiff, an insurer would never have in his possession unearned premiums subsequent to the cancellation because the company would be obligated to provide coverage throughout the prorated period for which premiums were paid. We believe that position is untenable.

Justice Higgins, speaking for our Court in Walsh v. Insurance Co., 265 N.C. 634, 639, 144 S.E.2d 817, 820 (1965), said: '(W)here the language of an insurance policy is plain, unambiguous, and susceptible of only one reasonable construction, the courts will enforce the contract according to its terms. (Citations omitted.)' In our case, the plaintiff and defendant had agreed that the premium would be paid in ten consecutive monthly installments and, as a result, they are bound by the terms of their agreement. Since they have so agreed, the parties shall be bound accordingly. Duke v. Insurance Co., 286 N.C. 244, 210 S.E.2d 187 (1974).

It has long been our policy to construe insurance policies liberally in favor of the insured, but this rule will not permit us to write into the contract terms beyond its meaning. We cannot rewrite it and make a new contract for the parties. Duke v. Insurance Co., supra, 4 Strong, N.C. Index 2d, Insurance, § 6, p. 461.

The facts in Allen v. Insurance Co., 215 N.C. 70, 1 S.E.2d 94 (1939), are instructive. That case involved a suit to recover on a policy of accident and health insurance. Under the terms of the policy, premiums were due on the first of each month with a seven day grace period, with a further provision that acceptance of the premiums by the company after that time should reinstate the policy only as to accidental injuries thereafter sustained and such sickness as might begin more than ten days after such acceptance. It was held that under the terms of the contract the policy lapsed as of the due date of the premiums upon failure to pay the premium prior to the expiration of the grace period and that tender of payment on the 20th day of the month did not put the policy in force as to illness beginning on the seventh day of the month. The net effect was that the acceptance of the premiums had the effect under the contract of reinstating the policy prospectively only.

As Chief Justice Clark stated in speaking for the Court in Hay v. Association, 143 N.C. 256, 259, 55 S.E. 623, 624 (1906): 'It is true it is found in this case that prior to 1905 the defendant had, on some occasions, accepted payment by the insured of assessments after the date at which they should have been paid. It is not found how often, nor after how long a default, these indulgences were granted. But these were mere personal favors and cannot be construed into a standing waiver of the terms of the contract. They did not constitute a 'course of dealing' which amounted to an express agreement that premiums need not be paid promptly . . ..' Later Chief Justice Clark pointed out: 'But insurance is a business proposition, and no company could survive if the insured could default while in good health, but retain a right to pay up when impaired health gives warning.' Id. at 259, 55 S.E. at 625.

It might be noted in our case that each time the defendant sent a cancellation notice to the plaintiff it clearly set forth the date that the policy would be cancelled if payment were not made. Except for the final notice requiring a payment of $191.50 on 22 July 1973, the plaintiff always paid past due premiums prior to the effective cancellation date and defendant, in turn, sent a reinstatement notice to the plaintiff. Thus, when the June payment was not paid when due the defendant, having an absolute right to cancel the policy on ten days' notice, sent plaintiff a cancellation notice requiring the payment of $191.50 by cashier's check or money order by 22 July 1973 and providing that coverage would automatically terminate if the payment were not made by that date. The payment which the plaintiff said he mailed on 10 July 1973 was received by the defendant on 16 July 1973 in the amount of $38.30, but this only took care of the premium due 16 June 1973. The plaintiff did not by this comply with the terms of the cancellation notice mailed on 11 July 1973. For whatever reason, the plaintiff chose not to comply with the conditions. Thus, by the terms of the policy and the notice mailed 11 July 1973, the policy was duly cancelled on 22 July 1973, prior to the date of the loss on 28 July 1973. The above contention of the plaintiff that 'unearned premiums' in the hands of the insured prevent the defendant from cancelling the policy for nonpayment is without merit and is overruled.

Next the plaintiff contends that the defendant by its conduct waived the plaintiff's forfeiture and that the defendant is estopped from claiming cancellation of the policy.

Our Court in Manufacturing Co. v. Building Co., 177 N.C. 103, 107, 97 S.E. 718, 720 (1919), said: 'Waiver must be manifested in some unequivocal manner, and to operate as such it must in all cases be designed, or one party must have so acted as to induce the other to believe that he intended to waive, when he will be forbidden to assert the contrary.' (Quoted in Realty Co. v. Spiegel, Inc., 246 N.C. 458, 98 S.E.2d 871 (1957)).

Waiver sometimes has the characteristics of estoppel and sometimes of contract, but it is always based upon an express or implied agreement....