Kudrna v. Great Northern Insurance Company

• Decision Date: 21 August 1959
• Docket Number: Civ. No. 177.
• Citation: 175 F. Supp. 783
• Parties: Joe KUDRNA, also known as Joe Kudina, Plaintiff, v. GREAT NORTHERN INSURANCE COMPANY, a corporation, Defendant and Third-Party Plaintiff, National Farmers Union Property & Casualty Co., Third-Party Defendant.
• Court: U.S. District Court — District of Montana

175 F. Supp. 783

Joe KUDRNA, also known as Joe Kudina, Plaintiff, v. GREAT NORTHERN INSURANCE COMPANY, a corporation, Defendant and Third-Party Plaintiff National Farmers Union Property & Casualty Co., Third-Party Defendant.

Civ. No. 177.

United States District Court D. Montana, Billings Division.

August 21, 1959.

Victor G. Koch, Sidney, Mont., for plaintiff.

Cale Crowley, Coleman, Lamey & Crowley, Billings, Mont., for defendant and third-party plaintiff.

John C. Sheehy, Wiggenhorn, Hutton, Schiltz & Sheehy, Billings, Mont., for third-party defendant.

JAMESON, District Judge.

Plaintiff and third-party defendant seek a declaratory judgment determining that an automobile liability policy of insurance written by defendant was a binding contract between plaintiff and defendant and in effect on October 11, 1957. On that date there was an accident involving the automobile described in the policy.

In September, 1956 plaintiff purchased a used car from First National Bank of Wibaux and in connection with this purchase obtained a policy of liability insurance from the defendant, Great Northern Insurance Company, through its agent, Wibaux Insurance Agency.¹ This policy was effective for the period September 5, 1956 to September 5, 1957.

On or about August 29, 1957, Ellis Jones, manager of Wibaux Insurance Agency, mailed to plaintiff a renewal policy in Great Northern, together with a statement for the annual premium in the amount of $92.15. This policy recited an effective period of September 5, 1957 to September 5, 1958. Otherwise it was identical with the previous policy. This renewal policy was unsolicited by plaintiff. He testified that he did not want the policy as he could obtain the same or better coverage at less premium from the third-party defendant, National Farmers Union Property & Casualty Company.²

On September 24, 1957, plaintiff did in fact obtain a policy from National Farmers Union, effective for the period September 24, 1957 to April 21, 1958. It afforded the same coverage as the renewal policy of Great Northern and its provisions otherwise were substantially the same.

On or about October 1, 1957, the Wibaux Insurance Agency sent plaintiff a second statement for the premium. On or about October 3, plaintiff wrote the Wibaux Insurance Agency, enclosing a check for $10, payable to First National Bank of Wibaux, upon which was the notation "Ins. Red. Ford." The note transmitting this check was lost or destroyed. Plaintiff and his wife testified that it read substantially as follows: "I am sending you $10.00 to extend on the policy and whenever that $10.00 is used up cancel the policy." According to Jones, the note said in effect: "Please cancel the policy on the 1955 Ford. We have obtained insurance elsewhere. I am enclosing $10.00 to cover expense to you in cancelling the policy."

On October 4, 1957, Jones wrote plaintiff as follows:

"I received your $10.00 check and the attached note to the effect that you did not want to keep the above referenced policy.

"The enclosed envelope is for your use in returning the policy, since it is necessary that the policy be returned to the company before cancellation can be completed. Your cooperation in returning the policy will expedite the cancellation proceedings.

"I want to thank you for the privilege of being able to provide insurance on your car for one year, and regret that I am not able to continue serving you. * * *"

On the back of this letter Mrs. Kudrna wrote the following note to Jones: "When I was cleaning house I must of picked the policy up with other papers and destroyed it. I didn't read it I thought it was an old policy as we were cleaning out some of the old run out policy. Hoping this doesn't inconvenience you too much."

On October 4, 1957, Jones also wrote to Great Northern: "Please cancel the enclosed policy flat, and issue a credit for the full amount of the premium. The insured has notified this agency that he has insured his car with another company, consequently the above policy will not be required. I will attempt to obtain the original copy of the policy from the insured and return it to your office for your records." This letter was received by Great Northern on October 7, and the policy was subsequently marked by the Company as cancelled flat. A policy register kept by the agent shows a cancellation of the policy on October 4, 1957.

As noted above the accident in question occurred on October 11. Plaintiff notified National Farmers Union of the accident, but did not at any time notify Great Northern. When asked why he had not notified Great Northern, plaintiff replied, "I felt the $10.00 had expired by this time."

On October 12, the Wibaux Insurance Agency paid its bill to Great Northern for the month of September, including a charge for plaintiff's insurance policy, less the agent's commission. On or prior to October 16, Jones learned of the accident and informed Great Northern of it on that date by telephone. At that time Great Northern informed Jones that the policy had been cancelled flat pursuant to the agent's request.³ The agent's account with Great Northern for the month of November contained a credit of the premium on plaintiff's policy in the amount of $92.15. No notice was ever sent to plaintiff by defendant or its agent that the policy had been cancelled flat, or otherwise. On December 7 the agent sent plaintiff a check for $10, which plaintiff refused to accept and which was not cashed.

The foregoing is a fair resumé of the pertinent testimony. There was no dispute except with reference to the contents of the note sent by plaintiff to Jones on or about October 3, 1957, and as to whether any letters were exchanged between plaintiff and Jones between plaintiff's receipt of the renewal policy and the note of October 3. It was the recollection of plaintiff and his wife that they had written Jones sometime in September requesting a cancellation of the policy and that Jones had informed plaintiff the policy would have to be surrendered to be cancelled.⁴ Jones denied receiving any letter from plaintiff or answering it.

It is my conclusion that the Jones' version on both points finds more support in the other evidence by reason of the following: (1) Jones' letters to Great Northern dated October 4, 1957 and October 16, 1957, and the entry in the policy register on October 4; (2) Mrs. Kudrna's note to Jones in reply to Jones' letter of October 4; (3) plaintiff's purchase of the new policy on September 24 prior to receipt of the second premium notice from Jones; (4) plaintiff's own repeated testimony that he did not intend to insure with Great Northern and his testimony that he felt "obligated to Jones. It seemed like he was carrying me all this time." In any event, the discrepancy in testimony between plaintiff and his wife and Jones would not affect the result.

The plaintiff and the third-party defendant contend that: (1) a valid contract of insurance was entered into between plaintiff and defendant; (2) the policy was not cancelled according to its terms; and (3) the defendant is estopped to deny the validity of the policy by reason of (a) acceptance of the premium and its retention; (b) refusal to cancel the policy upon the plaintiff's request except upon redelivery of the policy; and (c) acceptance of the $10 on the premium at a time when the policy would have expired under the short rate premium table.

It is the contention of the defendant that: (1) there was no contract of insurance in effect between plaintiff and defendant for the reason that the plaintiff never accepted the policy; (2) at most plaintiff made a counter-proposal for insurance for a period of less than one year; (3) if there was any contract, the premium would be computed at the short rate, and the payment of $10 would not have effected coverage beyond Sept. 16, 1957; and (4) plaintiff requested defendant's agent to cancel the policy and the policy accordingly was cancelled by the insured under the terms of the contract prior to the accident. All of the parties have submitted able and comprehensive briefs.

Was there an acceptance of the insurance contract by plaintiff? "It is elementary that, in order to effect a contract, there must be an offer by one party and an unconditional acceptance of it, according to its terms, by the other." Beale v. Lingquist, 1932, 92 Mont. 480, 488, 15 P.2d 927, 930.⁵ An insurance policy is a contract. Weyh v. California Insurance Co., 1931, 89 Mont. 298, 296 P. 1030; Turner, Dennis & Lowry Lumber Co. v. St. Paul F. & M. Ins. Co., D.C.Mont.1923, 290 F. 541. At this point we are concerned solely with the question of whether plaintiff and defendant entered into a contract.⁶

Normally, in insurance cases, the offer is made by application by the insured and acceptance is manifested by delivery of the policy by the insurer. The unsolicited delivery of a renewal policy prior to the expiration of the original policy, as in this case, is not an acceptance, but an offer, and no contract of renewal is created unless acceptance by the insured is expressly made or necessarily inferred.⁷ Here the plaintiff did nothing to manifest his intent to accept the policy. Rather on September 24 he took out a policy of insurance with National Farmers Union, identical with that offered by Great Northern. There is no suggestion that he intended to have two policies in effect. On the contrary, it is clear that the policy issued by National Farmers Union was to replace the coverage offered by Great Northern.

Plaintiff and third-party defendant concede that plaintiff may not "at the beginning" have intended to take out the renewal policy and that after procuring the National Farmers Union policy he indicated that he did not desire to "keep" the Great Northern policy. They argue, however, that he later decided to accept the "continuing offer" of Great Northern and ask for cancellation according to the terms of the policy. I am...