Lemons v. State Automobile Mutual Insurance Co., 885.

• Decision Date: 25 January 1960
• Docket Number: No. 885.,885.
• Citation: Lemons v. State Automobile Mutual Insurance Co., 181 F.Supp. 281 (E.D. Ky. 1960)
• Parties: Patsy Jane LEMONS, by and through Carlos lemons, Plaintiff, v. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

181 F. Supp. 281

Patsy Jane LEMONS, by and through Carlos lemons, Plaintiff, v. STATE AUTOMOBILE MUTUAL INSURANCE COMPANY, Defendant.

No. 885.

United States District Court E. D. Kentucky, Covington Division.

January 25, 1960.

Frank Gilliam, Lexington, Ky., Robert Milby, London, Ky., for plaintiff.

Stoll, Keenon & Park, Lexington, Ky., for defendant.

SWINFORD, District Judge.

This is an action on a policy of automobile liability insurance. A statement of the facts in their chronological order is important to an understanding of the decision in this case. William Moore, Jr. was the owner of a 1949 Ford. On May 10, 1956 he purchased from the defendant, through the McCracken Insurance Agency of Cynthiana, Kentucky, the policy of personal liability insurance on which this action is based. Item 3 recited that the policy period was from May 10, 1956 to May 10, 1957. The premium, totaling $50, was to be paid as follows: the first installment of $20 upon the issuance of the policy; the second installment of $15 on or before noon of August 10, 1956; and the third installment of $15 on or before noon of November 10, 1956. The first installment was paid on May 10, 1956 as provided by the policy. No other installment was ever paid.

On May 3, 1957, William Moore, Jr. and the Ford automobile, on which the policy was taken, were involved in an accident in which the plaintiff, Patsy Jane Lemons, was injured. No report of the accident was made to the defendant or any of its agents, including the McCracken Insurance Agency at Cynthiana, the home of William Moore, Jr. On April 8, 1958, Patsy Jane Lemons, plaintiff here, filed an action in the Harrison County (Kentucky) Circuit Court against William Moore, Jr. in which she sought damages growing out of the accident of May 3, 1957. Process on this state court action was issued and served on the policyholder on April 8, 1958.

Moore consulted an attorney and upon his advice took the summons to the McCracken Insurance Agency in Cynthiana and laid it down on the table or desk of the agent with knowledge of the agent. Neither Moore nor the insurance company made any defense to the state court action and on October 24, 1958, a judgment was entered in favor of Patsy Jane Lemons in the sum of $27,659.03.

On December 12, 1958 this action was instituted by Patsy Jane Lemons in the Harrison County Circuit Court on the automobile liability insurance policy issued to William Moore, Jr. on May 10, 1956. Her complaint alleged that the policy was in full force and effect at the time of the accident which resulted in her injuries and that they were caused and brought about by the sole negligence of William Moore, Jr. In addition to the five thousand dollar limit, as evidenced by the face of the policy, she sought recovery for the full amount of her judgment in the state court, alleging that the defendant was liable because of its negligent failure to defend the action in the state court under the terms of the policy.

The defendant, a non-resident of Kentucky, removed the case to the federal court and it is now submitted for final judgment on the record, stipulations and depositions.

The plaintiff must be denied recovery and her complaint dismissed on two grounds. First, the policy had lapsed for non-payment of premiums and was not in effect at the time of the alleged injury. Second, the policyholder did not notify the insurance company or its agent of the accident within a reasonable time as provided by the terms of the policy and did not give assistance and cooperation.

Paragraph 24 of the "Conditions" set forth in the policy provides that the policy may be canceled by the company by mailing to the insured at the address shown in the policy written notice stating that in ten days thereafter such cancelation shall be effective. The mailing of the notice shall be sufficient proof of notice to the insured. The effective date and hour of the cancelation stated in the notice shall become the end of the policy period.

Paragraph 27 provides that when any installment is not paid when due, the insurance afforded by the policy shall terminate upon notice mailed by the company to the named insured at the address shown in the policy, stating when such termination shall become effective. It is further provided in this paragraph of the policy that the mailing of the notice shall be sufficient proof of notice and that the company shall not be liable for any loss occurring after the date and hour of termination specified in the notice.

In the light of the record it is difficult for the court to understand how the plaintiff can seriously contend that this policy of insurance was in effect on the date of the accident, which occurred within seven days of one year after the policy had been originally issued. The first installment of $20 had been paid and no other sum had ever been paid by the policyholder for the policy. The installments due on August 10 and November 10 had been ignored. The insured called at the office of the McCracken Insurance Agency two or three months after the policy was issued but before the second premium installment was due. The purpose of his call was to ascertain whether or not the policy covered a damage to his car, known as property damage liability. When he was advised by Mr. Shearle Hicks, an agent in the McCracken Insurance Agency, that damage to the car was not covered by the policy, he told Mr. Hicks to cancel the policy. In addition to the statement of Mr. Hicks on this question, the deposition of William Moore, Jr. contains the following questions and answers which clearly indicate that he was fully aware that the premium was due and that he had no intention of paying it:

"Q. Mr. Moore, this policy was issued by Mr. McCracken, is that right? A. Yes, sir.

"Q. And I believe you stated here —rather it is stated here May 10, 1956? A. Back in that neighborhood, yes.

"Q. When it was issued, you gave him $20, didn't you? A. No, between $30 and $40, like I said while ago.

"Q. What? A. Between $30 and $40, I don't know exactly. I paid it in cash.

"Q. Do you know whether it was $30, $40 or $20? A. Between $30 and $40.

"Q. Was anyone present when you paid him that? A. Him and the secretary was all.

"Q. What is the secretary's name? A. I don't know that.

"Q. Did you get a receipt? A. No, I don't think he had that much sense to give me a receipt.

"Q. He is just a dumb man, is he? A. I think so, yes.

"Q. Is his secretary dumb too? A. I think so.

"Q. Did you ever pay any more on this policy? A. Hell, no, never did and ain't about to.

"Q. Why? A. Anybody that can't take care of that I don't think much of them.

"Q. Do you owe them anything since the accident happened? A. Hell, no.

"Q. Weren't you supposed to pay $50? A. Would you pay after he wouldn't take care of that. * * *. I just give him one payment and didn't go back anymore.

"Q. You didn't pay $50 at anytime, did you? A. No, not that much, no."

Notwithstanding this disregard of the policyholder's obligation and his breach and abandonment of the contract, the defendant company fully complied with its terms and provisions in sending him the required notice of cancelation, mailed to the address given by the policyholder as his home address at Cynthiana, Kentucky, R.F.D. No. 3. This notice was mailed and its mailing was established by the fact that it was returned to the company by the post office. Subsequently, the company mailed a second notice to the same address which obviously reached its destination as it was not returned as the first notice had been.

The mailing of notice shall be sufficient proof of notice and the effective date of cancellation stated in the notice shall fix the end of the policy period. The defendant is not required to show a receipt of the notice. The terms of the policy control and in the absence of statute or state ruling to the contrary, where the policy provides for notice by mailing, the proof of such...