McDonald v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 10 July 1985
• Docket Number: No. CA,CA
• Citation: 15 Ark.App. 346,692 S.W.2d 274
• Parties: Myrtle McDONALD, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INS. CO., Appellee. 84-285.
• Court: Arkansas Court of Appeals

Page 274

692 S.W.2d 274

15 Ark.App. 346

Myrtle McDONALD, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INS. CO., Appellee.

No. CA 84-285.

Court of Appeals of Arkansas Division I.

July 10, 1985.

Eugene Hunt, Pine Bluff, for appellant.

Boswill, Smith, & Clardy by Floyd Clardy, Bryant, for appellee.

MAYFIELD, Judge.

Appellant appeals a summary judgment granted appellee State Farm. We reverse and remand.

In October of 1980 appellee issued separate policies to appellant and her husband, insuring a 1977 Monte Carlo automobile and a 1969 Ford pickup truck for a period of six months. Renewal notices for the next six-month period of April 6, 1981, to October 6, 1981, were sent to appellant on each of the vehicles. The notice covering the Monte Carlo plainly stated: "Payment of premium by date due insures your 1977 M Carlo until Oct-06-81." The date due is stated "Apr-06-81" and the amount due is stated to be "$153.22."

Both parties agree that appellant paid the premium on the Monte Carlo by April 6, 1981, but that the coverage on the pickup was allowed to lapse. In mid-May, State Farm sent appellant a notice of balance due of $17.84. The notice contained no explanation of the increase in premium but appellant later learned it was for loss of the multicar discount which had applied when both vehicles were insured. When appellant failed to pay this balance, State Farm sent appellant a cancellation notice, dated September 4, 1981, which informed her that if the balance due remained unpaid the insurance coverage on the Monte Carlo would expire on September 18, 1981. The payment was not made and on October 10, 1981, the Monte Carlo was involved in an accident which resulted in the death of appellant's husband.

On October 13, 1981, appellant visited the office of her local State Farm agent, and paid the secretary in the office the amount of $188.30, representing the $17.84 unpaid balance from the previous six months and $170.56 as the renewal premium for the six-month period of October 6, 1981, to April 6, 1982. Appellant told the secretary that the car had been wrecked (the secretary already knew appellant's husband had been killed) and appellant asked that the agent contact her.

The insurance policy covering the Monte Carlo also provided that appellant would be paid $5000.00 if her husband's death was caused by a motor vehicle accident. Upon being contacted by State Farm's agent, she was advised that the policy was not in force at the time of her husband's death. Appellant then filed suit to collect the $5000.00. State Farm filed an answer alleging that the policy on the Monte Carlo had lapsed on September 18, 1981, was reinstated on October 13, and that no coverage existed between those dates. Subsequently, State Farm mailed appellant a check of $23.12 as a refund for the period it claims there was no coverage. Both parties filed motions for summary judgment. State Farm's motion was granted on the basis that the insurance policy was not in force on October 10, 1981, when the death of appellant's husband occurred.

Appellant argues that the court erred in holding that the policy had expired at the time of the accident. It is appellant's contention that when originally issued, the policy covered the period from October 6, 1980, to April 6, 1981; that the policy provided for successive periods of coverage of six months each if renewal premiums were paid; that the renewal premium for the next renewal period was paid in the amount and for the period stated in the renewal notice; that the company had a policy that allowed a 22-day grace period within which the premium could be paid for the next six months and thereby maintain continuous coverage; and that by paying the premium on October 13, 1981, which was within 22 days of the renewal date of October 6, 1981, the appellant acquired this continuous coverage. We agree.

The premium notice received by appellant provided that payment of premium by date due would insure appellant's 1977 Monte Carlo until October 6, 1981. The stated amount due was $153.22, and it is undisputed that appellant paid this amount. Neither side has referred us to an Arkansas case that decides this precise point, but appellant cites Howard v. American Southern Ins. Co., 148 Ga.App. 25, 251 S.E.2d 7 (1978). In that case the appellant had been issued a policy giving coverage for one year at a stated premium to be paid in monthly installments. After two payments had been made the insurance company advised appellant his premium would be increased by $254.00 because he had denied on his application any traffic violations during the preceding 36 months whereas the state's driving records showed to the contrary. He did not pay the increased premium and when he was involved in an accident the company claimed the policy had been cancelled for nonpayment of premiums. The trial court found for the insurance company, but the appellate court reversed, saying:

The increase in premium was a material modification of the policy terms to which plaintiff did not agree and it was not supported by any consideration, both of which would be necessary to effect a valid modification of the insurance contract.... The plaintiff under the time payment plan was current at the time of cancellation on payment of the agreed premium. The cancellation for the reason cited in the notice was therefore not authorized.

Another case holding the same way is Anderson v. Pennsylvania National Mutual Ins. Co., ...