McElmurray v. American Fidelity Fire Ins. Co., 17634

• Decision Date: 01 April 1960
• Docket Number: No. 17634,17634
• Court: South Carolina Supreme Court
• Parties: Richard P. McELMURRAY, Respondent, v. AMERICAN FIDELITY FIRE INSURANCE COMPANY, Appellant.

Page 528

113 S.E.2d 528

236 S.C. 195

Richard P. McELMURRAY, Respondent, v. AMERICAN FIDELITY FIRE INSURANCE COMPANY, Appellant.

No. 17634.

Supreme Court of South Carolina.

April 1, 1960.

Turner, Padget & Graham, Columbia, for appellant.

Ryan L. Scott, Columbia, for respondent.

STUKES, Chief Justice.

This action was on an insurance policy issued by the appellant, American Fidelity Fire Insurance Company, to the respondent, Richard P. McElmurray, covering a 32-foot produce trailer, insuring against loss by upset or collision, among other hazards, in the amount of the actual cash value at the time of such collision subject to a $250 deductible provision. The respondent alleged that the trailer was completely wrecked and damaged in an accident on July 5, 1958, and demanded payment of $4,635 under the provisions of the policy, which was alleged to have been in effect on that date.

The appellant's answer admitted the issuance of the aforesaid policy but alleged that it had been duly cancelled on May 7, 1958, in accordance with the policy provisions, and that the trailer was therefore not insured by the appellant at the time of the accident.

The evidence upon trial established the facts that the respondent had purchased the trailer on a conditional sales contract on November 26, 1956, from Fruehauf Trailer Company for $6,736.94, which sum was made up of a price of $4,635. for the trailer, $1,192.11 for the three year insurance policy referred to heretofore, and $909.83 finance charges. A down payment of $463.50 was made by the respondent and the balance of $6,273.44 was to be paid in thirty-six monthly installments under the terms of the contract. Thereafter the aforesaid policy was issued to the respondent by the appellant with an effective date of November 26, 1956.

On April 22, 1958, respondent was given notice that the policy would be cancelled as of May 7, 1958. The notice of cancellation was mailed to respondent's address and receipted for there on April 25, 1958. After the notice was sent and prior to the accident, July 5, 1958, the respondent made two additional installment payments to Fruehauf, such payments being in the same amount, $160, as the payments made prior to cancellation. After the wreck no further payments were made by the respondent on the contract.

Respondent asserted that the policy had never been effectively cancelled because of appellant's failure to return the unearned premium to respondent personally. He further contended that even if there had been a cancellation, such had been waived by Fruehauf's acceptance as agent for appellant of the two additional unreduced payments on the contract, a portion of which he contended was insurance money. Appellant argued that under the peculiar provisions of the policy tender of the unearned premium to the respondent was not a condition of cancellation. Appellant further argued that no portion of the payments accepted after cancellation constituted insurance money because the insurance premium had been prepaid in a lump sum by Fruehauf to the appellant at the inception of the contract. The trial judge overruled appellant's motions for nonsuit and directed verdict and submitted the case to the jury on the questions of waiver and the value of the trailer. The jury returned verdict for respondent of $3,500.

Appellant made timely motions for judgment notwithstanding the verdict or in the alternative for a new trial. These motions were denied and this appeal is from the denial of appellant's motions for nonsuit, directed verdict, judgment notwithstanding the verdict and new trial.

All of the foregoing is from the 'Statement' in the record for appeal, which was 'settled' by the trial judge and from which there was no appeal.

The conditional sales contract provided as follows with respect to insurance:

'2. Buyer covenants and agrees to the following: * * * (c) Buyer will procure, pay all premiums thereon, and deliver to Seller, an insurance policy or policies issued by a stock company satisfactory to Seller, with loss payable clause in form satisfactory to Seller, in an amount not less than the time balance hereunder, under which the goods shall be insured against loss or damage by collision fire and theft thereof. Upon the failure of Buyer to procure and maintain such insurance and to keep all premiums paid thereon during the life of this agreement, Seller and its Assignees are hereby authorized (but not obligated) to procure such policy or policies, and pay all premiums thereon which shall not be paid when due. All amounts so paid by Seller shall become payable by Buyer to Seller hereunder and be paid with the installment next falling due hereunder. Failure of Buyer to provide such insurance or repay such sum or sums so paid by Seller as premiums on such policy or policies when due shall constitute a material breach of this agreement. The proceeds of any insurance, whether paid by reason of loss, damage, returned premium (emphasis added) or otherwise, shall be applied toward the replacement of the goods or the payment of Buyer's obligations to Seller at the option of Seller or its assigns. Buyer hereby directs and authorizes any insurance company to make payment direct to Seller and appoints Seller as the attorney-in-fact of Buyer to endorse any and all drafts for such proceeds.'

Fruehauf, by its insurance department or subsidiary, procured the policy from appellant with loss payable clause to it or assignee, but the policy was delivered to respondent.

The cancellation clause of the policy follows:

'This policy may be cancelled by the insured by surrender thereof to the company or any of its authorized agents or by mailing to the company written notice stating when thereafter the cancellation shall be effective. This policy may be cancelled by the company by mailing to the insured at the address shown in this policy written notice stating when not less than ten days thereafter such cancellation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice. The time of the surrender or the effective date and hour of cancellation stated in the notice shall become the end of the policy period. Delivery of such written notice either by the insured or by the company shall be equivalent to mailing. If the insured cancels, earned premium shall be computed in accordance with the customary short rate table and procedure. If the company cancels, earned premium shall be computed pro rata. Premium adjustment may be made either at the time cancellation is effected or as soon as practicable after cancellation becomes effective, but payment or tender of unearned premium is not a condition of cancellation.' (Emphasis added.)

It is noted that cancellation by the company, the appellant, was not made dependent upon refund or tender of the unearned portion of the premium, which effectively distinguishes this case from our former decisions which will be cited. Appellant was granted leave to argue against them and seek reversal or modification of them. However, their soundness need not, and will not, be re-examined because they involved different policy provisions from that quoted above which distinguish them from the case in hand, as has been said, but see annotation in 16 A.L.R.2d 1200 and supplements.

The former decisions referred to are: Crotts v. Fletcher Motor Co., 219 S.C. 204, 64 S.E.2d 540; Elmore v. Middlesex Mutual Fire Ins. Co., 219 S.C. 520, 65 S.E.2d 871, and Rice v. American Security Ins. Co., 222 S.C. 463, 73 S.E.2d 683. In the Crotts case the policy provision for cancellation required that the unearned portion of the premium should be refunded to the insured; in fact, it was refunded to the chattel mortgagee; another distinction is that the mortgagee had no lien upon the premium refund, as here. Likewise in the Elmore case the policy provided, in effect, that upon cancellation by the insurer the unearned premium should be tendered or refunded to the insured. The evidence relating to tender was in conflict and the jury, by its verdict, found against the insurer. After its claimed attempt at tender of the premium, it was refunded to the local agent who credited it to the account of the insured. The policy provisions relating to cancellation in the Rice case were identical with the corresponding provisions in the Elmore case, and the authority of the latter was followed; there a premium refund check was issued which was payable to the insured and the chattel mortgagee and delivered to the latter, which held it in its files without notice to the insured; the gravamen of the decision was expressed in the following words of the opinion: 'Since refund of the unearned premium was not made or tendered to him (the insured) pursuant to the policy provision for cancellation, the attempt (to cancel the policy) was ineffectual * * *.'

The evidence in the case at bar leaves no doubt that there was compliance with the policy provision for cancellation which has been quoted (and there is no question as to the propriety of the form and content of it). The following is copy of the notice thereof which was sent by registered mail to respondent:

'American Fidelity Place Detroit, Michigan

'Fire Insurance Company Date April 22, 1958

'Richmond, Virginia

'Notice of Cancellation

'American Fidelity Fire Insurance Company hereby gives you written notice in accordance with the Policy conditions of the Cancellation of its Automobile Policy No. AFF 07-103-7843 issued through its Charlotte, North Carolina Agency to RICHARD P. McELMURRAY

'By virtue of this notice, as issued to you, the Policy will be cancelled and all liability of American Fidelity Fire Insurance Company under said Policy will cease at and from 12:01 A. M., Standard Time, May 7th, 1958, without further notice.

'If the premium has been paid, the excess of paid premium above the pro rata premium for the expired term, if not tendered to you herein, will be refunded on...