Mooney v. Nationwide Mut. Ins. Co.

• Decision Date: 19 December 1991
• Parties: Joseph MOONEY, Respondent, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 506

577 N.Y.S.2d 506

172 A.D.2d 144

Joseph MOONEY, Respondent, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant.

Supreme Court, Appellate Division,

Third Department.

Dec. 19, 1991.

Daniel A. Whalen (Paul J. Connolly, of counsel), Albany, for appellant.

Linnan, Bacon & Meyer (Nicholas E. Tishler, of counsel), Albany, for respondent.

Before MAHONEY, P.J., and WEISS, YESAWICH, LEVINE and HARVEY, JJ.

YESAWICH, Justice.

Appeal from a judgment of the Supreme Court (Kahn, J.) in favor of plaintiff, entered November 8, 1990 in Albany County, upon a directed verdict at the close of the evidence.

This action was commenced by plaintiff in an attempt to recover for property damage under the collision insurance provision of a comprehensive automobile insurance policy written by defendant and purchased by plaintiff in January 1988. On his insurance application, plaintiff wrongly reported that neither he nor any driver in his household had any motor vehicle violations during the preceding five years. In March 1988, plaintiff substituted a 1988 Pontiac Grand Prix automobile, registered in plaintiff's name but owned by Michael Mooney, plaintiff's brother, in place of the 1979 pickup truck originally covered by the policy; Michael Mooney had a poor driving record including several driving while impaired offenses and a restricted license. Though owned by Michael Mooney, the car was registered in plaintiff's name and the automobile insurance premiums were paid by plaintiff.

On May 8, 1988, plaintiff mailed defendant a check covering an overdue premium. The next day defendant, which apparently had not yet received plaintiff's check, sent plaintiff a notice canceling the policy as of May 26, 1988 for nonpayment of premium. On May 10, 1988, defendant sent notice to plaintiff that due to his and his brother's driving records, his insurance coverage would be terminated on June 2, 1988; plaintiff testified that he did not carefully read this notice because he assumed it concerned his late premium payment. Shortly after receiving the May 10, 1988 letter, plaintiff received a reinstatement notice, prepared by defendant on May 11, 1988, acknowledging the payment, advising that plaintiff's auto insurance was reinstated and retracting the notice of cancellation "effective 05-24-88"; no mention was made of plaintiff's or his brother's driving records or that the policy would still be canceled on June 2, 1988.

On July 25, 1988, upon being ordered by the Department of Motor Vehicles (hereinafter DMV) to turn in his plates and registration because his liability insurance had terminated June 2, 1988, plaintiff presented the reinstatement notice to DMV and the latter thereupon issued him a receipt permitting him to drive. That evening, the Grand Prix was totally destroyed in an accident while Michael Mooney was driving.

When plaintiff informed defendant of the accident, he was told that his coverage had terminated on June 2, 1988. This lawsuit followed. Because plaintiff allegedly could not afford to repair the Grand Prix without the insurance payment, the car, which had been towed to a repair shop soon after the accident, remained there unrepaired, accumulating rent charges until trial two years later.

At trial, plaintiff maintained that he reasonably relied on the fact that defendant's last communication to him was a reinstatement notice, that DMV had allowed him to keep his plates after seeing that notice, that defendant had cashed all his premium checks, and that he had never received a refund for overpayment on a canceled policy. Defendant claimed that plaintiff did not have an insurable interest in the car and hence was unable to enforce the policy, that this policy was void ab initio because plaintiff misrepresented his and his brother's driving records on his application, that plaintiff's reliance on the reinstatement notice was misplaced given the May 10, 1988 cancellation notice, and that a refund check was sent to plaintiff's address after the reinstatement notice but was never cashed.

At the close of the evidence, Supreme Court granted plaintiff's motion for a directed verdict, denied defendant's renewed motion to dismiss the complaint, directed a verdict in favor of plaintiff on the issue of damages, holding that there was no question of fact as to plaintiff's entitlement to $14,112, the cost of storing the vehicle from the date of the accident to the time of trial, and dismissed defendant's counterclaim for unpaid premiums on the continued policy. Defendant appeals.

Regardless of whether plaintiff had an insurable interest in the Grand Prix (see, Insurance Law § 3401) or whether he obtained the policy by misrepresentation, defendant could not rescind the policy ab initio and it could not terminate the policy prospectively without satisfying the procedural requirements of Vehicle and Traffic Law § 313 (see, A-Drive Corp. v. General Acc. Group, 114 A.D.2d 430, 431, 494 N.Y.S.2d 344; Middlesex Ins. Co. v. Carrero, 103 A.D.2d 694, 695, 477 N.Y.S.2d 644; Aetna Cas. & Sur. Co. v. Garrett, 31 A.D.2d 710, 711, 296 N.Y.S.2d 12, affd. 26 N.Y.2d 729, 309 N.Y.S.2d 34, 257 N.E.2d 284; Teeter v. Allstate Ins. Co., 9 A.D.2d 176, 185, 192 N.Y.S.2d 610, affd. 9 N.Y.2d 655, 212 N.Y.S.2d 71, 173 N.E.2d 47). That statute reads that "[n]o contract of insurance for which a certificate of insurance has been filed with the commissioner shall be terminated by cancellation by the insurer until at least twenty days after mailing to the named insured * * * a notice of termination" (Vehicle and Traffic Law § 313[1][a].

Defendant urges that this notice requirement is inapplicable in this instance because the policy provision invoked involves collision insurance, not liability insurance. It is defendant's submission that the proscription against retroactive cancellation applies only to contracts of insurance for which a certificate of insurance has been filed with the Commissioner of Motor Vehicles pursuant to Vehicle and Traffic Law § 313 and that, because the certificate of insurance evidences that "liability insurance" (Vehicle and Traffic Law § 311[5] as opposed to collision or theft insurance has been secured on the vehicles designated in the insurance policy, retroactive cancellation is not prohibited here where plaintiff's claimed loss was occasioned by collision damage (see, Cortina v. General Ins. Co. of Am., 40 Misc.2d 916, 244 N.Y.S.2d 243). This conclusion is said to be reinforced by the fact that the statutory proscription against retroactive cancellation is designed to protect innocent victims, and that plaintiff is not such a victim. Given that the statute is far from unambiguous with respect to the distinction defendant would have us draw and no legislative history has been brought to our attention in support of doing so, and because any ambiguity in the statute's meaning must be construed against the insurer (Government Employees Ins. Co. v....