Motsinger v. Perryman

• Decision Date: 19 June 1940
• Docket Number: 745.
• Citation: 9 S.E.2d 511,218 N.C. 15
• Parties: MOTSINGER v. PERRYMAN et al.
• Court: North Carolina Supreme Court

9 S.E.2d 511

218 N.C. 15

MOTSINGER v. PERRYMAN et al.

No. 745.

Supreme Court of North Carolina

June 19, 1940

Claim for compensation under the Workmen's Compensation Act prosecuted by plaintiff, the injured employee.

Plaintiff and defendant employer are both bound by the Workmen's Compensation Act. The defendant Associated Indemnity Corporation is the alleged insurance carrier for the employer.

On 9 October, 1937, plaintiff suffered an accident which arose out of and in the course of his employment which resulted in a complete loss of the sight of his left eye. The hearing Commissioner awarded compensation. On appeal to the full Commission the award was affirmed. On appeal to the Superior Court the award of the full Commission was likewise affirmed.

The defendant employer makes no contention that the plaintiff is not entitled to compensation and did not appeal from the award. The controversy is as to the liability of the alleged insurance carrier. On this controversy the following facts appear:

Sometime prior to 1 June, 1937, the defendant Perryman applied to The Phoenix Company, insurance agency and broker, for a policy of compensation insurance. The Phoenix Company in turn applied to Baylor Insurance Service of Durham, which was a State agency for the Associated Indemnity Corporation of San Francisco, California. As a consequence of said negotiation the Associated Indemnity Corporation issued its compensation policy to W. D. Perryman bearing date 1 June, 1937.

The defendant Perryman, upon receipt of the policy, issued his two checks to G. L. Zimmerman, representative of The Phoenix Company, in an amount equal to the advance premiums for the period of 6 months for which the policy was issued. Thereafter, on or about 15 June, 1937, the Associated Indemnity Corporation sent to W. D. Perryman by registered letter notice of cancellation of the policy. This registered letter was received by Perryman. No notice of cancellation was mailed to or served on the Industrial Commission or on the North Carolina Rating Bureau.

Zimmerman representative of The Phoenix Company, never accounted for the premium received, either to Baylor Insurance Service or to the defendant Indemnity Corporation. After the injury to plaintiff he repaid to the defendant Perryman, an amount equal to the premium received to be applied on claims arising out of the injury for hospital expenses, etc. Subsequent to the injury the defendant insurance carrier was paid the amount due as earned premium to the date of the cancellation.

The individual commissioner concluded that the policy was still in full force and effect and granted an award against the corporate defendant. This conclusion and award was affirmed both by the full Commission and by the Superior Court. From judgment of the Superior Court affirming the award of the full Commission the defendant Associated Indemnity Corporation appealed.

Henry Bane, of Durham, and Fred S. Hutchins and H. Bryce Parker both of Winston-Salem, for defendant Associated Indemnity Corporation, appellant.

J. F. Motsinger and E. M. Whitman, both of Winston-Salem, for plaintiff, appellee.

BARNHILL Justice.

It was admitted here that the defendant Perryman is solvent and able to pay the award made so that the rights of the plaintiff are not endangered by the controversy presented which is, as found by the Commission, primarily between the defendant Perryman and the defendant Associated Indemnity Corporation. This controversy is to be determined by the answers to two questions: (1) Was the policy cancelled as between the employer and the insurance carrier? and (2) if so, was such cancellation effective as against the rights of the plaintiff employee?

If the policy was not cancelled the insurance carrier is liable both as to the employer and as to the employee. If the policy was cancelled as to the employer but not as to the employee, then the plaintiff may have recourse against the insurance carrier as well as against his employer for the collection of his award.

The Commission found that "on or about 15 June, 1937, the Associated Indemnity Corporation attempted to cancel their policy No. P. 10206 issued to W. D. Perryman June 1, 1937, upon which the premium was paid for a period of six months, by addressing a registered letter to said W. D. Perryman at his last known address; and, the Commissioner finds as a fact that said letter was received by W. D. Perryman but was misplaced by him before ever being read by him and before he ever ascertained the contents thereof, and he did not know that the Associated Indemnity Corporation had attempted to cancel said policy. The Commissioner further finds that W. D. Perryman, the insured, never at any time prior to the alleged injury in this case or thereafter agreed or consented to the cancellation of the policy of compensation insurance offered in evidence in this case." As to this the defendant Perryman testified: "I received a registered letter from the Associated Indemnity Corporation through Baylor's Insurance Service, Inc., one evening when I got home and I opened it and it said something about an insurance policy, and I had promised to be at Thomasville Orphanage at 7:30 and I stuck it in my pocket and I have never seen it since. I said to myself, Mr. Zimmerman will let me know if there is anything wrong." He further testified that his daughter received the letter at his office and that she turned the notice over to him and that he received it on the same day it arrived at the office. He likewise testified that he never filed any notice of the accident with the insurance carrier or with the Industrial Commission and that Zimmerman always handled his insurance and represented him in all of these transactions as his agent.

The cancellation of the policy under the terms thereof as to the defendant employer is dependent upon receipt of the notice and not upon whether he read the notice, ascertained its contents and knew that it was a cancellation. In holding to the contrary the individual Commissioner and the Industrial Commission relied upon Pettit v. Wood-Owen Trailer Co., 214 N.C. 335, 199 S.E. 279. This decision does not sustain the position assumed by the Commission. That case merely held that the 10-day period began to run from the date of the receipt and not from the date of mailing of the notice.

The policy in question provides that "this policy may be cancelled at any time by either of the parties upon written notice to the other party stating when, not less than 10 days thereafter, cancellation shall be effective. The effective date of such cancellation shall then be the end of the Policy Period." Under the express terms of the contract written notice is the condition upon which the policy may be cancelled.

Roberta Mfg. Co. v. Royal Exch. Assurance Co., 161 N.C. 88, 76 S.E. 865; Sherrod v. Farmers' Mut. Fire Ins. Ass'n, 139 N.C. 167, 51 S.E. 910; 32 C.J., 1249. That the recipient of the notice shall read and ascertain the contents thereof is not a condition precedent to cancellation. It was error for the Commission to so hold.

The notice was in accord with the terms of the contract. A tender of the unearned premiums was not essential. This identical question is discussed and so decided in Hughes v. Lewis, 203 N.C. 775, 166 S.E. 909.

But it is contended that even if the policy was cancelled as against the employer it was not cancelled as against the employee. This contention is bottomed upon a provision in the policy and a rule adopted by the Industrial Commission.

The policy provides in part that "the law of any State, in which this policy applies, which requires that notice of cancellation shall be given to any Board, Commission or other State agency is hereby made a part of this Policy and cancellation in such state shall not be effective except in compliance with such law." It is provided further by rider attached:

"The obligations of Paragraph One (a) of the Policy to which this Endorsement is attached include such Workmen's Compensation Laws as are herein cited and described and none other.

"Chapter 120, Laws of 1929, State of North Carolina, known and cited as the North Carolina Workmen's Compensation Act, and all laws amendatory thereof or supplementary thereto which may be or become effective while this Policy is in force."

The rule adopted by the Industrial Commission, relied upon by appellee, is as follows: "Any insurance carrier having issued a policy to an employer and desiring to cancel same shall be required to give ten days' prior notice thereof to the Industrial Commission at its office in the City of Raleigh. Cancellation of policies shall give cause and be reported promptly to the Commission."

Is the rule thus adopted by the Industrial Commission a part of the law of the State within the meaning of the provision in the policy and the prevailing rule of construction which writes the law of the State into the contract so that there could be no cancellation thereof without ten days' prior notice to the Industrial Commission? The Commission so held. We reluctantly conclude that in this there was error.

It is well established that the general laws of a state in force at the time of the execution and performance of a contract become a part thereof and enter into and form a part of it as if they were referred to or incorporated in its terms. Hood v. Simpson, 206 N.C. 748, 175 S.E. 193, and cases cited; Headen v. Metropolitan Life Ins. Co., 206 N.C. 270, 173 S.E. 349; Abernethy v. Mecklenburg Farmers' Mut. Fire Ins. Co., 213 N.C. 23, 195 S.E. 30; Bryson City Bank v. Town of Bryson City, 213 N.C. 165, 195 S.E. 398, and cases cited; 17 C.J.S., Contracts, p. 782, § 330; This principle embraces laws which affect its validity,...