Scott v. Southwestern Mut. Fire Ass'n

• Decision Date: 27 December 1994
• Citation: Scott v. Southwestern Mut. Fire Ass'n, 647 A.2d 587, 436 Pa.Super. 242 (Pa. Super. Ct. 1994)
• Parties: E. Glenn SCOTT and Donnice Scott, Husband and Wife, Appellants, v. SOUTHWESTERN MUTUAL FIRE ASSOCIATION, a Pennsylvania Corporation.
• Court: Pennsylvania Superior Court

Page 587

647 A.2d 587

436 Pa.Super. 242

E. Glenn SCOTT and Donnice Scott, Husband and Wife, Appellants, v.SOUTHWESTERN MUTUAL FIRE ASSOCIATION, a Pennsylvania Corporation.

Superior Court of Pennsylvania.

Argued April 28, 1994.

Filed July 18, 1994.

Reargument Denied Sept. 16, 1994.

Petition for Allowance of Appeal Denied Dec. 27, 1994.

Gary M. Davis, Pittsburgh, for appellants.

Vincent J. Roskovensky, II, Uniontown, for appellee.

Before ROWLEY, President Judge, and CIRILLO and OLSZEWSKI, JJ.

CIRILLO, Judge:

This is an appeal from a judgment entered in the Court of Common Pleas of Washington County.We affirm.

On February 4, 1989, appellantsE. Glenn and Donnice Scotts' home was destroyed by fire.At the time of the fire, the Scotts' property was insured by Southwestern Mutual Fire Association(Southwestern).The Southwestern policy carried a three year term, payable annually, commencing on January 13, 1988 and terminating on January 13, 1991.The policy provided coverage in the amounts of $45,000.00 for the dwelling, $15,000.00 for household and personal property (contents), and $3,000.00 for the detached garage and its contents.The record indicates that the Scotts paid the first annual premium in the amount of $243.00.

In late December of 1988, Southwestern sent a renewal notice of premium to the Scotts for the term commencing on January 13, 1989.The Scotts did not respond to this notice.Rather, on January 13, 1989, the Scotts applied for other homeowner's insurance with the Prudential Insurance Company(Prudential).The Scotts conveyed to a Prudential agent their intent to replace the Southwestern policy with the Prudential policy.Mrs. Scott entered into a binder of insurance with Prudential on January 13, 1989, effective that same day, which provided in pertinent part:

I understand that the company [Prudential] hereby binds ... the coverage and limits of liability shown in the application....The temporary insurance provided by this BINDER shall terminate not later than thirty days from the Effective Date stated.Earlier termination will result will result from: (1) Issuance of a policy in which event this BINDER is void; or (2) Cancellation by the Applicant or by the Company.

The binder provided coverage in the amounts of $68,500.00 for the dwelling and $47,950.00 for the personal property.The binder also contained a notation that Southwestern was the Scotts' "previous insurer," with the expiration date of that policy at "1/13/89."To effectuate the binder, Mrs. Scott made a payment to Prudential in the amount of $61.00.

On February 2, 1989, two days before the fire, Mrs. Scott telephoned Southwestern and informed Southwestern secretary, Norma Geisel, that she and Mr. Scott had entered into a binder of insurance with Prudential and that she, therefore, intended to cancel their policy with Southwestern.On or about February 27, 1989, Mrs. Scott made a second premium payment to Prudential.

Approximately two months after the fire, the Scotts filed Proof of Loss Statements for their dwelling and personal property with Prudential.Pursuant to these statements, Prudential paid out the limits of its liability.The following month, in May of 1989, the Scotts filed a Proof of Loss Statement with Southwestern for personal property only.Southwestern denied the claim, contending that the policy had been cancelled on January 13, 1989 or, at the very latest, on February 2, 1989, two days prior to the date of the fire.The Scotts filed the instant action against Southwestern for breach of contract.

Before the Honorable Thomas J. Terputac, a jury returned a verdict in favor of the Scotts, finding that the Southwestern insurance policy was not cancelled prior to the date of the fire.The jury then awarded the Scotts $59,131.00.Thereafter, Southwestern moved for judgment notwithstanding the verdict (JNOV) and/or a new trial.The Scotts moved for prejudgment interest on the damages which the jury awarded.Judge Terputac granted Southwestern's motion for JNOV and entered judgment thereon.Judge Terputac, therefore, did not decide the Scotts' motion for prejudgment interest.The Scotts now appeal from the judgment and raise one question for our review:

Whether the trial court erred in determining that the Scotts cancelled the insurance policy as a matter of law, and thereby granting JNOV?

The standard of review for an appellate court is the same as that for a trial court: JNOV will be entered only in a clear case where the facts are such that no two reasonable minds could fail to agree that the verdict was improper.Pirozzi v. Penske Olds-Cadillac-GMC, 413 Pa.Super. 308, 311, 605 A.2d 373, 375(1992).We must determine whether there was sufficient competent evidence to sustain the verdict, granting the verdict winner the benefit of every reasonable inference that can be reasonably drawn from the evidence and rejecting all unfavorable testimony and inferences.Wenrick v. Schloemann-Siemag Aktiengesellschaft, et al., 523 Pa. 1, 4, 564 A.2d 1244, 1246(1989);Spagnol Enterprises, Inc. v. Digital Equipment Corp., 390 Pa.Super. 372, 374, 568 A.2d 948, 949(1990).An appellate court will reverse a trial court's ruling only if it finds an abuse of discretion or an error of law that controlled the outcome of the case.Timbrook v. Foremost Ins. Co., 324 Pa.Super. 384, 387, 471 A.2d 891, 892(1984).

The issue which is presented to this court is whether the Scotts cancelled their policy with Southwestern prior to the date of the fire.Generally, the law requires that when an insurance policy is to be cancelled, the conditions upon which the right is exercised must be strictly complied with, unless the insured waives this requirement.Pomerantz v. Mutual Fire Ins. Co., 279 Pa. 497, 499, 124 A. 139, 140(1924);Letvin v. Phoenix Ins. Co., 91 Pa.Super. 422, 426-27(1926);see alsoFederal Kemper Ins. Co. v. Commonwealth, Ins. Dept., 509 Pa. 1, 500 A.2d 796(1985)(holding that an insured who does not wish to continue a policy is free to cancel the policy at any time, as long as that right is provided for in the policy).

Where the cancellation of a policy is relied upon as an affirmative defense, the burden is on the defendant(insurer) to prove an effective cancellation of the policy prior to the loss.Moser Mfg. Co. v. Donegal & Conoy Mut. Fire Ins. Co., 362 Pa. 110, 115, 66 A.2d 581, 584(1949);see alsoHanna v. Reliance Ins. Co., 402 Pa. 205, 166 A.2d 877(1961);Harty v. Standard Acc. Ins. Co., 394 Pa. 358, 147 A.2d 421(1959);Coppola v. Insurance Placement Facility, 386 Pa.Super. 413, 563 A.2d 134(1989);Mackiw v. Pennsylvania Thresh. & Farmers Mut. Cas. Ins. Co., 201 Pa.Super. 626, 193 A.2d 745(1963).The crux of the insurer's burden turns on whether it can prove that the insured had a clear and precise intent to cancel the policy prior to the loss.Coppola, 386 Pa.Super. at 416, 563 A.2d at 136;see alsoDel Boring Tire Service v. Federal Emergency Management Agency, 496 F.Supp. 616(W.D.Pa.1980).

The standards to be applied in reviewing insurance contracts are well settled.The proper focus regarding issues of coverage under insurance contracts is the reasonable expectation of the insured.Dibble v. Security of America Life Ins. Co., 404 Pa.Super. 205, 210, 590 A.2d 352, 354(1991).In determining the reasonable expectations of the insured, courts must examine the totality of the insurance transaction involved.Id.However, while reasonable expectations of the insured are the focal points in interpreting the contract language of insurance policies, seeCollister v. Nationwide Life Insurance Co., 479 Pa. 579, 388 A.2d 1346(1978)andWinters v. Erie Insurance Group, 367 Pa.Super. 253, 532 A.2d 885(1987), an insured may not complain that his or her reasonable expectations were frustrated by policy limitations which are clear and unambiguous.Bateman v. Motorists Mut. Ins. Co., 527 Pa. 241, 244, 590 A.2d 281, 283(1991);see alsoNeil v. Allstate Insurance Co., 379 Pa.Super. 299, 549 A.2d 1304(1988);St. Paul Mercury Ins. Co. v. Corbett, 428 Pa.Super. 54, 630 A.2d 28(1993)(en banc).However where a provision of an insurance policy is ambiguous, the provision is construed in favor of the insured and against the insurer.Bateman, 527 Pa. at 244, 590 A.2d at 283.

We now turn to the facts of this case and the language contained in the Southwestern policy to determine whether the Scotts cancelled the Southwestern policy prior to the date of the fire.The policy provided that either party could cancel the term of insurance in the following manners: First, an endorsement to the policy provided that "this policy shall be cancelled at any time at the request of the insured upon the return of this policy to the Home Office of the Association and the payment of all assessments or other charges against the policy."Next, the Amendatory Cancellation and Nonrenewal Endorsement to the policy (FormNo. 182) provided:

CANCELLATION FOR NON-PAYMENT OF PREMIUM.This policy may be cancelled by this Company at any time during the policy period for failure to pay any premium when due ... by mailing or delivering to the insured written notice stating when, not less than thirty (30) days ther[e]after, such cancellation shall be effective.

In compliance with the above-quoted provision, Southwestern's renewal notice to the Scotts contained the following language:

Neglect or failure to pay any Premium within thirty days from [the] date of this notice to pay same shall without further notice, render the policy void as to the interest of the insured until such payment be made, and in no case shall the Association be liable to the insured for any loss occurring during such suspension.

Although the renewal notice was sent to the Scotts sometime in late December of 1988, the only date contained in or on the notice was January 13, 1989, the annual renewal date of the policy.The Scotts argued before the trial court,...