Smart v. New Hampshire Ins. Co.
| Decision Date | 15 June 1987 |
| Docket Number | Docket No. 77324 |
| Citation | 428 Mich. 236,407 N.W.2d 362 |
| Parties | Ross D. and Viola A. SMART, d/b/a the Menu Restaurant and Indian Trail Motel, Plaintiffs-Appellants, v. The NEW HAMPSHIRE INSURANCE CO., Defendant-Appellee, v. BARNICH, KAVANAUGH & COOPER INC., and William Kavanaugh, Defendant-Appellees. |
| Court | Michigan Supreme Court |
Daniel Loznak, Cheboygan, for plaintiffs-appellants.
Gregory A. Elzinga, Lyle Andrew Peck, Sault Ste. Marie, for defendant-appellee.
Defendant The New Hampshire Insurance Company issued, for a period commencing May 1, 1980, a policy of fire insurance covering a motel and other property owned by plaintiffs Ross and Viola Smart. This policy replaced a policy issued by Great American Insurance Company that expired May 1, 1980. There was thus continuous coverage on May 1, 1980, the date on which a fire occurred.
The Great American policy required the insurer to pay the actual cash value of property that was lost. The New Hampshire policy provided that the insurer would pay the replacement cost, a difference found by the jury to be $30,000.
After the Smarts had been paid the actual cash value, $90,000, by Great American, they commenced this action against New Hampshire. The Court of Appeals reversed a $30,000 judgment for the Smarts entered by the circuit court on the jury verdict, finding that the New Hampshire policy did not become effective until noon on May 1, five hours after the fire broke out at 7:00 A.M. on that day, 148 Mich.App. 724, 384 N.W.2d 772. We agree and affirm the judgment of the Court of Appeals.
There is a standard form of fire insurance policy in use throughout the United States that is prescribed by statute in Michigan. 1 It appears that the policy period may commence at 12:01 A.M. in some states. In Michigan, the statute prescribes that the policy period begins at "noon Standard Time" 2 on the date the policy period begins.
Both the Great American and the New Hampshire policies stated, however, on the face of the policy, that the policy began at 12:01 A.M., standard time. The Smarts claim that the New Hampshire policy--providing for replacement cost--thus became effective at 12:01 A.M., seven hours before the loss occurred.
The New Hampshire policy contained a "Michigan Amendatory Endorsement" stating that "[t]he time of inception and the time of expiration of this policy and of any schedule or endorsement attached shall be Noon Standard Time." The policy, as so amended, thus by its terms commenced at noon rather than at 12:01 A.M.
The Michigan Amendatory Endorsement provided further that "[t]o the extent that coverage in this policy replaces coverage in other policies terminating at 12:01 A.M. (Standard Time) on the inception date of this policy, this policy shall be effective at 12:01 A.M. (Standard Time) instead of at Noon Standard Time." The Smarts argue that since the Great American policy stated on its face that it began and expired at 12:01 A.M., the New Hampshire policy, under this language of the Michigan Amendatory Endorsement, became effective at 12:01 A.M., rather than at noon.
It does not appear whether there was language in the Great American policy paralleling the language of the Michigan Amendatory Endorsement to the New Hampshire policy stating that the time of inception and expiration of the policy shall be noon standard time. In all events, the Insurance Code provides that "[a]ll contracts of fire insurance upon property real or personal located in this state shall be held and deemed to be made and consummated within this state"; 3 and that "[t]he printed form of a policy of fire insurance, as set forth in § 2832 4 [of the Insurance Code], shall be known as the 'Michigan standard policy;' " 5 and that "[n]o policy or contract of fire insurance shall be made, issued or delivered" by any insurer or agent "unless it shall conform as to all provisions, stipulations, agreements and conditions," of the Michigan standard policy. 6 And, again, the Michigan standard policy provides that it shall be for a term commencing "at noon, Standard Time." 7
It is well established that "[i]nsurance contracts are subject to statutory regulations and provisions of the statutes must be read into the contract." 8
In sum, without regard to whether the Great American policy provided by amendatory endorsement that it would commence at noon, by virtue of § 2832 of the Insurance Code the Great American policy expired at noon rather than at 12:01 A.M., and, by virtue of both § 2832 of the Insurance Code and of the Michigan Amendatory Endorsement that was a part of the New Hampshire policy, the New Hampshire policy became effective at noon. 9
The Smarts contend alternatively that New Hampshire represented that its policy began at 12:01 A.M. While the policy did in a number of places state that it became effective at 12:01 A.M., the Michigan Amendatory Endorsement that was a part of the New Hampshire policy stated that the time of inception was noon. Even if the Great American policy did not contain such an endorsement and, in such event, it would or might not have been clear from an examination of the Great American policy that it expired at noon rather than at 12:01 A.M., New Hampshire made no representation concerning when the Great American policy expired. The Michigan Amendatory Endorsement stated only that if the New Hampshire policy replaced coverage terminating at 12:01 A.M., the New Hampshire policy would become effective at 12:01 A.M. instead of at noon. The Great American policy, for reasons already stated, expired at noon rather than at 12:01 A.M.
The record indicates that the Smarts were interested in obtaining replacement cost coverage in lieu of actual cash value coverage. It is clear that the Smarts expected the new coverage to be effective May 1. While they were concerned that there be continuous coverage, there was no discussion regarding specific hours, 12:01 A.M. or noon.
Since a policy period must, under § 2832, commence at noon, it might have been necessary to begin the New Hampshire policy at noon on April 30 in order to provide coverage by 12:01 A.M. on May 1. There is no suggestion that the Smarts or the insurance agent focused on the twelve-hour period commencing 12:01 A.M., May 1, when they discussed renewal of the existing or alternative coverage. The focus was rather on providing coverage for replacement cost in lieu of actual cash value and continuous coverage. 10
In sum, we agree with the Court of Appeals that New Hampshire's motions for a directed verdict and judgment notwithstanding the verdict should have been granted. There was no misrepresentation by the insurer or its agent. The expectations of the Smarts were met by providing replacement cost coverage commencing at noon on May 1 when the Great American policy expired.
Affirmed.
GRIFFIN, J., not participating.
Because this case presents facts unlikely to reoccur and has little jurisprudential significance, I believe leave was improvidently granted. I concur in the result of affirmance for the reasons expressed by the Court of Appeals, in particular:
I cannot agree with the majority that the New Hampshire policy was not in effect at the time of the fire. I would reverse the decision of the Court of Appeals with respect to plaintiffs' breach of contract claim.
The body of the New Hampshire policy made multiple references to the inception time of 12:01 a.m. However, as the majority notes, the Michigan Amendatory Endorsement brought the policy into compliance with Michigan law by stating that "[t]he time of inception and the time of expiration of this policy and of any schedule or endorsement attached shall be Noon Standard Time." However, the endorsement continued "[t]o the extent that coverage in this policy replaces coverage in other policies terminating at 12:01 a.m. (Standard Time) on the inception date of this policy, this policy shall be effective at 12:01 a.m. (Standard time) instead of at Noon Standard Time." The New Hampshire policy replaced a policy issued by Great American Insurance Company which expired at 12:01 a.m. 1 Thus, under the plain terms of the endorsement, the New Hampshire policy was in effect at the time of the fire because it was replacing a policy terminating at 12:01 a.m.
Several familiar maxims of insurance contract interpretation bear repeating. As noted in Murphy v. Seed-Roberts Agency, 79 Mich.App. 1, 7-8, 261 N.W.2d 198 (1977):
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