Superior Insurance Company v. Restituto

• Decision Date: 05 October 1954
• Docket Number: No. 15307-C.,15307-C.
• Citation: Superior Insurance Company v. Restituto, 124 F.Supp. 392 (S.D. Cal. 1954)
• Court: U.S. District Court — Southern District of California
• Parties: SUPERIOR INSURANCE COMPANY, a corporation, Plaintiff, v. Geri RESTITUTO, aka G. Restituto aka Gerie Restituto, aka Jerry Restituto, and Annie M. Restituto, individually and as co-partners dba El Adobe Motel, Lawrence Andrini, Canadian Indemnity Company, Defendants.

124 F. Supp. 392

SUPERIOR INSURANCE COMPANY, a corporation, Plaintiff, v.Geri RESTITUTO, aka G. Restituto aka Gerie Restituto, aka Jerry Restituto, and Annie M. Restituto, individually and as co-partners dba El Adobe Motel, Lawrence Andrini, Canadian Indemnity Company, Defendants.

No. 15307-C.

United States District Court S. D. California, Central Division.

October 5, 1954.

COPYRIGHT MATERIAL OMITTED

John S. Bolton, Los Angeles, Cal., for plaintiffSuperior Ins. Co.

Jack W. Bradley, Bakersfield, Cal., for defendants Restitutos.

DeForrest Home and Eugene Kelly, Los Angeles, Cal., for defendantCanadian Indemnity Co.

Morris B. Chain, Bakersfield, Cal., for defendant Andrini.

JAMES M. CARTER, District Judge.

This is an action for declaratory relief, brought by Superior Insurance Company against Geri Restituto and Annie Restituto, husband and wife, owners and operators of the El Adobe Motel at Bakersfield, California, Lawrence Andrini and the Canadian Indemnity Company.

On June 20, 1952, Andrini was injured at the swimming pool at the motel, brought suit against the Restitutos and recovered a judgment in the sum of approximately $7,000.Because of the matters set forth hereafter both Canadian and Superior refused to defend and the action was defended by the Restitutos at their expense.Conflicting claims by the various parties led to this action for declaratory relief.The jurisdiction of this court is based on diversity.

Since Leo V. Bray, an insurance agent, is the villain in the controversy, since the case concerns his activities and he has apparently absconded, some description is needed as to his status.From the files of the California Department of Insurancewe find that from July 5, 1950 to May 7, 1951, United Insurance Agencies was a partnership of which Bray was a member.From the testimony of Mrs. Restituto, apparently one Barrymore, was the other partner in United Insurance Agencies.He went into the service and left the business with Bray.

Thereafter the business was incorporated, and United Insurance Agencies Inc. was issued an agents' corporate license by the California Insurance Department on July 12, 1951.Bray was authorized by the department to transact business under this license.Canadian filed an appointment of United Insurance Agencies Inc., as its agent with the California Insurance Department on June 25, 1951 and Superior Insurance Company appointed the United Insurance Agencies Inc., its agent on June 12, 1951.

On November 18, 1950, there was issued by Canadian to G. Restituto¹ a comprehensive bodily injury and property damage policy effective from November 21, 1950 to November 21, 1951.The policy was signed for Canadian by "United Insurance Agencies" by Leo V. Bray, authorized representative.On October 30, 1951, a renewal certificate was issued by Canadian and signed by "Leo V. Bray", authorized representative, for the period from November 21, 1951 to November 21, 1952.

Canadian's Liability

Prior to Andrini's accident on June 20, 1952, on March 21, 1952, Canadian mailed to G. Restituto, dba El Adobe Motel, their insured, a notice of cancellation effective March 27, 1952, and obtained a return receipt from the post office for the piece of mail.G. Restituto and his wife claim they never received the notice but under the terms of the Canadian policy, the policy could be "cancelled by the company by mailing to the named insured at the post office address shown in this policy," written notice of cancellation."The mailing of the notice as aforesaid shall be sufficient proof of notice and the effective date and hour of cancellation stated in the notice shall become the end of the policy period."

About May 1, 1952, Canadian adjusted its account with United, set forth the debits and credits and sent the agent a check for $32.04, the balance due it on the account.The credit due Restituto for unearned premium as shown in the account was $123.23.United never repaid any amount to the Restitutos.

The question of Canadian's liability rests on the validity of the notice of cancellation, including the question of whether a refund of unearned premium was a condition precedent to cancellation.

(a)The Notice by Mail

"* * * whether a notice of cancellation, sent to the address of the assured as stated in the policy, and pursuant to a provision in the policy stating that the mailing thereof shall be sufficient notice, is effective despite lack of receipt by the insured * * * has not been directly ruled upon in this jurisdiction."Naify v. Pacific Indemnity Co., 1938, 11 Cal.2d 5, 10, 76 P.2d 663, 666, 115 A.L.R. 476.The court said further, "In this simple form, the question may perhaps be answered in the affirmative."Truck Ins. Exchange v. Industrial Acc. Comm., 1951, 36 Cal.2d 646, 650, 226 P.2d 583, states there is a sharp conflict in the authorities generally but does not decide the problem.American B. M. Co. v. Indemnity Ins. Co., 1932, 214 Cal. 608, 615, 7 P.2d 305, states that the mailing of notice under a similar policy clause would have been sufficient, but then states that if the notice sent by mail was not received the cancellation is ineffective, citing Farnum v. Phoenix Ins. Co., 1890, 83 Cal. 246, 256, 23 P. 869, 870.In that case the policy was entirely different and provided for termination "on giving notice."There was no agreement that the mails might be used.83 Cal. at page 251, 23 P. 869.

Since in this diversity case we must follow California law, we are left in the unhappy position of determining what California courts will say in the future on this question.Other jurisdictions have answered the question squarely and have held the cancellation under similar clauses effective regardless of whether the notice was actually received.Gendron v. Calvert Fire Ins. Co., 1943, 47 N.M. 348, 143 P.2d 462, 149 A.L.R. 1310;Medford v. Pac. Nat. Fire Ins. Co., 1950, 189 Or. 617, 219 P.2d 142, 222 P.2d 407, 16 A.L.R.2d 1181;Trinity Universal Ins. Co. v. Willrich, 1942, 13 Wash.2d 263, 124 P.2d 950, 955, 142 A.L.R. 1.

Parties to a contract may contract on such method of giving notice as they desire and unless public policy is contravened, the contract should be enforced as made.The use of the mails has become too well integrated into our economic and business life for such a public policy question to concern us.We conclude the notice by mail under the clause in question effected a termination even though the notice was never received by the insured.

(b)The Return of Premium

The Canadian policy also provided, "Premium adjustment may be made at the time cancellation is effective.Premium for this policy being subject to determination upon audit the return due the insured, or any additional due the company, shall be adjusted upon computation thereof.The company's check or the check of its representative mailed or delivered as aforesaid shall be a sufficient tender of any refund of premium due to the named insured."

The question of the necessity for a refund of premium to effect a valid cancellation involves interpreting the language of the policy.The problem is well analyzed in Perry v. Manufacturers Nat. Bank, 305 Mass. 368, 25 N.E.2d 730, 127 A.L.R. 341.

(1) Where the policy provides that the insurer may cancel upon giving notice and refunding the unearned portion of the premium, cancellation is only effective upon refund.Quong Tue Sing v. Anglo-Nevada Assurance Co., 1890, 86 Cal. 566, 25 P. 58, 10 L.R.A. 144.

(2) Another type of policy provides for return of the unearned premium on surrender of the policy and for a retention of a pro rata premium only.Here there is a split of authority.The majority rule provides that this unearned premium must be returned to effect a cancellation.See cases in 127 A.L.R. 1341, 1348-1349.California follows the minority rule in such type of policy and the return of unearned premium is not a condition precedent to cancellation.Mangrum & Otter v. Law Union & Rock Insurance Co., 1916, 172 Cal. 497, 157 P. 239, L.R.A.1916F, 440.For other jurisdiction see127 A.L.R. 1341, 1351-1352.

(3) Another type of policy provides for cancellation on notice and return of unearned premium on demand.The general rule is if the company refunds or states they will refund on demand, cancellation is complete and the refund of the unearned premium is not a condition precedent to cancellation.Naify v. Pacific Indemnity Co., 1938, 11 Cal.2d 5, 76 P.2d 663;Summers v. Travelers Ins. Co., 8 Cir., 1940, 109 F.2d 845, 127 A.L.R. 1341-1356.

(4) Akin to this latter classification is another type of policy with a clause more like that in the Canadian policy.In Medford v. Pacific National Fire Ins. Co., supra189 Or. 617, 219 P.2d 144, the clause provided that "'premium adjustment may be made at the time cancelation is effected and, if not then made, shall be made as soon as practicable after cancelation becomes effective.'"In Department of Labor and Industries v. Northwestern Mutual Fire Ass'n, 1942, 13 Wash.2d 288, 124 P.2d 944, 945, the clause provided for cancellation "`with or without tender of the excess of paid premium * * * which excess if not then refunded, shall be refunded as soon as practicable after cancellation becomes effective.'"In each case cancellation was held effective without the return of the premium.²

We conclude from the language of the policy and the cases above, that the cancellation by Canadian was effective, without return of premium as a condition precedent, on the date specified in the notice, to wit, March 27, 1952.However, since United was Canadian's agent, the fact that United held the $123.23 was not payment or tender to the Restitutos.They are entitled to a declaration of their right to a return of the unearned premium in the sum of $123.23 from Canadian.

Superior's Liability

Bray in some manner not shown by the evidence, received...