Travelers Ins. Co. v. Jenkins

• Decision Date: 12 November 1973
• Docket Number: No. 9494,9494
• Citation: 285 So.2d 839
• Parties: The TRAVELERS INSURANCE COMPANY and William E. Crawford v. Edgar JENKINS et al.
• Court: Court of Appeal of Louisiana — District of US

Page 839

285 So.2d 839

The TRAVELERS INSURANCE COMPANY and William E. Crawford v. Edgar JENKINS et al.

No. 9494.

Court of Appeal of Louisiana, First Circuit.

Nov. 12, 1973.

Ben C. Toledano and John J. Hainkel, Jr., New Orleans, for third-party defendant-appellant Southern Farm Bureau Cas. Ins. Co.

France W. Watts, III, Franklinton, for plaintiff-appellee Travelers.

Wm. E. Crawford, Baton Rouge, for plaintiff in intervention, Sandra Crawford.

Clayton S. Knight, Franklinton, for defendants-appellees W. Blackwell, Jenkins and Cotton.

Before LANDRY, ELLIS and PICKETT, JJ.

LANDRY, Judge.

Third party defendant, Southern Farm Bureau Casualty Insurance Company (Southern Farm) appeals a judgment in favor of its alleged insureds, Ralph Cotton, Walter G. Blackwell and Edgar Jenkins (defendants), defendants in the main demand herein, holding Southern Farm liable for judgments rendered against defendants in favor of plaintiffs, The Travelers Insurance Company (Travelers) and its insured, William R. Crawford. Southern Farm asserted lack of coverage of the vehicle involved in the accident giving rise to this litigation as a defense to defendants' third party demand, considering its policy was cancelled for nonpayment of premiums before the accident occurred. The trial court rejected Southern Farm's defense of cancellation. Judgment was also rendered in favor of third party plaintiffs against Southern Farm for attorney's fees in the amount of $750.00, and also for amounts recovered from defendants (third party plaintiffs) by plaintiffs in the main demand. The trial court also rejected Southern Farm's claim for setoff of premiums allegedly owed as a credit due Southern Farm on any judgments rendered against it in favor of third party plaintiffs. We affirm the judgments in all respects save its rejection of Southern Farm's claim for set-off, and remand this matter to the trial court for disposition of that issue.

The record discloses some sort of arrangement between Cotton and Blackwell, akin to a partnership agreement, for the operation of a trucking and hauling business. Cotton owned a fleet of trucks and occasionally leased or hired vehicles covered under a fleet policy issued by Southern Farm. Jenkins is the employee of Cotton and Blackwell. On July 19, 1969, a tractor either owned or leased by Cotton, and driven by Jenkins, ran into the rear of an automobile owned and being driven by Crawford. It is conceded Jenkins was at fault in causing the accident. Crawford was accompanied by his wife and other guest passengers. Travelers' policy covering Crawford's vehicle contained an uninsured motorist clause. Travelers paid Crawford $1,380.13 for damages to Crawford's vehicle, and also paid the occupants of the Crawford car a total of $1,930.00 under the uninsured motorist clause in Crawford's policy. Pursuant to subrogation and assignments, Travelers sued Cotton, Blackwell and Jenkins for the amounts paid, alleging that Cotton's vehicle was uninsured. Crawford sued the same defendants for $100.00 deducted from his damages pursuant to his policy with Travelers, also alleging the Cotton vehicle was uninsured. Judgment was rendered in favor of plaintiffs on their main demands for the amounts claimed, and on defendants' third party demand against Southern Farm as above indicated.

Southern Farm, the only appellant, makes the following contentions: (1) The trial court erred in holding the policy was in effect on the accident date because of Southern Farm's failure to give proper cancellation notice; (2) If the policy is held to be effective, Travelers is not entitled to judgment under its uninsured motorist clause; (3) If the policy was in effect on the accident date, Southern Farm is entitled to off-set of the premiums due by Cotton, and (4) If the policy be determined to be in effect, the sum of $750.00 awarded third party plaintiffs for attorney's fees, is excessive.

Third party plaintiffs maintain the lower court rightly held the policy was not effectively cancelled because the notice sent Cotton was defective. Alternatively, third party plaintiffs maintain that Southern Farm's acceptance of Cotton's check, tendered in payment of premiums on July 11, 1969, estops Southern Farm from pleading nonpayment of premiums.

The record discloses that Cotton held an automobile fleet policy issued by Southern Farm with a termination date of February 5, 1969. On February 26, 1969, John Acaldo, Southern Farm's Underwriting Manager, wrote Cotton that a renewal premium of $3,272.83 was due on the policy, and if not paid, coverage would cease, effective March 8, 1969. On March 19, 1969, a letter from Stephen T. Kimball, Underwriter for Southern Farm, to Cotton advised that coverage ceased March 8, 1969, and that an audit premium in the sum of $699.35 was due on or before April 4, 1969.

On April 11, 1969, Kimball wrote Cotton a letter containing the following concerning policy CA 701153:

'We have reinstated your policy effective April 3, 1969, and we are enclosing your renewal policy and a premium notice in the amount of $208.33.

The total premium needed for renewal of your policy is $3,069.16. We have received your payment in the amount of $2,860.83 leaving a balance due in the amount of $208.33. If you will kindly forward this amount to us, your policy will be paid in full until April 3, 1970.'

Cotton's check, mentioned in Kimball's letter of April 11, 1969, was dishonored by the drawee bank because of insufficient funds in Cotton's account. On May 20, 1969, Kimball returned Cotton's unpaid check by letter which also advised that Cotton's coverage would be extended until May 30, 1969, to permit Cotton opportunity to forward a replacement check. Kimball further advised that if the check were not made good, coverage would be cancelled effective May 30, 1969. On May 29, 1969, Cotton forwarded Southern Farm a check in the sum of $3,069.16, which included the premium due on the new policy, and a balance owed for a previous policy period. This check was also dishonored by the drawee bank and returned to Southern Farm for insufficient funds to Cotton's credit.

On July 1, 1969, Kimball wrote Cotton a letter of cancellation which states, in pertinent part, as follows:

'We are returning your check dated May 29, 1969 in the amount of $3,069.16 intended to apply to the above policy. This check has been returned to us by your bank marked 'Insufficient Funds.'

We feel that this was simply an oversight on your part, however, this is the second check which has been returned to us for insufficient funds in the past few weeks. Therefore, we will continue coverage on this policy until 12:01 a.m., July 11, 1969 in order that you may have an opportunity to submit a replacement payment to us. It will be necessary that you send a money order or a certified check in order to clear your account. If we have not received the replacement payment within the time mentioned above, the policy will be cancelled effective that date.'

At some time on the morning of July 11, 1969, during normal office hours, and admittedly after 12:01 A.M. of that date, Cotton tendered his uncertified personal check, dated that day, in the sum of $3,069 .16, to Southern Farm's local agent, Jack Sharp. The accident in question occurred July 19, 1969. On July 25, 1969, John J. Acaldo, Underwriting Manager for Southern Farm, returned Cotton's check of July 11, 1969, in a letter which states:

'We are returning your check dated July 11, 1969 intended to apply for payment of the above policy.

In accordance with our letter dated July 1, 1969, we called to your attention that the policy could not be continued unless we received a certified check or a money order from you on or before July 11, 1969.

In view of the above, the policy was cancelled effective April 3, 1969 and no coverage has been provided under the policy since that date. There is audit premium due in the amount of $699.35 as a result of changes that occurred on the policy during the last policy term. Please forward a cashier's check or money order to cover this additional premium.

If there are any questions, please contact us.'

Cancellation of automobile liability policies for nonpayment of premiums is governed by LSA-R.S. 22:636.1, in which we note these pertinent provisions:

'B. A notice of cancellation of a policy shall be effective only if it is based on one or more of the following reasons:

(1) Nonpayment of premium, or . . ..'

C. No notice of cancellation of a policy to which Subsection (B) applies shall be effective unless mailed or delivered by the insurer to the named insured at least twenty days prior to the effective date of cancellation; provided, however, that where cancellation is for nonpayment of premium at least ten days' notice of cancellation accompanied by the reason therefor shall be given . . ..'

In holding Southern Farm's attempted cancellation ineffective for lack of proper notice, the trial court relies upon Ellzey v. Hardware Mutual Ins. Co. of Minnesota, La.App., 40 So.2d 24 (1st Cir .) (1949). In Ellzey, above, the insurer sent the following notice of...