Villwock v. Insurance Co. of North America/CIGNA, 0434-95-3

• Decision Date: 19 March 1996
• Docket Number: No. 0434-95-3,0434-95-3
• Citation: 22 Va.App. 127,468 S.E.2d 130
• Court: Virginia Court of Appeals
• Parties: Robert A. VILLWOCK, t/a Pioneer Construction Co., Inc. v. INSURANCE COMPANY OF NORTH AMERICA/CIGNA, Christopher R. Routh, Robert C. Huffman and Uninsured Employers' Fund. Record

Page 130

468 S.E.2d 130

22 Va.App. 127

Robert A. VILLWOCK, t/a Pioneer Construction Co., Inc. v. INSURANCE COMPANY OF NORTH AMERICA/CIGNA, Christopher R. Routh, Robert C. Huffman and Uninsured Employers' Fund.

Record No. 0434-95-3.

Court of Appeals of Virginia Salem.

March 19, 1996.

R. Louis Harrison, Jr., Bedford (R. Louis Harrison, Jr., P.C., on briefs), for appellant.

John M. Poma, Richmond (Midkiff & Hiner, P.C., on brief), for appellee Insurance Company of North America/CIGNA.

No brief or argument for appellees Christopher R. Routh, Robert C. Huffman and Uninsured Employers' Fund.

Present: MOON, C.J., and COLEMAN and FITZPATRICK, JJ.

MOON, Chief Judge.

Robert A. Villwock appeals the ruling of the Workers' Compensation Commission that CIGNA, the putative insurer, complied with Code § 65.2-804(B) in cancelling his workers' compensation insurance policy. We affirm because credible evidence supported the commission's finding that the employer received notice of cancellation.

Robert A. Villwock owns and operates the Pioneer Construction Company. He had workers' compensation insurance through CIGNA. The most recent policy was to be effective from April 7, 1993 through April 7, 1994. As a condition of that policy, Villwock was required to comply with certain audit requirements, including provision of payroll records.

On March 30, 1993, CIGNA requested payroll information for an audit. The request was accompanied by a notice that the information had to be provided within fifteen days in order to avoid an interruption in coverage. CIGNA received no response from Mr. Villwock, and sent a second request for information on May 8th. Villwock's insurance agent, Virginia Fowler, received a copy of this notice, and contacted Villwock by telephone. Villwock assured Fowler on two occasions that he would provide the requested information immediately, but did not do so.

CIGNA then requested permission from NCCI, which administers workers' compensation insurance for the Commonwealth of Virginia, to cancel Villwock's policy. A copy of this request was sent to Villwock and his agent. On August 13, 1993, NCCI responded directly to Villwock, with a copy to CIGNA, informing Villwock that if he did not provide the requested information within fifteen days his policy would be cancelled. While both Fowler and CIGNA received their copies of the aforementioned notices, Villwock denied receiving any of them.

CIGNA then proceeded with cancellation of the policy pursuant to Code § 65.2-804(B). On August 27, 1993, it sent a notice to Villwock, with a copy to the agent, informing him that his insurance would be cancelled effective September 30, 1993. The statute requires a thirty-day notice to the employer and the commission, and CIGNA routinely adds five to seven days to account for mailing. Under standard office practice, the notices to Villwock and the agent would be mailed the day the notice was typed, and the commission's would be mailed two to five days later in a bulk mailing.

The commission did not receive its notice until September 22, 1993. NCCI, to which CIGNA also sent a copy of the notice, received its notice on September 16. Because it received its notice less than thirty days from the cancellation date, the commission changed the effective date of the cancellation to October 21, 1993, thirty days from its receipt of the notice from CIGNA. The commission's standard practice was to send a notice to the employer notifying it of the cancellation and the effective date. A commission witness testified that this form was sent, although he was unable to produce a copy of it because the hard copies of the record had been destroyed. Villwock denied receiving notice from either CIGNA or the commission. His agent received her copy of the notice from CIGNA.

On November 15, 1993, two employees of Pioneer Construction fell from a scaffold and were injured, one severely. On the day of the accident, Villwock contacted his insurance agent, who informed him that his policy had been cancelled. Villwock testified that CIGNA did not inform him that the policy was cancelled until he contacted the company himself in February 1994.

At his deposition, Villwock testified that in June 1993 he moved from Route 1, Box 148B in Huddleston, Virginia to 112 Autumn Avenue in Huddleston. Villwock did not inform either CIGNA or his insurance agent of his change of address. He did, however, provide a forwarding order to the post office, and he received forwarded mail. He was still receiving forwarded mail as of the deposition date of August 24, 1994. Yet, he testified that he never received a single item of correspondence from CIGNA, NCCI, or the commission concerning either the audit or the cancellation of his insurance. He testified that he was unaware of any other mail he failed to receive after changing his address. ¹ He acknowledged receiving and cashing a refund check from CIGNA that was mailed to his former address in March 1994.

Villwock's method of dealing with his business mail was haphazard. Both he and his wife, who helped with the business, collected the mail. Mail was opened each day "at random" by either Villwock or his wife. The business and personal mail were both delivered to the same mailbox. The Villwocks did not open all of the business mail at once, but instead "at various times." They did not datestamp the mail.

We construe the evidence in the light most favorable to the party prevailing below. States Roofing Corp. v. Bush Construction Corp., 15 Va.App. 613, 616, 426 S.E.2d 124, 126 (1993). The commission's factual findings will not be disturbed on appeal if supported by credible evidence. Id. This Court is not bound by the commission's determination of legal questions. Cibula v. Allied Fibers & Plastics, 14 Va.App. 319, 324, 416 S.E.2d 708, 711 (1992), aff'd, 245 Va. 337, 428 S.E.2d 905 (1993).

Resolution of this case requires interpretation of Code § 65.2-804(B). The statute provides, in pertinent part:

No policy of insurance hereafter issued under the provisions of this title ... shall be cancelled or nonrenewed by the insurer issuing such policy ... except on thirty days' notice to the employer and the Workers' Compensation Commission ...

The threshold question is whether the insurance company must show that the notice was received, or merely that it was mailed. The commission's opinion is ambiguous on this issue. For the reasons set forth below, we hold that CIGNA must show that the employer received the notice. ²

In American Mutual Fire Insurance Co. v. Barlow, 4 Va.App. 352, 355-56, 358 S.E.2d 184, 186-87 (1987), we held that the notice must actually be received by the commission in order for cancellation to be effective. In Barlow, the employer received the notice but the commission did not. We thus had no need to decide whether the employer must actually receive the notice.

In deciding whether actual receipt is necessary to effect cancellation, the language of the statute controls. Where the statute provides that the policy may be cancelled by giving a certain number of days' notice to the insured, and does not specify mailing as the method of providing notice, actual receipt is required for the notice to be effective. ³ This rule is well established in both cases and commentary. See Scanlon v. Empire Fire and Marine Insurance Co., 117 Idaho 691, 693-94, 791 P.2d 737, 739 (1990); Larocque v. Rhode Island Joint Reinsurance Assoc., 536 A.2d 529, 530-31 (R.I.1988); Nunley v. Florida Farm Bureau Mutual Insurance Co., 494 So.2d 306, 307 (Fla.Dist.Ct.App.1986); Osborne v. Unigard Indemnity Co., 719 S.W.2d 737, 740-41 (Ky.Ct.App.1986); Smith v. Municipal Mutual Insurance Co., 169 W.Va. 296, 298-99, 289 S.E.2d 669, 670-71 (1982); Rocque v. Co-operative Fire Insurance Association of Vermont, 140 Vt. 321, 325, 438 A.2d 383, 385-86 (1981); Martin J. McMahon, Annotation, Actual Receipt of Cancellation Notice Mailed By Insurer as Prerequisite to Cancellation of Insurance, 40 A.L.R.4th 867, 873, 883-88 (1985); 43 Am.Jur.2d Insurance § 391 (4th ed.1982).

This rule is consistent with the policy that underlies Code § 65.2-804(B). As the Court noted in Barlow, one purpose of the notice requirement is to allow employers to secure insurance with another carrier. See also Hartford Accident & Indemnity Co. v. Fidelity & Guaranty Insurance Underwriters, Inc., 223 Va. 641, 643-44, 292 S.E.2d 327, 328 (1982). If the employer does not receive the notice, the employer does not have the opportunity to secure other insurance, and thus the statutory purpose is not fulfilled. See Larocque, 536 A.2d at 531; Smith, 169 W.Va. at 299, 289 S.E.2d at 671.

CIGNA met its burden of showing, based on credible evidence, that the employer received the notice. ⁴ First, CIGNA presented evidence concerning...