Wahl v. Country Mut. Ins. Co.

• Decision Date: 12 March 2002
• Docket Number: No. 20010262.,20010262.
• Parties: Fred WAHL, d/b/a Wahl Construction, Plaintiff and Appellee, v. COUNTRY MUTUAL INSURANCE COMPANY, Defendant and Appellant, Terry Burke, Terry Burke, Inc. and Nodak Agency, Inc., Defendants.
• Court: North Dakota Supreme Court

640 N.W.2d 689

2002 ND 42

Fred WAHL, d/b/a Wahl Construction, Plaintiff and Appellee, v. COUNTRY MUTUAL INSURANCE COMPANY, Defendant and Appellant, Terry Burke, Terry Burke, Inc. and Nodak Agency, Inc., Defendants.

No. 20010262.

Supreme Court of North Dakota.

March 12, 2002.

Rodney E. Pagel, Pagel Weikum Law Firm, Bismarck, ND, for plaintiff and appellee.

Jerry W. Evenson, Zuger Kirmis & Smith, Bismarck, ND, for defendant and appellant.

VANDE WALLE, Chief Justice.

[¶ 1] Country Mutual Insurance Company ("Country Mutual") appealed from a summary judgment declaring plaintiff, Fred Wahl, doing business as Wahl Construction, had insurance coverage on a damaged tractor loader under a commercial package insurance policy with Country Mutual. We hold Wahl's policy expired for nonpayment of premium prior to the damage of the tractor loader, and we reverse and remand with instructions the trial court enter summary judgment dismissing Wahl's claim against Country Mutual.

I. Facts

[¶ 2] The facts relevant to this appeal are not in dispute. Fred Wahl and his wife, Colleen Wahl, operate a small family manure hauling business. In 1991, Wahl obtained a commercial package insurance policy for the business through Nodak Agency, Inc., and underwritten by Country Mutual. The policy term was for one year commencing July 30, 1991. Over the years, the policy was continued on an annual basis, but on several occasions Wahl failed to make timely payment of the annual premium. In each case, the premium was eventually paid and the insurance coverage was continued. After the insurance coverage term ended July 30, 1997, Wahl failed to pay the renewal premium. On August 7, 1997, Nodak Agency, Inc., sent Wahl a letter stating the policy had expired and Wahl should contact his agent if he wanted coverage reinstated. Although the Wahls' daughter signed a return receipt for the letter, the Wahls claim they never saw the letter until sometime in May of 1998. Wahl never paid the premium to renew the policy after July 30, 1997.

[¶ 3] On March 31, 1998 a tractor loader owned by Wahl and used in the business was damaged. Wahl filed a claim for reimbursement of the damages under the commercial package insurance policy. Country Mutual denied the claim on the ground coverage had expired for nonpayment of premium, and Wahl sued for damages.

[¶ 4] The parties filed cross-motions for summary judgment. The trial court concluded Country Mutual had failed to provide a notice of cancellation or a notice of nonrenewal and, therefore, the insurance policy was automatically renewed and was in force when the tractor loader was damaged in March 1998. The court entered summary judgment declaring Country Mutual was required to provide coverage for the damaged tractor loader under the insurance policy.

II. Statutory Notice Requirements

[¶ 5] Country Mutual asserts that the statutory notice requirements for cancellation or nonrenewal of a commercial insurance policy do not require an insurer to provide notice when a policy expires at the end of its term for nonpayment of premium by the insured. Country Mutual argues the trial court erred, therefore, in granting summary judgment to Wahl declaring there was coverage for the damaged tractor loader.

[¶ 6] Under N.D.R.Civ.P. 56(c), summary judgment is a procedure for the prompt and expeditious disposition of a controversy, without trial, if either litigant is entitled to judgment as a matter of law and if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts or if resolving factual disputes would not alter the results. Close v. Ebertz, 1998 ND 167, ¶ 8, 583 N.W.2d 794. Whether the trial court has properly granted summary judgment is a question of law which we review de novo on the entire record. Twogood v. Wentz, 2001 ND 167, ¶ 11, 634 N.W.2d 514.

A. Cancellation

[¶ 7] Our statutory law regarding cancellation of a commercial insurance policy is found in N.D.C.C. §§ 26.1-30.1-02 and 26.1-30.1-03, which provide, in part:

26.1-30.1-02. Midterm cancellation of commercial insurance. No insurer may cancel a policy of commercial insurance during the term of the policy, except for one or more of the following reasons:

1. Nonpayment of premiums....

26.1-30.1-03. Notice....A policy may not be canceled for nonpayment of premium pursuant to subsection 1 of section 26.1-30.1-02 unless the insurer, at least ten days prior to the effective cancellation date, has given notice to the policyholder of the amount of premium due and the due date. The notice must state the effect of nonpayment by the due date. No cancellation for nonpayment of premium is effective if payment of the amount due is made prior to the effective date set forth in the notice.

The trial court concluded this statute required Country Mutual to provide Wahl notice of cancellation to effectively terminate coverage when Wahl failed to pay a premium to continue coverage after June 30, 1997.

[¶ 8] We summarized the standards for our interpretation of a statute in Narum v. Faxx Foods, Inc., 1999 ND 45, ¶ 18, 590 N.W.2d 454 (citations omitted):

This issue involves the interpretation of a statute, a question of law fully reviewable by this Court. The primary objective of statutory construction is to ascertain the intent of the Legislature. We look first in ascertaining legislative intent at the words used in the statute, giving the words their ordinary, plain language meaning. Statutes must be construed as a whole to determine the legislative intent and the intent must be derived from the whole statute.

By express language, N.D.C.C. § 26.1-30.1-02 unambiguously limits its application to the cancellation of a policy of commercial insurance "during the term of the policy." The statute does not contain language requiring an insurer to give notice when a policy expires by its own terms. This statute was enacted in 1987. 1987 N.D. Sess. Laws ch. 359, § 2. It was amended in 1991, but those changes are not relevant to this appeal. See 1991 N.D. Sess. Laws ch. 302, § 19.

[¶ 9] Although courts may resort to extrinsic aids to interpret a statute if it is ambiguous, when the language is unambiguous the legislative intent is presumed clear from the face of the statute. Overboe v. Farm Credit Servs. of Fargo, 2001 ND 58, ¶ 9, 623 N.W.2d 372. The statute's language is clear that its notice requirement applies only to cancellations during a policy term for nonpayment of premiums which were to have been paid during the policy term. We, nevertheless, refer to the 1987 testimony of a cosponsor of this legislation, Representative Frank Wald, to the Senate Committee on Industry, Business, and Labor, which reinforces the unambiguous language of the statute itself. In referring to this legislation, Wald testified, "this would prohibit mid-term cancellations. It is a 12-month contract, the insurer ought to honor their commitment for that duration." As Representative Wald's testimony highlights, the clear intent of this statute is to provide limitations upon the midterm cancellations of coverage by insurers, rather than to impose a notice requirement for an expired policy. We hold this statute did not impose a duty upon Country Mutual to provide a notice of cancellation at the end of the policy term when Wahl failed to pay a premium to continue insurance coverage.

B. Nonrenewal

[¶ 10] Section 26.1-30.1-06(1), N.D.C.C., provides, in part:

26.1-30.1-06. Nonrenewal of commercial insurance policies—Notice required—Exceptions.

1. An insurer shall renew the policy, unless at least thirty days prior to the date of expiration provided in the policy, a notice of intention not to renew the policy beyond the agreed expiration date is made to the policyholder. The insurer shall include a statement of the reasons for a nonrenewal with the notice.

[¶ 11] Wahl asserts this statute required Country Mutual to provide a notice of nonrenewal, and its failure to do so resulted in continuation of coverage, even though Wahl failed to pay a renewal premium. Wahl contends that, unless notice of nonrenewal is given before expiration of the policy term, the insurer must continue to provide coverage until thirty days after the notice of nonrenewal is given, even though no renewal premium is paid. Under Wahl's interpretation of the statute, an insurer would need to provide a notice of nonrenewal on every policy during the term of the policy to protect itself from having to continue coverage if its insured decides to not submit a renewal premium. The notice of nonrenewal would have to be sent by the insurer even though it fully intended to continue coverage for another term, upon payment of the renewal premium.

[¶ 12] This Court interprets a statute to avoid absurd or ludicrous results. Ohnstad Twichell, P.C. v. Treitline, 1998 ND 10, ¶ 20, 574 N.W.2d 194. We reject Wahl's interpretation of the statute, which, in our view, would constitute an absurd and ludicrous result. The...